NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Michelle Hanlon

Sloan School of Management
Massachusetts Institute of Technology
E62-668, 100 Main Street
Cambridge, MA 02142

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org

NBER Working Papers and Publications

September 2005Book-Tax Conformity for Corporate Income: An Introduction to the Issues
with Terry Shevlin
in Tax Policy and the Economy, Volume 19, James M. Poterba, editor
January 2005Bank-Tax Conformity for Corporate Income: An Introduction to the Issues
with Terry Shevlin: w11067
This paper discusses the issues surrounding the proposals to conform financial accounting income and taxable income. The two incomes diverged in the late 1990s with financial accounting income becoming increasingly greater than taxable income through the year 2000. While the cause of this divergence is not known for certain, many suspect that it is the result of earnings management for financial accounting and/or the tax sheltering of corporate income. Our paper outlines the potential costs and benefits of one of the proposed "fixes" to the divergence: the conforming of the two incomes into one measure. We review relevant research that sheds light on the issues surrounding conformity both in the U.S. as well as evidence from other countries that have more closely aligned book and taxable i...
 
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