Section 263A was one of the largest revenue raising provisions enacted in the Tax Reform Act of 1986. Little empirical research regarding the impact of this tax law change has been conducted. The primary objective of this study was the empirical assessment of Section 263A to determine its relative impact on firms of different sizes, inventory methods and industries.
Section 263A has been criticized for its complex rules which impose high compliance costs on affected firms. The secondary objective of this study was evaluation of simplification proposals to determine if simpler rules could be enacted that would have an impact similar to Section 263A yet reduce compliance costs.
Corporate tax return data for taxable years 1986 and 1987 were analyzed to identify firms that were severely impacted by Section 263A. The results show the tax burden from this law change fell more heavily on small firms not electing the Last-In-First-Out inventory method. In addition, wholesalers paid relatively more tax than retailers. These firms have a relatively stronger incentive to react to Section 263A by reducing inventories, relocating their production and distribution facilities outside the United States and/or restructuring their investments away from production and distribution activities towards activities in the service sector. Reactions by these firms have potential adverse consequences on the U.S. economy.
Four proposals for simplifying Section 263A rules were evaluated by simulating the impact of these proposals on the taxable income of affected firms. Use of an individual firm capitalization ratio for all future years based a firm's average ratio for the first three years Section 263A was in effect appeared superior to other proposals. The results show there is potential for decreasing the complexity of Section 263A without reducing current tax revenues. / Ph. D.
| Identifer | oai:union.ndltd.org:VTETD/oai:vtechworks.lib.vt.edu:10919/37240 |
| Date | 01 February 2006 |
| Creators | Schloemer, Paul G. |
| Contributors | Business (Accounting), Seago, W. Eugene, Kauffman, N. Leroy, Yardley, James A., McGuirk, Anya M., Cremer, Helmuth |
| Publisher | Virginia Tech |
| Source Sets | Virginia Tech Theses and Dissertation |
| Language | English |
| Detected Language | English |
| Type | Dissertation, Text |
| Format | vi, 87 leaves, BTD, application/pdf, application/pdf |
| Rights | In Copyright, http://rightsstatements.org/vocab/InC/1.0/ |
| Relation | OCLC# 25136489, LD5655.V856_1991.S346.pdf |
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