Comps - Ed Tax

22 - Angaretis Galle Organ Prohofsky 2022 WP

*What?* Do non-monetary sanctions work for tax enforcement? *Why?* *1 sentence:* Yes! *How?* CA FTB Top 500 program: warn people, and then publish the taxpayer's personal information and suspend their license. Compliance response is much stronger to the initial letter than to the actual publication. *Other:*

1 - Erickson et al. Textbook 2020

*What?* An introduction to many of the tax concepts that are illustrated in other papers throughout the seminar. *1 sentence:* Taxes affect risk taking, incentive contracting, organizational design, and financial accounting income. *Other:* Tax clientele: Categories of investors who have specific preferences for transactions because of differences in their personal marginal tax rates. Tax arbitrage: an event where investors profit from differences that arise from the ways various types of income, capital gains, and transactions are taxed. Market frictions and tax-rule restrictions usually prevent this from occurring. An approximation for taxable income = current tax expense / statutory TR (or alternative estimate for taxable income = pretax book income ± temp and perm differences)

21 - Moussawi Shen Velthuis 2021 WP

*What?* Are tax benefits partly driving the migration from active mutual funds to ETFs over the last 20 years? *Why?* *1 sentence:* Authors think so. *How?* Tax efficiency of ETFs is economically significant (compare capital gains distributed by ETFs vs. active mutual funds, and it's hugely different as % NAV). *Other:*

6 - Dyreng Hanlon Maydew 2008 TAR

*What?* Can firms avoid corporate income taxes over long periods of time? *Why?* Lots of research on annual tax avoidance, but nothing on whether the same firms are avoiding taxes YOY. *1 sentence:* Develop a measure of LR tax avoidance: LR Cash ETR over 10 years. *How?* 26% of sample is able to avoid taxes over long periods of time. Annual cash ETR is not a good predictor of LR cash ETR. *Other:*

5 - Badertscher Katz Rego Wilson 2019 TAR

*What?* Can we develop a measure of conforming tax avoidance (i.e. corporate tax avoidance that reduces both financial and taxable income?) *Why?* As book tax conformity increases, understanding conforming tax avoidance becomes more important. *1 sentence:* Yes, the measure is the residual from TXPD/AT on BTDiff (fully interacted with indicator for NegBTD) *How?* Validate it with simulations that increase the amount of conforming tax avoidance, picking up FIFO->LIFO conversions, and private/public transitions. *Other:*

11 - Schwab Stomberg Williams 2021 TAR

*What?* Can we develop a measure of effective tax planning that is theoretically aligned with the Scholes-Wolfson paradigm of maximizing after tax cash flows? *Why?* Scholes and Wolfson concept of maximizing after tax cash flows for effective tax planning and considering all parties, all taxes, and all costs has not been explicitly aligned with a measure before. *1 sentence:* Yes, their measure does that and is incremental to cash ETR/overall firm performance. *How?* Data envelopment analysis: estimates how efficiently a firm converts tax planning inputs (R&D, PP&E, tax haven operations, intangibles, inventory, leverage) to outputs (after-tax ROE). Effective tax planning measure is associated with higher pre-tax returns and lower cash taxes paid. *Other:*

8 - Lisowsky Robinson Schmidt 2013 JAR

*What?* Do FIN 48 tax reserves reflect aggressive tax positions (i.e. tax shelters)? *Why?* Literature on the benefits/costs of tax shelters to shareholders is mixed. If we can use a publicly available and reliable proxy for studying tax sheltering, we can probably understand it better. *1 sentence:* Yes. *How?* Use IRS reportable transactions data (e.g. buy in lease out, options as comp to RP, short asset holding periods) as "truth" for sheltering. Find that the tax reserve (UTB) is positively associated with tax shelters; other commonly used measures of tax avoidance are not. *Other:*

3 - Scholes Wilson Wolfson 1990 RFS

*What?* Do banks respond to tax incentives? *Why?* First paper to examine tax and nontax tradeoffs in research. *1 sentence:* Yes they do: muni bond holdings, direct leases, tax preferred equities, and gain recognition all vary based on taxes. *How?* Firms change holdings of muni bonds based on the tax deductibility of its interest. Firms without NOL CFs hold more muni bonds, direct leases, and tax preferred equities (capital notes have tax deductible interest, while common stock does not). Firms recognize their securities' gains strategically to minimize taxes, but also balance it with regulatory capital requirements. *Other:*

18 - De Simone 2016 JAE

*What?* Does adoption of IFRS by individual affiliates of MNEs facilitate tax-motivated income shifting? *Why?* Because shift happens. *1 sentence:* Yes: arm's length range increases, and shifting increases after IFRS adoption. *How?* Use a model of income shifting derived from cobb-douglas production function: where "C" is the incentive to shift, and fully interact that with IFRS adoption. PTI on productive assets and IFRS. "C" is revenue-weighted tax rate differential between subs of an MNC: if there are large differentials, then there's an incentive to shift. *Other:*

25 - Gale Thorpe 2022 WP

*What?* Does labor bear some of the burden of taxes on excess returns? *Why?* Standard public finance: assumes that SHers bear the burden of taxes on corporate excess returns, but Labor econ shows that firms share rents with workers. So workers may bear some of the burden imposed on excess returns. *1 sentence:* Yes, if employees get some of the share of economic rents. But the tax is progressive. *How?* Model. *Other:*

17 - Lampenius Shevlin Stenzel 2021 JAE

*What?* How can we measure the corporate tax rate vs. base avoidance of US domestic/MNC firms? *Why?* The difference is important. *1 sentence:* Produce a measure of average STR at the year level (assume constant across all firms). Then use that to create a firm-year level measure of base avoidance (i.e. book-tax differences). *How?* Do some validations like finding that rate avoidance increased after TRA 86 (because STR decreased), but base avoidance decreased (because it broadened the base). *Other:*

19 - Dobridge 2021 TAR

*What?* How do tax loss carrybacks affect firms' financial health in recessions? *Why?* In 2002 and 2009: NOL CB period was extended from 2 to 5 years, with the goals of improving firms' financial conditions and increasing investment and employment. What did firms do with this cash? *1 sentence:* Tax loss carrybacks had little effect on financial condition (bankruptcy risk/credit conditions) during 2002 but improved them in 2009. Funds from NOL CBs were used to fund investment in 2002 but held as cash or used to pay down debt in 2009. *How?* RKD: causal effect of an endogenous policy variable (US tax refund) can be estimated by testing for a kink in slope of the outcome variable that occurs at the same point as a discontinuity in slope of the policy variable. *Other:*

7 - Gallemore Labro 2015 JAE

*What?* How does the IIQ of a firm affect its ability to avoid taxes? *Why?* The aggressiveness of a firm's tax position is a function of its IIQ (because aggressiveness depends on strength of supporting facts). *1 sentence:* Firms with higher IIQs are better able to avoid taxes. *How?* IIQ: speed of EA, accuracy of MF, mtl restatement, internal ctrl weakness; High IIQ --> lower ETR, more pronounced when information is more important (e.g. dispersed firms). High IIQ also --> lower cash ETR volatility, so the better avoiding taxes is also done without increasing tax risk. *Other:* distinction between incentive and ability to pay less tax

2 - Shackelford Shevlin 2001 JAE Section 1

*What?* Intro to tax research. *1 sentence:* Scholes-Wolfson framework: all taxes (implicit vs. explicit), all parties, all costs. If all are identified and controlled, then observed tax planning behavior would be rational and predictable. *Other:* Tax research attempts to address three questions: Do taxes matter? If not, why not? If so, how much?

23 - Hutchens Richter Stomberg Williams 2022 WP

*What?* Is WOTC disclosure a credible signal of commitment to creating good jobs for underrepresented workers, or simply virtue signaling? *Why?* *1 sentence:* External stakeholders perceive WOTC disclosure as evidence of ESG activities, but this perception is not shared among employees. *How?* Scrape 10-Ks for WOTC disclosure. Look at implications for inclusion in socially responsible investment funds, and for Glassdoor ratings. *Other:*

16 - Dyreng Hanlon 2021

*What?* Review of how MNCs avoid taxes, and how taxes affect MNCs' investing, financing, accounting, and other practices. *1 sentence:* % of firms that are MNCs has increased from 35 to 70% in the last 30 years. MNCs pay a substantial amount of taxes, but the location of their income as well as real investment, debt, and employment are still sensitive to taxation. But lots of things changed with TCJA and we don't know what things are like after TCJA. *Other:* definition on tax avoidance is great: relative to a zero tax world

13 - Hanlon Heitzman 2010 JAE Section 5

*What?* Review of literature on investor-level taxes and asset prices. *1 sentence:* · The price difference before and after ex-dividend date is not the full amount of the dividend, because dividend taxes! The marginal investor will determine the effect of a tax change. *How?* *Other:*

12 - Shackelford and Shevlin 2001 JAE Section 3

*What?* Review of literature: to what extent do prices impound taxes? *1 sentence:* Prices impound taxes. *How?* Tax deductibility of goodwill increased purchase price on M&A transactions. Dividend/cap gains taxes are capitalized into price. Firms are more likely to finance through equity when they have NOL CFs (Scholes)/low MTRs (Graham). *Other:*

20 - Guenther Njoroge Williams 2020 TAR

*What?* What do firms do with the cash saved from tax avoidance? *Why?* Policymakers care. *1 sentence:* They save a lot of it, and invest less of it than other after-tax cash flow, presumably because of uncertainty about future repayments. *How?* Flow of funds model. *Other:*

10 - Edwards Kubata Shevlin 2021 TAR

*What?* What is causing the documented decline in cash ETR over time? *Why?* Dyreng et al. (2017) find that US cash ETR have decreased over time. Is this due to tax avoidance increasing over time? Or is it due to a mechanical relation? *1 sentence:* Not tax avoidance, but simply the growth in pre-tax income. Cash ETRs are a negative convex function of PI. *How?* Say that instead of regressing TXPD on PI with no intercept, there should be an intercept, scaled by PI. Once you do that, the negative trend in ETR over time is almost all attributed to growth in PI. *Other:* Scott says there shouldn't be an intercept because there is no such thing as a tax that is put on a firm for just existing.

9 - Coles Patel Seegert Smith 2021 JAR

*What?* What is the corporate elasticity of taxable income (CETI)? *Why?* The consequences of the corporate tax system for corporate behavior (esp. the distortionary effects) is of interest to lots of people. *1 sentence:* CETI is 0.91: firms reduce taxable income by 9.1% in response to a 10% change in the tax rate. Net effect is a slight reduction in revenue collection, but not economically significant. *How?* Use variation in kink points driven by variation in NOL CFs of firms to get identification. *Other:* Related to the Laffer curve

24 - Jacob Zerwer 2021 WP

*What?* What is the effect of environmental taxes on emissions in corporate investment? *Why?* *1 sentence:* Environmental taxes reduce investment. But it's not the polluters that are paying for this, but the ones who cannot easily adjust (i.e. low profit margin). *How?* DiD: Data on firms in Spain and leveraging an emission tax increase in 2013. Use the neighboring provinces of Alicante (treatment group) and Murcia (control group) to observe a potential effect of the introduced tax rates on the consumption of sulfur oxides (SOx) and nitrogen oxides (NOx) in Alicante. *Other:*

4 - Hanlon Maydew Shevlin 2008 JAE

*What?* What is the effect of increasing B/T conformity on earnings informativeness? *Why?* Increasing B/T conformity has been proposed to improve financial reporting and curtail aggressive tax planning. *1 sentence:* Increasing conformity results in earnings that are less informative. *How?* TRA 86 required all firms above a size threshold to use accrual method (T), compared to some firms who were already using accrual method (C). DiD of ERCs: find that ERC decreased: so conformity increased noise in measure (If conformity made reported earnings decrease, ERC would've increased). *Other:* Evidence that tax law changes (no accounting law change) affect the informativeness of accounting earnings!

14 - Dai Maydew Shackelford Zhang 2008 JF

*What?* What is the equilibrium impact of a change in capital gains tax? *Why?* Policy implications. *1 sentence:* When capital gains taxes decrease, there is a capitalization effect (eventual tax is lower, so demand shifts out) AND a lock in effect (lower taxes upon selling, so supply shifts out). *How?* Look at the Taxpayer Relief Act of 1997: on the announcement date, there was a capitalization effect and demand shifted out, and on the enactment date, there was a lock in effect and the supply shifted out (with the corresponding change in P and Q). *Other:*

26 - Belnap Hoopes Wilde 2021 WP

*What?* Who affects corporate tax outcomes? Of those involved, who matters most? *Why?* *1 sentence:* Accountant explains 10.8%, partner 8.2%, manager 6.8% and accounting firms 1% of the total explained variation in Cash ETR. *How?* Shapley values + IRS Data. *Other:*

15 - Hoopes Langetieg Nagel Reck Slemrod Stuart 2020 WP

*What?* Who sells their stock holdings during periods of market tumult? *Why?* Perceived wisdom in the business press is that "small investors" are most prone to "panic," but it is not consistent with standard portfolio choice models. *1 sentence:* Investors with high risk appetites sell during a crash. *How?* IRS data: When VIX rises, selling volume increases the most for taxpayers who are the most willing to bear risk and optimism—those with high levels of taxable income, dividend income, and private business income. *Other:*