IRS Attention

Abstract

We study how public and private disclosure requirements interact to influence both tax regulator enforcement and firm disclosure. To capture IRS enforcement activities, we introduce a novel data set of IRS acquisition of firms' public financial disclosures, which we label IRS attention. We examine the implementation of two new disclosure requirements that potentially alter IRS attention: FIN 48, which increased public tax disclosure requirements, * The Ohio State University; † University of North Carolina at Chapel Hill; ‡ Brigham Young University; § University of Texas at Austin.Accepted by Douglas Skinner. We are grateful for the insightful suggestions received from an anonymous reviewer. We also appreciate comments from Sam Anderson, Darren Bernard, Terrence Blackburne, Amoray Cragun, Mike Drake, Scott Dyreng, Alex Edwards (ATA discussant), Merle Erickson, Paul Fischer, Pete Frischmann, Kevin Holland (Oxford discussant), Mike Iselin, Colin Koutney, Ed Maydew, Rick Mergenthaler, Lillian Mills, Michelle Nessa (Midwest Conference Discussant), Phil Quinn, Darren Roulstone, Jeri Seidman, Terry Shevlin, Lorien Stice-Lawrence, Erin Towery (FARS discussant), and Jaron Wilde; workshop participants at the University of Chicago, the University of North Carolina, the University of Minnesota, and the University of Texas at Austin; and participants at the 2014 BYU Accounting Symposium, the 2015 AAA FARS Midyear Meeting, the 2015 ATA Midyear Meeting, the 2015 Midwest Summer Research Conference, and the 2016 Oxford Academic Symposium. We are grateful for data assistance from SECLive.com and, in particular, from Slavi Marinov. Thornock is affiliated with SECLive.com as an academic advisor. We gratefully acknowledge financial support from the Fisher College of Business, the Foster School of Business, the Kenan-Flagler Business School, the Marriott School of Management, and the McCombs School of Business. Neither the IRS nor the SEC have provided any of the authors with privileged data for this paper or have reviewed the paper. This work is solely the responsibility of the authors. An online appendix to this paper can be downloaded at http://research.chicagobooth.edu/ arc/journal-of-accounting-research/online-supplements. The IRS attention data are available at http://www.jeffreyhoopes.com/data/irsattentiondata.html. and Schedule UTP, which increased private tax disclosure. We find that IRS attention increased following FIN 48 but subsequently decreased following Schedule UTP, consistent with public and private disclosure interacting to influence tax enforcement. We next examine how private tax disclosure requirements under Schedule UTP affected firms' public disclosure responses. We find that, following Schedule UTP, firms significantly increased the quantity and altered the content of their tax-related disclosures, consistent with lower tax-related proprietary costs of disclosure. Our results suggest that changes in SEC disclosure requirements altered the IRS's behavior with regard to public information acquisition, a...

Public Pressure and Corporate Tax Behavior

“…For example, recent evidence suggests that the IRS finds FIN 48 disclosures in the United States useful for tax enforcement purposes (Bozanic et al. []). In a similar manner, mandatory subsidiary disclosures could provide new information to tax authorities in the United Kingdom and other jurisdictions.…”

Increasing Tax Transparency: Investor Reactions to the Country-by-Country Reporting Requirement for EU Financial Institutions

“…First, banks might reduce their extent of profit shifting since tax authorities have more information at hand to audit tax-aggressive banks more efficiently. As Bozanic et al (2017) have shown, tax authorities actually make use of tax-related disclosures in financial statements in case they contain incremental information to the tax return data. Second, increased public scrutiny might induce banks to voluntarily pay their "fair share of taxes".…”

Agressividade Tributária: Um Survey da Literatura

“…Aqui, identificam-se tanto investigações teóricas (De Simone, Sansing & Seidman, 2013) como empíricas (Bozanic, Hoopes, Thornock & Williams, 2017). As pesquisas centram-se, predominantemente, no papel das autoridades fiscais na inibição da Agressividade Tributária (Hoopes, Mescall & Pittman, 2012), a distância à autoridade fiscal da sede física do sujeito passivo (Kubick, Lockhart, Mills & Robinson, 2017), a atuação dos reguladores financeiros, tais como o monitoramento da SEC, (Hope, Ma & Thomas, 2013; e o papel da transparência fiscal (Beck & Lisowsky, 2014;Henry, Massel & Towery, 2016).…”

“…No Brasil poder-se-ia tentar investigar qual o efeito das ações das auditorias tributárias na agressividade fiscal? (Bozanic et al, 2017;Hoopes et al, 2012;.…”