US Corporate Tax Reform and Financial Reporting Incentives

8 Pages Posted: 15 Oct 2013 Last revised: 22 Oct 2013

See all articles by Roy Clemons

Roy Clemons

New Mexico State University

Kirsten A. Cook

Texas Tech University - Area of Accounting

Michael Kinney

Texas A&M University - Department of Accounting

Date Written: October 7, 2013

Abstract

Under the current U.S. tax system, corporations have an incentive to defer the repatriation of their foreign earnings. This incentive is commonly referred to as the lock-out effect. The lock-out effect is significant, as estimates indicate that U.S. corporations hold nearly $2 trillion of earnings in foreign jurisdictions. While the U.S. tax system creates an incentive to retain these earnings abroad, research suggests that a non-tax factor, financial reporting incentives, exacerbates this lock-out effect. This study informs the debate regarding the lock-out effect by discussing evidence that financial reporting incentives significantly affect U.S. corporations’ tax policy responses.

Keywords: financial reporting incentives, corporate tax reform, lock-out effect, repatriation

Suggested Citation

Clemons, Roy and Cook, Kirsten A. and Kinney, Michael R., US Corporate Tax Reform and Financial Reporting Incentives (October 7, 2013). Tax Notes, Vol. 141, No. 1, 2013. Available at SSRN: https://ssrn.com/abstract=2340001

Roy Clemons (Contact Author)

New Mexico State University ( email )

P.O. Box 30001
Las Cruces, NM 88003-8001
United States

Kirsten A. Cook

Texas Tech University - Area of Accounting ( email )

P.O. Box 42101
Lubbock, TX 79409
United States

Michael R. Kinney

Texas A&M University - Department of Accounting ( email )

430 Wehner
College Station, TX 77843-4353
United States
979-862-2078 (Phone)
979-845-0028 (Fax)

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