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The Implications Of Tax Asymmetry For U.S. Corporations

  • Cooper, Michael G.
  • Knittel, Matthew J
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    This paper examines the implications of the asymmetric treatment of tax losses for U.S. corporations for 1993–2004. We find that partial refunding of tax losses reduces their real values by approximately one-half and produces modest effective tax rate differentials between taxable and non-taxable firms. However, if firms use debt financing or utilize an investment tax credit, then rate differentials can be significant. We also find that certain industries and younger firms disproportionately bear the negative consequences of partial refunding, due to either delayed realization or the inability to use tax losses to offset prior or future profits.

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    File URL: http://www.ntanet.org/NTJ/63/1/ntj-v63n01p33-61-implications-tax-asymmetry-for.html
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    Article provided by National Tax Association in its journal National Tax Journal.

    Volume (Year): 63 (2010)
    Issue (Month): 1 (March)
    Pages: 33-61

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    Handle: RePEc:ntj:journl:v:63:y:2010:i:1:p:33-61
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    1. Cooper, Michael & Knittel, Matthew, 2006. "Partial Loss Refundability: How Are Corporate Tax Losses Used?," National Tax Journal, National Tax Association, vol. 59(3), pages 651-63, September.
    2. Auerbach, Alan J, 1986. "The Dynamic Effects of Tax Law Asymmetries," Review of Economic Studies, Wiley Blackwell, vol. 53(2), pages 205-25, April.
    3. Altshuler, Rosanne & Auerbach, Alan J, 1990. "The Significance of Tax Law Asymmetries: An Empirical Investigation," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 61-86, February.
    4. Jason G. Cummins & Kevin A. Hassett & R. Glenn Hubbard, 1994. "A Reconsideration of Investment Behavior Using Tax Reforms as Natural Experiments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 1-74.
    5. Cordes, Joseph J & Sheffrin, Steven M, 1983. " Estimating the Tax Advantage of Corporate Debt," Journal of Finance, American Finance Association, vol. 38(1), pages 95-105, March.
    6. Mintz, Jack M, 1988. "An Empirical Estimate of Corporate Tax Refundability and Effective Tax Rates," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 225-31, February.
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