How do disclosures of tax uncertainty to tax authorities affect reporting decisions? : evidence from Schedule UTP

This study exploits the recently-issued Uncertain Tax Position Statement (Schedule UTP) to examine the effect of mandatory disclosures of tax uncertainty to tax authorities on firms' reporting decisions. Schedule UTP requires firms to disclose federal income tax positions to the Internal Revenue Service that have been classified as 'uncertain' for financial reporting purposes. In showing how Schedule UTP disclosure requirements affect private and public reporting decisions, I provide insights into the usefulness of these disclosures. Using confidential tax return data and public financial statement data, I find that after imposition of Schedule UTP reporting requirements, firms report lower financial reporting reserves for uncertain income tax positions, but do not claim fewer income tax benefits on their federal tax returns. These findings suggest some firms changed their financial reporting for uncertain tax positions to avoid Schedule UTP reporting requirements without changing the underlying positions. The effect is concentrated among firms with greater business complexity, whose business operations facilitate tax planning strategies that are more difficult for the IRS to identify. More broadly, my results imply private disclosures of tax uncertainty can affect the informativeness of public disclosures of tax uncertainty.

Name thesis:degree_name

Doctor of Philosophy

Level thesis:degree_level

Doctoral

Discipline thesis:degree_discipline

Accounting

Grantor

The University of Texas at Austin

Year dc:date.issued

2013

Author dc:creator

• Towery, Erin Marie

Advisor dc:contributor.advisor

• Mills, Lillian F.

• IRS
• Tax uncertainty
• Accounting for income taxes
• Disclosure
• Schedule UTP

Language dc:language.iso

en_US

Handle dc:identifier.uri

http://hdl.handle.net/2152/21819

OAI identifier oai:identifier

oai:repositories.lib.utexas.edu:2152/21819