Is Tax Planning Best Done In Private?

50 Pages Posted: 16 Jul 2019 Last revised: 28 Nov 2020

See all articles by Jeffrey L. Hoopes

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area

Patrick Langetieg

Government of the United States of America - Internal Revenue Service (IRS)

Edward L. Maydew

University of North Carolina at Chapel Hill

Michele Mullaney

Indiana University - Kelley School of Business - Department of Accounting

Date Written: August 4, 2020

Abstract

We utilize extensive Internal Revenue Service data to investigate the tax behavior of comparable privately-held and publicly-held corporations. Our findings paint a nuanced picture of private versus public firm tax planning. Consistent with prior research, we find that private firms are more willing to engage in tax strategies that also decrease financial accounting income (conforming tax planning). Additionally, we find that private firms are more responsive to shareholder-level dividend taxes. However, tests reveal that private firms engage in either the same or less of other types of tax planning than their public peers. These tests include general measures of nonconforming tax planning and aggressive tax planning, in addition to specific measures such as tax haven usage and use of certain credits and deductions. Overall, our findings suggest that private firms have advantages over their public peers for some types of tax planning, but are not more active tax planners otherwise.

Keywords: Tax planning, Private corporations, C-corporations

JEL Classification: H25, H26, K34, G38, M41

Suggested Citation

Hoopes, Jeffrey L. and Langetieg, Patrick and Maydew, Edward L. and Mullaney, Michele, Is Tax Planning Best Done In Private? (August 4, 2020). Available at SSRN: https://ssrn.com/abstract=3420362 or http://dx.doi.org/10.2139/ssrn.3420362

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Patrick Langetieg

Government of the United States of America - Internal Revenue Service (IRS) ( email )

1111 Constitution Avenue, NW
Washington, DC 20224
United States

Edward L. Maydew (Contact Author)

University of North Carolina at Chapel Hill ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)

HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/accounting/edward-maydew

Michele Mullaney

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States

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