Select a company that is publicly listed on a U.S. stock exchange and that is of personal interest to you. Access its latest Annual Report on Form 10K and attach a copy of that latest Annual Report to your initial response.
Using CTRL F on your personal computer or Command F on Mac, do a search of that latest Annual Report and locate any information contained in that latest Annual Report related to:
- Transfer pricing and/or tax havens.
- From the Business Section of the Annual Report on Form 10K, find any information or disclosures made by management related to income taxes
- From the Summary of Accounting Policies, any income tax policies related to the accounting for income taxes.
- From the footnotes to the financial statements, the income tax footnote, and in managementâ€™s Discussion and Analysis section of the Annual Report on 10K, find any information or disclosures related to income taxes made by managementEnsure you select a company that none of your peers has selected. Also, make sure you cover from the income tax footnote for your chosen company the portion of that footnote which covers Uncertain Tax Positions. That portion of that footnote will help you with your overall evaluation of whether your chosen Company appears to be tax aggressive or tax conservative
- Finally, would you say that your chosen company has been tax conservative or tax aggressive or something in between regarding the management of income tax expense? For example, the basic corporate income tax rate as of January 1, 2018 is 21% for U.S. corporations; what is the effective income tax rate of your chosen company in its latest Annual Report? (Hint: take income tax expense on the income statement divided by income before income taxes to obtain the overall effective income tax rate.) What has been the trend in that effective income tax rate over the last two fiscal years compared to the 21% basic corporate tax rate? Does that change your answer to the tax â€œconservative or aggressiveâ€ question for your chosen company? Make sure you take into consideration when evaluating your Company’s effective income tax rate that as a result of the Tax and Jobs Act of 2017, the corporate income tax rate was reduced from 35% to 21% effective January 1, 2018. So, a large decline in your chosen Company’s effective overall income tax rate from 2017 to 2018 was certainly due to the Tax and Jobs Act of 2017 alone.