The Financial Reporting and Tax Aggressiveness Implications of Schedule UTP

In 2010, the Internal Revenue Service (IRS) announced the requirement to disclose uncertain tax positions (UTPs) on a new schedule (Schedule UTP) to be filed with federal corporate income tax returns. Schedule UTP requires companies to report line-item detail to the IRS of the aggregate disclosure requirement of uncertain tax benefits (UTBs) established by FIN 48 (KPMG 2010a). I examine firms' change in reporting UTBs subsequent to the announcement of Schedule UTP. Deterrence theory suggests with the increased scrutiny of Schedule UTP, firms will be motivated to reduce reported UTBs. Additionally, I examine whether the announcement of Schedule UTP impacts other proxies for tax aggressive behavior