Thursday, March 26, 2020
GILTI Tax Data: Yeah, We Got That

Monday, March 23, 2020
Exec Comp: Another Interesting Trend

Thursday, March 19, 2020
Trends in Executive Comp, 2010-2018

Wednesday, March 18, 2020
Another Look at Strength of Balance Sheets

Wednesday, March 11, 2020
Studying Debt Levels

Wednesday, March 4, 2020
A Q&A on Using Calcbench Data for Academic Research

Monday, March 2, 2020
Calcbench Talkin’ Shop!

Thursday, February 27, 2020
A Broader Look at Coronavirus Risk

Thursday, February 20, 2020
Yum Brands and Coronovirus Damage

Wednesday, February 12, 2020
Another Calcbench Use Case: Benchmarking DPO Changes

Tuesday, February 11, 2020
Updated Calcbench Excel Add-In

Monday, February 10, 2020
Hot Take on Cooling PPE Outlays

Monday, February 3, 2020
A Brief History of Juul Impairment Charges

Thursday, January 30, 2020
Research Note: Impairment of Leased Assets

Tuesday, January 28, 2020
Tracking Coronavirus Risk, Disclosures

Thursday, January 23, 2020
How to Find a Material Weakness

Sunday, January 19, 2020
Calcbench Tip: Email Alerts

Sunday, January 19, 2020
Calcbench Tip: Text Disclosures

Tuesday, January 14, 2020
Devising an Impairment Sensitivity Test

Thursday, January 9, 2020
Acuity Impairment on Leased Asset

Archive  |  Search:

Earlier this month, we chose to analyze the tax reconciliation data for a subset of S&P500 firms. Anyone with a Calcbench subscription is invited to do something similar (or better). Here is a short summary of what we found.

Background and Data:

During the reporting of effective tax rates, companies provide more detailed information on the reconciling of these rates, or the taxes owed, versus the statutory corporate tax rate. At Calcbench, we examined the reconciling items on a systematic basis to observe behavior within this group of firms.

The exercise of systematically reconciling each item and putting them on an apples-to-apples basis is much easier said than done. An example of why this is a challenging exercise is that some firms reconcile to the dollar while others reconcile to the tax rate. In this case, the picture(s) below save us a thousand words.

So we took our data that was in percents and converted it into dollars so that we could try to do a closer comparison.

Once we started looking at the income tax footnotes, we found that there were 5 common reconciling items that impacted corporate taxes owed:

  1. State / Local taxes
  2. Research and Development
  3. Foreign Impacts (e.g. Irish subsidiary)
  4. Share Based Compensation Effects
  5. Domestic Manufacturing Credits

Certainly, there are other contributing factors, with many of them being firm specific. We chose not to examine these for purposes of this exercise. But we may return to firm specific factors at a later date.

Some high level observations from the 2016 annual filings are below:

  • 473 firms out of 500 reported reconciling items with 428 firms reporting profits before tax in 2016
  • 224 reported an effective tax rate (e.g. 25%)
  • 127 reported dollar levels of taxes owed (e.g. $1 billion)
  • 122 firms provided both percentages and dollars owed in detailed breakdowns

Of the 428 firms in our sample that reported profits before tax in 2016, the 5 reconciling items in aggregate are below:

(Note that the State / Local deduction is added back when calculating the federal effective tax rate. We reported the results because the data is significant)

The top 10 foreign reconciling items were taken by the following firms:

The top 10 share R&D reconciling items were taken by the following firms:

The top 10 manufacturing reconciling items were taken by the following firms:

Top 10 share based compensation reconciling items were taken by the following firms:

The top 10 State/ Local reconciling items were taken by the following firms:

The idea behind the data is rather simple. Get data and use it.

FREE Calcbench Premium
Two Week Trial

Research Financial & Accounting Data Like Never Before. More features and try our Excel add-in. Sign up now to try the Premium Suite.