George Hani is Quoted Regarding Lower Corporate Tax Reserves as a Possible Effect of UTP Reporting in Tax Analysts

Lower Corporate Tax Reserves Hint at Possible Effects of UTP Reporting
Tax Analysts
09.11.12George Hani was quoted regarding the dip in tax reserves on Fortune 500 firms’ 2011 financial statements. Those firms recorded a collective total of $187.5 billion in tax reserves in 2011, compared to $200 billion in unrecognized tax benefits in 2010. Hani said it is possible that the decrease in aggregate tax liability reserves by the Fortune 500 has been a result of the UTP reporting regime. "I know that for a good number of companies, the prospect of submitting a Schedule UTP caused them to take steps to eliminate uncertainty and therefore reduce the reserve number," he said, noting that some businesses took proactive steps with the IRS to address the uncertainty while others simply took more conservative positions on the return.

But not all items reflected in a taxpayer's tax reserve are for issues on which the taxpayer believes the government has the better case, Hani said. "The reserve also includes items for which the taxpayer believes its position is more likely than not to succeed," he said, adding that the second step of the analysis under Financial Accounting Standards Board Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," requires some amount to be reported in the reserve because of some amount of uncertainty. "I know of large taxpayers whose only issues in their reserves—and only issues on Schedule UTP—are for issues [regarding which] the taxpayer believes it has the better case than the government," he said.
Related Files
Related Links