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IRS Attention

47 Pages Posted: 23 Nov 2014 Last revised: 14 Jul 2017

Zahn Bozanic

Ohio State University (OSU) - Fisher College of Business

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill

Jacob R. Thornock

Brigham Young University

Braden Williams

University of Texas at Austin - Department of Accounting

Multiple version iconThere are 2 versions of this paper

Date Written: September 12, 2016

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 dataset 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, 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, and, relatedly, changes in IRS private disclosure requirements appear to change firms’ public disclosure behavior.

Keywords: financial reporting, tax enforcement, FIN 48, IRS

JEL Classification: M41, H25, H26, G38, P38

Suggested Citation

Bozanic, Zahn and Hoopes, Jeffrey L. and Thornock, Jacob R. and Williams, Braden, IRS Attention (September 12, 2016). Journal of Accounting Research, Vol. 55, No. 1, 2017. Available at SSRN: https://ssrn.com/abstract=2529268 or http://dx.doi.org/10.2139/ssrn.2529268

Zahn Bozanic

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

Jacob Thornock (Contact Author)

Brigham Young University ( email )

Provo, UT 84602
United States
8014220828 (Phone)

Braden Williams

University of Texas at Austin - Department of Accounting ( email )

Austin, TX 78712
United States

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