Journal article
Nonrecurring income taxes
Review of accounting studies, Vol.29(2), pp.1741-1793
06/2024
DOI: 10.1007/s11142-022-09736-7
Abstract
Nonrecurring income taxes are transitory items that exclusively affect earnings through tax expense. We conduct the first in-depth examination of nonrecurring income taxes to determine whether they are primarily attributable to economic events or managerial opportunism. We find that nonrecurring income taxes have little predictive power for future earnings, are not associated with meeting or beating analyst earnings forecasts, and are not associated with future tax expense restatements. We also provide descriptive information about the tax events that frequently result in nonrecurring income taxes and find that the most common events are tax audit resolutions, valuation allowance changes, tax law changes, mergers, and repatriations. Overall, our findings suggest that nonrecurring income taxes are driven by economics rather than opportunism. We recommend that researchers consider whether the inclusion of nonrecurring income taxes (or specific types of nonrecurring taxes) is appropriate when using effective tax rate levels or volatility as measures of tax risk, avoidance, or aggressiveness.
Details
- Title: Subtitle
- Nonrecurring income taxes
- Creators
- Dain C. Donelson - University of IowaColin Q. Koutney - George Mason UniversityLillian F. Mills - Univ Texas Austin, McCombs Sch Business, Austin, TX 78712 USA
- Resource Type
- Journal article
- Publication Details
- Review of accounting studies, Vol.29(2), pp.1741-1793
- DOI
- 10.1007/s11142-022-09736-7
- ISSN
- 1380-6653
- eISSN
- 1573-7136
- Publisher
- Springer Nature
- Number of pages
- 53
- Grant note
- Beverly H. and William P. O'Hara Chair in Business McCombs Research Excellence Fund
- Language
- English
- Electronic publication date
- 12/03/2022
- Date published
- 06/2024
- Academic Unit
- Accounting; Law Faculty
- Record Identifier
- 9984380415802771
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