FIN 48 and Tax Compliance

Lillian F. Mills · Leslie A. Robinson · Richard C. Sansing

158 citations0/0 files storedThe Accounting Review

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Corporate Taxation and Avoidance Taxation and Legal Issues Auditing, Earnings Management, Governance

Abstract

ABSTRACT: We develop a model to examine the effects of Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), on the strategic interaction between publicly traded corporate taxpayers and the government. Several of our findings contradict conjectures voiced by members of the business community regarding the economic effects of implementing FIN 48. Specifically, taxpayers with strong facts obtain higher expected payoffs from uncertain tax benefits and some disclosed liabilities understate the expected tax liability. Consistent with the common conjectures, however, some taxpayers are more likely to be audited or are deterred from entering into transactions that generate uncertain tax benefits because of FIN 48.

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2008Financial Accounting Standards Board (FASB)2000Forcing Firms to Talk: Financial Disclosure Regulation and Externalities 1986The Tax Compliance Game: Toward an Interactive Theory of Law Enforcement 2012Do Publicly Disclosed Tax Reserves Tell Us About Privately Disclosed Tax Shelter Activity?2002Materiality and Contingent Tax Liability Reporting

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2016IRS and corporate taxpayer effects of geographic proximity 2017Unintended Consequences of Linking Tax Return Disclosures to Financial Reporting for Income Taxes: Evidence from Schedule UTP 2013Tax Avoidance vs. Tax Aggressiveness: A Unifying Conceptual Framework 2010Pre-Empting Disclosure? Firms’ Decisions Prior to FIN No. 48 2015Multinationality, Tax Havens, Intangible Assets, and Transfer Pricing Aggressiveness: An Empirical Analysis 2013Incentives for corporate tax planning and reporting: Empirical evidence from Australia 2019How do IRS Resources Affect the Corporate Audit Process?2015One Size Does Not Fit All: How the Uniform Rules of FIN 48 Affect the Relevance of Income Tax Accounting

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