04 Taxation (TAX)
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ItemThe Impact of the “Grain Glitch Fix” on Specialized Cooperatives( 2022)This paper examines the influence of the tax rule changes associated with the Tax Cuts and Jobs Act of 2017 (“TCJA 2017”) and the Consolidated Appropriations Act of 2018 (“2018 Act”) fix to the Grain Glitch on the financing decisions and after-tax cash flows of Specified Cooperatives and their patrons. I show Specialized Coops have incentive pass-down their Section 199A(g) deduction to eligible patrons to increase their after-tax cash flows. I also show that, depending on the situation, Specialized Coops will have incentive to issue qualified or non-qualified distributions to their patrons in the form or stock to increase their own level allocated equity as well as to provide their patrons future cash flow flexibility. Finally, I suggest that the ability of Exempt Coops to take the Section 199A(g) deduction on non-patronage income may increase their incentive to organize as a Section 521 Exempt Specialized Coop.
ItemInvestor Reactions to a Voluntary Tax-related Sustainability Reporting Standard: Evidence from GRI 207: Tax( 2022)We investigate the capital market reaction to events leading up to the introduction of the first standard for tax-related sustainability reporting, Global Reporting Initiative (GRI) 207. GRI is the dominant standard for sustainability reporting, which is voluntarily adopted by GRI reporting firms. Utilizing event study methodology, we document significant negative average cumulative abnormal returns (CAR) surrounding GRI 207 introduction events for a sample of GRI-reporting firms. We interpret this result as evidence that investors perceive the costs of tax transparency under the new standard to be greater than the benefits. Cross-sectional results suggest investors perceive that GRI 207 provides new information beyond existing country-by-country reporting requirements and that costs will be higher when tax is a material topic. Qualitative interviews supplement our empirical analyses and provide context for our results.
ItemTax-Loss Harvesting with Cryptocurrencies( 2022)This study describes the landscape of taxation in the crypto markets concerning U.S. taxpayers, and examines how recent increases in tax scrutiny have lead to changes in trading behavior by crypto traders. Using a conceptual framework, we predict and find that increased tax scrutiny leads crypto investors to utilize legal tax planning with tax-loss harvesting as an alternative to non-compliance. In particular, domestic traders increase compliance and tax-loss harvesting following the increase in tax scrutiny, and U.S. exchanges exhibit a significantly greater amount of wash trading. Additional findings suggest that broad-based and targeted changes in tax scrutiny can differentially affect crypto traders’ preference for U.S.-based exchanges. We discuss new gray areas for tax regulation relating to new crypto assets such as Non-Fungible Tokens and Decentralized Finance protocols that highlight the importance of the coordination between tax policy and other regulations.