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Frances Ellington

DBA Graduate - 2018

Thesis title

Volatility of State Corporate Income Tax Related to Combined Reporting


Sung Wook Yoon

Areas of expertise

  • Accounting and Finance
  • Careers & labor markets

I received my undergraduate and graduate degrees from the University of North Carolina - Chapel Hill's Kenan-Flagler Business School.  I am in the tax accounting field, with experience in private and public industry accounting in the U.S. and abroad.

Purpose: This paper aims to resolve the impact that combined reporting plays in stabilizing or increasing the volatility of state government tax revenue. Methodology: This chapter describes alternative models of quantitative research to evaluate combined reporting and separate reporting state tax volatility, then the models are applied to understand the volatility differences between state tax reporting methods. The state corporate income tax variables that influence the volatility are addressed. Findings: The models of state corporate income tax volatility provide that combined reporting states are often more volatile than separate reporting states as a whole. For individual firm analysis and state pair-wise comparisons, the volatility may not be significant or have opposite results based on the data and conditions of the taxpayer or state. Research Limitations: This chapter includes suggestions for future research, including firm-level data with larger sample sizes. The limitations of this study include the limited sample size (number of states and years) because of law changes and limited states applicable to the study criteria. Practical Implications: State governments are under pressure to manage and project budgets accurately due to shortage of discretionary funds and increasing costs of public services. Since the corporate income tax is the most volatile state tax revenue stream, rather than eliminate the income stream and the state corporate income tax all together, the opportunity to control and better forecast the tax revenue would help reduce fiscal debt and manage ongoing government projects. Firms use knowledge of state corporate income tax volatility for income projections and budgeting in a similar fashion in order to manage debt and cash flow. Originality and Value: This chapter provides insight to state tax policy for government officials for decisions specific to combined and separate corporate income tax reporting. The research builds on prior work by reviewing the time series decomposition elements of volatility in state corporate income tax revenue streams. Keywords: accounting, government finance, state tax policy.