IRS Attention

Posted: 25 Jul 2017

See all articles by Zahn Bozanic

Zahn Bozanic

Ohio State University (OSU) - Fisher College of Business

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area

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: March 1, 2017

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, 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: IRS; Corporate Disclosure; Tax Enforcement; FIN 48; UTP; XBRL

JEL Classification: G38; H25; H26; M40; M41; M48

Suggested Citation

Bozanic, Zahn and Hoopes, Jeffrey L. and Thornock, Jacob and Williams, Braden, IRS Attention (March 1, 2017). Journal of Accounting Research, Vol. 55, No. 1, March 2017 . Available at SSRN: https://ssrn.com/abstract=3006796

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 - Accounting Area ( email )

McColl Building
Chapel Hill, NC 27599-3490
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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