Trends in the Sources of Permanent and Temporary Book-Tax Differences During the Schedule M-3 Era

31 Pages Posted: 25 Jun 2016 Last revised: 29 May 2018

See all articles by Fabio B. Gaertner

Fabio B. Gaertner

University of Wisconsin - Madison - Department of Accounting and Information Systems

Stacie Kelley Laplante

University of Wisconsin - Madison

Dan Lynch

University of Wisconsin - Madison - Department of Accounting and Information Systems

Date Written: June 23, 2016

Abstract

We use a time-series of macro-economic Schedule M-3 tax return data from Subchapter C corporations to provide descriptive evidence on specific sources of permanent and temporary book-tax differences from 2004 to 2013. Our primary findings are that 1) total book-tax differences increase, fueled by increases in both positive and negative temporary and permanent book-tax differences; 2) firms’ operations and financing, as well as economic incentives, explain a substantial amount of book-tax differences; 3) firms report a substantial but decreasing amount of book-tax differences in the “other” categories throughout the sample period; 4) the frequency and magnitude of reportable transactions decreases significantly; and 5) foreign operations continue to provide an increasing source of earnings for firms, while the amount repatriated and subjected to U.S. income taxes is likewise growing. However, the relative amount of foreign earnings repatriated decreases substantially after 2009.

Keywords: Book-tax differences, tax avoidance, taxable income, corporate income

JEL Classification: H20, H25, H29

Suggested Citation

Gaertner, Fabio B. and Laplante, Stacie Kelley and Lynch, Dan, Trends in the Sources of Permanent and Temporary Book-Tax Differences During the Schedule M-3 Era (June 23, 2016). National Tax Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2799729 or http://dx.doi.org/10.2139/ssrn.2799729

Fabio B. Gaertner

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Stacie Kelley Laplante

University of Wisconsin - Madison ( email )

975 University Avenue
Madison, WI 53706
United States
608-265-3494 (Phone)
608-265-3494 (Fax)

Dan Lynch (Contact Author)

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

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