Schedule UTP: Stock Price Reaction and Economic Consequences

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This article discusses the effects of the Internal Revenue Service (IRS) requirement to disclose uncertain tax positions (UTP) on a new schedule (Schedule UTP) on firm value and firm reporting behavior.

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24 p.

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Abernathy, John L.; Davenport, Stephan A. & Rapley, Eric T. July 2012.

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  • © 2013, American Accounting Association

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This article discusses the effects of the Internal Revenue Service (IRS) requirement to disclose uncertain tax positions (UTP) on a new schedule (Schedule UTP) on firm value and firm reporting behavior.

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24 p.

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Abstract: In 2010, the Internal Revenue Service (IRS) announced the requirement to disclose uncertain tax positions (UTP) on a new schedule (Schedule UTP) to be filed with federal corporate income tax returns. Schedule UTP could increase a firm’s tax burden by providing a roadmap for the IRS to identify firms’ tax-planning strategies. We find that stock returns around the development of Schedule UTP are negative, consistent with investors’ concern that Schedule UTP would impose costs on firms. However, we document a significant positive stock price reaction to the release of the final draft of Schedule UTP in which the IRS relaxed many of the controversial provisions of Schedule UTP. Additionally, we find this positive reaction is incrementally larger for more taxaggressive firms. Finally, we find a significant decrease in reported unrecognized tax benefits (UTBs) and additions to UTBs after the adoption of Schedule UTP in 2010.

Schedule UTP: Stock Price Reaction and Economic Consequences
The Journal of the American Taxation Association 2013; 35(1): 25-48.
John L. Abernathy, Stephan A. Davenport and Eric T. Rapley
https://doi.org/10.2308/atax-50246

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  • Journal of the American Tax Association, 2013. Lakewood Ranch, FL: American Accounting Association

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  • Publication Title: Journal of the American Tax Association
  • Volume: 35
  • Issue: 1
  • Pages: 25-48
  • Peer Reviewed: Yes

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UNT Scholarly Works

Materials from the UNT community's research, creative, and scholarly activities and UNT's Open Access Repository. Access to some items in this collection may be restricted.

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  • December 2011

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  • June 2012

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  • July 2012

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  • Oct. 17, 2017, 7:11 p.m.

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Abernathy, John L.; Davenport, Stephan A. & Rapley, Eric T. Schedule UTP: Stock Price Reaction and Economic Consequences, article, July 2012; Lakewood Ranch, Florida. (digital.library.unt.edu/ark:/67531/metadc1035327/: accessed December 14, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT College of Business.