The TCJA Effects Tracker


What Do We Know About the Effects of the Tax Cuts and Jobs Act?

On December 22, 2017, the U.S. tax code was dramatically changed when what is commonly referred to as the Tax Cuts and Jobs Act (TCJA) was signed into law. As tax scholars, we have a keen interest in knowing how the TCJA will change the world. On this page, we are posting empirical academic studies that focus on specific provisions of this monumental tax reform.

We plan to update this page as more studies come out. Further, many of these studies are early working papers, and have not been vetted by the peer-review process, so check back regularly for updates.

Many of these articles below I have curated on my own, or others have shown to me. However, if you would like to request that we add your study, please email me at We are only posting studies that are hosted elsewhere (we prefer they be accessible on SSRN), and that are (1) empirical, (2) academic and (3) focus on the TCJA.

Jeff Hoopes
Jeff Hoopes
Research Director
UNC Tax Center

The Effects of the U.S. Tax Reform on Investments in Low-Tax Jurisdictions – Evidence from Cross-Border M&As

September 28, 2021

Dunker, Mathias and Pflitsch, Max and Overesch, Michael

This paper examines the effects of the 2017 U.S. tax reform, commonly known as the ‘Tax Cuts and Jobs Act’ [TCJA] on cross-border M&As of U.S. acquirers. The TCJA replaced the U.S. worldwide tax system by a territorial system, albeit with one important exception: the ‘Global Intangible Low-Taxed Income’ [GILTI] provision. Our results suggest that the outbound acquisition pattern changed significantly for those U.S. acquirers that are affected by the new GILTI provision. GILTI-affected firms acquire targets in low-tax countries and tax havens significantly less often after the TCJA. We also provide weak evidence that U.S. firms not affected by the GILTI regime acquire more often targets in low-tax countries and tax havens. More

U.S. Multinational Corporations’ Initial Income-Shifting Response to the TCJA

September 28, 2021

Atwood, T. J. and Johnson, Tyler P.

We find U.S. multinational corporations (MNCs) responded to the Tax Cuts and Jobs Act (TCJA) of 2017 by increasing income shifted to foreign sources in the first two years following the effective date. Financially constrained MNCs increased income shifting more, while higher operational uncertainty MNCs increased income shifting less than other MNCs. Moreover, MNCs likely to be subject to the base erosion and anti-abuse tax (BEAT) increased income shifting less than other MNCs, while firms having a global intangible low-taxed income (GILTI) inclusion are not discouraged from shifting income. MNCs that increase income shifting the most disclose less information about their GILTI liabilities. Our findings suggest that the GILTI provisions are not effective in curbing income shifting to foreign jurisdictions and that proposals such as the Global Minimum Tax are also unlikely to be effective if the rate is lower than the home country corporate income tax rate. More

How Does Removing the Tax Benefits of Debt Affect Firms? Evidence from the 2017 US Tax Reform

July 01, 2021

Sanati, Ali


Despite extensive efforts, the relation between tax incentives and corporate capital structure is an open question. The 2017 US tax reform creates an opportunity to directly estimate this relation. The reform limits the tax advantage of debt for all firms except for small businesses with average sales below $25 million. I use the exception threshold in a regression discontinuity design and show that corporate debt declines nearly dollar for dollar as the present value of the tax benefits of debt shrinks. Treated firms do not raise equity to replace debt, and they decrease investments and hiring, consistent with a rise in the cost of external financing. Confirming the tax channel, treatment effects are stronger in firms with more profits and smaller non-debt tax shields. Comparing the size of the debt tax shield across the firm size distribution suggests that the estimates likely provide a lower bound for the effects in large corporations. More

Early Evidence on the Use of Foreign Cash Following the Tax Cuts and Jobs Act of 2017

April 02, 2021

Beyer, Brook and Downes, Jimmy and Mathis, Mollie and Rapley, Eric T. 

The Tax Cuts and Jobs Act of 2017 (TCJA) reduces U.S. multinational companies’ (MNC) internal capital market frictions related to repatriation costs by decreasing costs to access internal capital (i.e., foreign cash). This study examines MNCs’ responses to the TCJA and finds spending and investment behavior are dependent upon liquidity, investment opportunities, and borrowing costs. Domestic capital expenditures increased for MNCs with low domestic liquidity and high domestic investment opportunities. These firms also increased share repurchases. In contrast, MNCs with low domestic liquidity and low domestic investment opportunities increased dividends. MNCs with low domestic investment opportunities and high cost of debt reduced their outstanding debt. We also investigate responses to global intangible low-taxed income (GILTI) incentives and find that MNCs with more foreign cash and a greater likelihood of being affected by the GILTI regime increase their foreign but not domestic capital expenditures - a potential unintended consequence of TCJA. More

How Do Business Owners Respond to a Tax Cut? Examining the 199A Deduction for Pass-through Firms

April 01, 2021

Goodman, Lucas and Lim, Katherine and Sacerdote, Bruce and Whitten, Andrew 


Identifying the Heterogeneous Impact of Highly Anticipated Events: Evidence from the Tax Cuts and Jobs Act

March 17, 2021

Borochin, Paul and Celik, Murat Alp and Tian, Xu and Whited, Toni M 

Authors estimate the market anticipated the probability of TCJA passage to be as high as 95% 30 days before the event. The full value impact of the TCJA is found to be 12.36%, compared to 0.68% when market anticipation is ignored. More

The Tax Cut and Jobs Act (2017) as a Driver of Pension Derisking: A Comprehensive Examination

March 12, 2021

Anantharaman, Divya and Kamath, Sairpriya and Li, Shengnan 


Corporate defined-benefit (DB) pension sponsors in the US are increasingly on a path of “derisking” – by moving pension assets away from equities and towards fixed-income securities that better match the obligations, or by transferring obligations off their balance sheets entirely, via settlements with insurance companies or lump-sum payouts to beneficiaries. In this study, we examine whether the Tax Cut and Jobs Act of 2017 (“TCJA”) served as a driver of pension derisking. Examining behavior in the window between the TCJA’s announcement and its lower tax rate going into effect, we document that sponsors with stronger incentives to derisk their pensions tend to contribute more into their plans in that window, while deductions can still be taken at the higher tax rate – specifically, sponsors expecting large and uncertain contribution requirements for pensions in the future, facing high regulatory costs to maintaining plans, and with competing demands on cash flows. Examining behavior after the TCJA goes into effect, we document that the firms with the largest TCJA-triggered contributions also engage in more derisking subsequently, both by shifting asset allocations and by transferring obligations to other parties. In sum, our findings point to the TCJA having acted as a trigger for what could be a fundamental reorganization of the DB pension landscape in the US. More

Sharing the Wealth: The Effects of TCJA Bonuses on Employee Pay Satisfaction

February 21, 2021

Hetchens, Michelle and Lynch, Dan and Stomberg, Bridget 

Approximately 60 public companies announced they would share cash windfalls from the Tax Cuts and Jobs Act (TCJA) with rank-and-file employees through bonuses, higher wages, or increased benefits. We use employee survey data from Culture X to examine how the announcement of these TCJA bonuses affected employee pay satisfaction. Although employees are economically better off upon receiving these bonuses, prior literature suggests employee pay satisfaction could decrease if employees perceive the bonuses to be unfairly small. Using a difference-in-difference design, we find a greater decline in pay satisfaction among employees at firms announcing a TCJA bonus versus those that do not. Consistent with dissatisfaction about unfairly small bonuses, we document a larger decline in pay satisfaction at announcing firms with larger increases in CEO bonuses and larger share repurchases around the TCJA. Our results provide new insights into how workers respond to changes in compensation stemming from corporate tax savings. More

‘Just BEAT It’ Do firms reclassify costs to avoid the base erosion and anti-abuse tax (BEAT) of the TCJA?

February 17, 2021

Laplante, Stacie Kelley and Lewellen, Christina and Lynch, Dan and Samuel, David M. P. 

This study examines whether multinational corporations (MNCs) reclassify related-party payments to avoid the new base erosion and anti-abuse tax (BEAT). The Tax Cuts & Jobs Act of 2017 included the BEAT to combat income shifting from the U.S. to foreign entities. An exclusion in the tax law provides MNCs an incentive to reclassify related-party payments as cost of goods sold. We use a triple-difference design that leverages the BEAT filing threshold of $500 million in revenue and the parent company’s location to document increases in the unconsolidated sales of foreign subsidiaries of MNCs subject to BEAT relative foreign subsidiaries of MNCs not subject to BEAT consistent with cost reclassification. We also find this effect is strongest in MNCs with more related-party payments. Overall, our results imply that firms use the subjectivity inherent in cost classification to reclassify costs as cost of goods sold to avoid the BEAT. More

Does Tax Matter? Evidence on Executive Compensation after 162(M)’s Repeal

February 04, 2021

Galle, Brian D. and Lund, Andrew and Polsky, Gregg D. 

As part of the most sweeping federal tax reform in a generation, the Tax Cuts and Jobs Act (“TCJA”) radically altered the tax treatment of compensation paid to senior executives of public companies. Prior to the TCJA, payment of such compensation in excess of one million dollars was non-deductible except to the extent the compensation was performance-based. The TCJA eliminated the exception so that all senior executive compensation above one million dollars is now non-deductible regardless of whether it is performance-based or not. This reform provides a natural experiment to study the role of tax law in influencing managerial pay decisions, an issue that has been debated for decades by scholars and policymakers. Did the elimination of the performance-based pay exception influence senior executive compensation decisions? Using a novel empirical design, we find no evidence that the repeal of the performance-based pay exception changed the most significant and salient compensation features, namely the proportion of performance-based pay to total pay and the overall amount of pay. On the other hand, when we move from headline compensation features to smaller technical ones, our data suggests that the tax change has had a significant influence. This suggests that tax rules may be only consequential in shaping executive compensation when no one else is paying attention otherwise.

The 283 Days of Stock Returns after the 2016 Election

November 10, 2020

Diercks, Anthony and Soques, Daniel and Waller, William (2020)

Conventional wisdom suggests that the promise of tax legislation played an important and positive role in the 25% increase in the stock market that began on November 9, 2016 and continued through December 22, 2017 (the day TCJA was signed into law). Our comprehensive and exhaustive forensic analysis confirms its positive effect. With that said, we find that its net impact is relatively modest. To come to this conclusion, we first construct a novel daily human-based attribution by carefully reading the news on each of the 283 days. This exercise shows the 52 days in which tax-related news was important make up less than 1% of the total observed return. We attribute large gains to tax-related news immediately after the election as well as the build-up to passage in late 2017. However, key events in the summer of 2017 decreased the prospects for tax legislation, which wiped out most of the gains that we attributed to tax policy over the full sample. This "up, down, and up again" narrative is corroborated across a wide-range of alternative approaches, including (1) a machine-driven textual analysis based on over 1,500 possible specifications, (2) a novel probability measure tied to the passage of tax legislation constructed from prediction markets, (3) the relative performance of high tax firms compared to low tax firms, (4) a daily attribution based on firm-level regressions, and (5) several macroeconomic financial indicators. The relatively modest estimated effects are consistent with the market potentially being more driven by strong global growth, changes in other policies, a weaker dollar (which coincided with a reduction in the likelihood of passage of tax legislation), and numerous below-expectations inflation prints (keeping monetary policy at bay) that fortuitously occurred over this time period. More

Earnings Management around the Tax Cuts and Jobs Act of 2017

October 30, 2020

Lynch, Dan and Pflitsch, Max and Stich, Michael W.

This paper examines earnings management around the reduction in the corporate tax rate from 35% to 21% as enacted by the ‘Tax Cuts and Jobs Act’ (TCJA) of 2017. Building on a theoretical model that considers a higher level of book-tax conformity of ‘real earnings management’ (REM) in relation to ‘accrual-based earnings management’ (AEM), we hypothesize that firms concertedly use these manipulation techniques for different purposes. Specifically, we predict and find that firms engage in REM to shift income from the high-tax period prior to the TCJA to the low-tax period after of the TCJA to realize tax benefits. In contrast, we predict and find that firms use AEM, which has a lower degree of book-tax conformity, to simultaneously increase book income. Consistent with intertemporal income shifting, we also find that these effects reverse in 2018. Overall, our results document a potential unintended consequence of the TCJA on firm behavior that should be useful to policymakers, regulators, and researchers to evaluate the largest tax reform since 1986. More

In the Nick of Time: Performance-Based Compensation and Proactive Responses to the Tax Cuts and Jobs Act

October 29, 2020

Durrant, Jon and Gong, James Jainxin and Howard, Jennifer 

The Tax Cuts and Jobs Act of 2017 (TCJA) introduced two major changes that may influence the structure of executive compensation: (1) reducing corporate tax rates from 35 to 21 percent and (2) eliminating the performance-based pay exception in Section 162(m). These changes provide incentives to maximize deductible compensation expense in 2017, before the TCJA goes into effect. Therefore, we predict performance-based compensation to increase more in 2017 relative to prior years. Consistent with our expectation, we find that the increase in CEO bonus and stock option compensation is significantly greater in 2017. Our difference-in-difference results are consistent with the tax rate reduction driving the bonus increase and the repeal of the performance-based exception leading to the increase in CEO stock options. The TCJA also changed the definition of covered employees to include the CFO. We find weak evidence for abnormal increases in CFO performance-based compensation. Additional analyses indicate firms facing stronger tax incentives drive our results. Overall, our findings suggest that firms’ responded to the TCJA in the period before it was effective. More

Does Government Play Favorites? Evidence from Opportunity Zones

September 18, 2020

Eldar, Ofer and Garber, Chelsea

In 2017, Congress introduced the Opportunity Zone (``OZ'') designation to promote development in distressed communities. A criticized feature of the program is that state governors select zones from many eligible tracts without meaningful scrutiny. We find that while governors are more likely to select tracts with higher distress levels and tracts on an upward economic trajectory, favoritism seems to play an important role in governor decisions. OZ designation is more likely for tracts in counties that supported the governor in the election and when executives or firms with an economic interest in the tract donated to the governor's campaign. More

Did tax reform influence the prevalence of nonfinancial compensation incentives?

August 26, 2020

Fox, Zackery D. 

I examine a presumably unintended consequence of the recent tax reform (Tax Cuts and Jobs Act or TCJA) for executives’ incentive compensation. Specifically, one often overlooked provision of the tax reform is that it removed the requirement that bonus plans be tied to objective financial performance measures for the bonus to be tax deductible. A potential consequence of this removal is that firms may begin to rely more heavily on nonfinancial performance measures in their bonus arrangements. I find an increase, post-TCJA, in both the number of and the weight applied to nonfinancial performance measures. Next, I investigate the implications of these changes. I find evidence of an increase in both investor and information uncertainty for firms increasing their use of nonfinancial performance metrics following the TCJA. I also examine whether the increase in nonfinancial metrics leads to improvements in sustainability outputs (actions aimed at environmental, social, and governance activities) and find evidence of a positive relation. Overall, the results suggest that the recent tax reform facilitated the inclusion of additional nonfinancial performance measures in executive bonus plans. Although the increased use of these metrics is associated with greater investor and information uncertainty, the changes appear to have also led to immediate improvements in sustainability performance. More

What is the Impact of Opportunity Zones on Employment Outcomes?

August 25, 2020

Atkins, Rachel M. B. and Hernandez-Lagos, Pablo and Jara-Figueroa, Cristian and Seamans, Robert 

We study the effect of Opportunity Zones (OZs) on employment outcomes. We match zip codes with OZs to a control group of similar zip codes that do not have any OZs, and compare job postings and posted salaries across these two groups over time. We find that zip codes with OZs have fewer job postings but higher posted salaries, though both effects are very small in magnitude. We explore further the extent to which the results are driven by particular OZs. About 8700 census tracts were designated as OZs in 2018, yet it appears that only a few hundred have received investments. Those OZs for which we are able to gather data on investments are among the most economically attractive in that they already had more job postings and job growth prior to their OZ designation. When we redo our analysis on the smaller set of OZs with investment we again find fewer job postings and higher posted salaries, but the magnitudes are slightly higher than on the full matched sample. More

Who Benefits from Place-Based Policies? Job Growth from Opportunity Zones

August 04, 2020

Arefeva, Alina and Davis, Morris A. and Ghent, Andra C. and Park, Minseon 

The Tax Cuts and Jobs Act of 2017 established a new program called “Opportunity Zones” that created tax advantages for investment locating in Census tracts with relatively low income or high poverty. Importantly, only 25% of eligible tracts in each state could be designated as an Opportunity Zone. We use detailed establishment-level data and a difference-in-difference (DiD) approach to identify the designation of a tract as an Opportunity Zone on job creation. We find the Opportunity Zone designation increased employment growth relative to comparable tracts by a statistically significant 2-4 percentage points over the 2017-2019 period. This result holds for many different industries and for a variety of skill levels. More

The Effect of U.S. Tax Reform on the Tax Burdens of U.S. Domestic and Multinational Corporations

July 14, 2020

Dyreng, Scott and Gaertner, Fabio and Hoopes, Jeffrey and Vernon, Mary

We quantify the net effect of recent U.S. tax reform on the tax rates of public U.S. corporations and find they decreased by 7.5 to 11.4 percentage points on average following tax reform. Further, we separately examine the effect of tax reform on purely domestic firms and multinational firms because some key provisions only affect multinational firms. We find both sets of firms benefited from tax reform, although domestics benefited the most. We also find the entirety of multinational tax savings stemmed from tax savings on their domestic operations, not as a result of more favorable taxation of international income. We also find no changes in the federal tax burden on foreign income for firms most likely to be subject to the new anti-abuse provisions. Overall, our findings suggest that despite the recent overhaul in international taxation, the federal tax burden on the foreign earnings of U.S. corporations appears to have been largely unaffected. More

The Impact of U.S. Tax Reform on U.S. Firm Acquisitions of Domestic and Foreign Targets

June 26, 2020

Atwood, T. J. and Downes, Jimmy and Henley, Jodi and Mathis, Mollie

The Tax Cuts and Jobs Act of 2017 (TCJA) eliminated disincentives for U.S. multinational corporations (MNCs) to repatriate foreign subsidiaries’ earnings, but the TCJA included additional provisions that will impact U.S. firms’ acquisition decisions. We find that both the likelihood and number of domestic and foreign acquisition announcements made by U.S. firms decreased on average after the TCJA but increased with repatriation taxes that U.S. MNCs faced prior to the TCJA. This effect is stronger for those MNCs that held larger amounts of foreign cash prior to the TCJA. The post-TCJA increase in foreign target acquisitions is driven by MNCs that are more likely to be subject to the global intangible low-tax income (GILTI) provisions after the TCJA. Our results suggest that the GILTI provisions introduced a contradictory incentive for U.S. MNCs with higher returns from intangible assets to investment in foreign target firms with lower returns on tangible property. More

The Tax Cuts and Jobs Act: Which Firms Won? Which Lost?

June 26, 2020

Wagner, Alexander F. and Zeckhauser, Richard J. and Ziegler, Alexandre

The Tax Cut and Jobs Act (TCJA) slashed corporations’ median effective tax rates from 31.7% to 20.8%. Nevertheless, 15% of firms experienced an increase. One fifth of firms recorded nonrecurring tax costs or benefits exceeding 3% of total assets. Proxies that existing studies employ to assess the TCJA’s impacts account for just half of actual impacts. Stock prices impounded those proxies during the legislative process. Total impacts were impounded the following year, once firms published their financials. These results indicate that investors find it hard to predict even large and immediate changes to company cash flows due to unfamiliar events. More

Do Analysts Mind the GAAP? Evidence From the Tax Cuts and Jobs Act of 2017

June 14, 2020

Chen, Novia (Xi) and Koester, Allison

This study examines the quality of analysts’ GAAP-based earnings forecasts. Ideally, addressing this question requires events that have an ex ante estimable earnings impact, and affect GAAP earnings but not street earnings. The deferred tax adjustment as a result of a 2017 tax law change meets these criteria. Focusing on the fourth quarter of 2017 (2017Q4), we find that analysts’ GAAP earnings forecasts and revisions fail to incorporate the vast majority of the deferred tax adjustment. We explore two potential explanations for this finding – task-specific complexity and lack of GAAP earnings forecasting effort. We find evidence consistent with the latter. Our final analyses consider two implications of our findings. First, despite analysts underreacting to the deferred tax adjustment, investors promptly impound the adjustment into stock prices at the legislative enactment date, indicating that analysts’ GAAP earnings forecasts are not a good proxy for investor expectations of GAAP earnings during our sample period. Second, analysts who best incorporate the adjustment into their 2017Q4 GAAP earnings forecasts issue more accurate GAAP earnings forecasts for subsequent quarters, indicating that our inferences extend beyond a single quarter and account. Collectively, these findings have implications for research that relies on analysts’ GAAP earnings forecasts to be of reasonable quality. More

The Effect of the 2017 U.S. Tax Reform on U.S. Acquisitions of Foreign Firms

June 09, 2020

Amberger, Harald and Robinson, Leslie A.

The Tax Cuts and Jobs Act (TCJA) of 2017 is the most significant tax reform that the U.S. has experienced in decades, thereby changing incentives for many significant corporate investment decisions. We emphasize the key tax reform provisions altering incentives for outbound investment and examine changing patterns in outbound acquisitions of U.S. firms before and after the TCJA. We find a decreased probability that a foreign target is acquired by a U.S. firm after the TCJA, particularly those that hold IP or are located in low-tax or low-growth markets. We also find a decreased probability that a U.S. firm with untaxed foreign earnings closes a foreign M&A deal after the TCJA, but an increased probability if the firm had no significant foreign presence prior to the TCJA. Taken together our results suggest that the TCJA was largely effective in reducing tax distortions to outbound M&A activity. More

(Un)intended Consequences? The Impact of the 2017 Tax Cuts and Jobs Act on Shareholder Wealth

May 25, 2020

Kalcheva, Ivalina and Plecnik, James and Tran, Hai and Turkiela, Jason

We study the stock market reactions to the Tax Cuts and Jobs Act (TCJA), the most significant structural U.S. tax reform in over 30 years. In line with the stated intent of TCJA proponents, we find that the Act benefited highly taxed firms. However, the Act hindered firms with international operations as well as firms with high interest expense and tax losses. Counter to claims that the TCJA would quickly spur economic growth, we find that financially constrained and high growth opportunity firms did not benefit. Rather, market participants anticipate that most of the TCJA’s benefits will be passed on to shareholders via higher corporate payouts. We confirm these market expectations by documenting that firms did increase payouts via repurchases after the TCJA, but did not increase their corporate investments. More

Pension Contributions and Tax-Based Incentives: Evidence from the TCJA

May 25, 2020

Ahmed, Ahmed and Zabai, Anna

We document that corporate pension contributions respond to tax-based incentives using the 2017 Tax Cut & Jobs Act (TCJA) as a natural experiment. The TCJA cut the U.S. federal corporate tax rate, temporarily increasing contribution incentives for sponsors of defined-benefit retirement plans. We exploit cross-sectional variation in ex-ante exposure to these incentives. We find that the tax break induced an extra $3 billion of sponsor contributions to medium- and large-scale plans in 2017. But we also find strong evidence of a reversal, both in terms of sponsor contributions and plan funding ratios by 2018. We find no evidence of impact on plan asset allocations. Our results suggest that the TCJA did not have a long-lasting impact on corporate defined-benefit pension funds. More

Tax and Nontax Incentives in Income Shifting: Evidence from Shadow Insurers

May 25, 2020

Hepfer, Bradford and Wilde, Jaron and Wilson, Ryan

Income shifting is a significant concern among policymakers worldwide and a growing area of academic interest. We use the shadow insurance setting to study the interplay between tax and nontax incentives in income shifting. Shadow insurance involves intercompany transactions ostensibly designed to help firms meet regulatory capital requirements. We argue that prior to the Tax Cuts and Jobs Act of 2017 (TCJA), foreign owned life insurance firms could use it to shift their U.S. profits to tax havens and save taxes. We find that although nontax incentives appear to be the dominant factor behind firms’ use of shadow insurance, tax considerations also played a significant role for certain firms. While our results suggest that taxes provided an important incentive for foreign owned life insurance firms to use shadow insurance, our study also highlights that, in this setting, nontax considerations appear to motivate U.S. owned firms’ use of tax havens. More

Taxes and IPO Pricing: Evidence from U.S. Tax Reform

May 25, 2020

Edwards, Alexander and Hutchens, Michelle

This study examines when and how tax reform impacts the pricing of IPOs. Using the Tax Cuts and Jobs Act of 2017 (TCJA), we examine IPO pricing during the periods of anticipated and post-tax reform. First, we document that firms completing an IPO following the passage of the TCJA experience an increase in valuation. The increase in valuation is significantly lower for firms with net deferred tax assets and U.S. based multinational firms, consistent with those firms benefiting less from the reform. Second, we fail to document an increase in valuation for firms completing their IPO during the period of anticipated tax reform. We further observe that firms did not experience an increased probability of an upward pricing revision during the book-building process during this period, suggesting that the IPO market was unwilling to impound the benefits of anticipated tax reform into offer prices until enactment. This result contrasts with research on the pricing of tax reform for existing publicly traded stock, where prices impound the anticipated benefits from tax reform, far in advance of enactment. More

The Impact of U.S. Tax Reform on U.S. Firm Acquisitions of Domestic and Foreign Targets

May 25, 2020

Atwood, T. J. and Downes, Jimmy and Henley, Jodi and Mollie, Mathis

The Tax Cuts and Jobs Act of 2017 (TCJA) eliminated disincentives for U.S. multinational corporations (MNCs) to repatriate foreign subsidiaries’ earnings, but the TCJA included additional provisions that will impact U.S. firms’ acquisition decisions. We find that both the likelihood and number of domestic and foreign acquisition announcements made by U.S. firms decreased on average after the TCJA but increased with repatriation taxes that U.S. MNCs faced prior to the TCJA. This effect is stronger for those MNCs that held larger amounts of foreign cash prior to the TCJA. The post-TCJA increase in foreign target acquisitions is driven by MNCs that are more likely to be subject to the global intangible low-tax income (GILTI) provisions after the TCJA. Our results suggest that the GILTI provisions introduced a contradictory incentive for U.S. MNCs with higher returns from intangible assets to investment in foreign target firms with lower returns on tangible property. More

What Determines Where Opportunity Knocks? Political Affiliation in the Selection of Opportunity Zones

February 07, 2020

Frank, Mary Margaret and Hoopes, Jeffrey L. and Lester, Rebecca

We examine the role of political affiliation during the selection of Opportunity Zones, a place-based tax incentive enacted by the Tax Cuts and Jobs Act of 2017. We find governors are on average 7.6% more likely to select a census tract as an Opportunity Zone when the tract’s state representative is a member of the governor’s political party. Further, we find that this effect ranges from 0.0% to 26.4% based on the state-level processes governors used to select Opportunity Zones, such as engagement of professional advisors and implementation of public comment procedures. These effects are incremental to important demographic factors that also increased the likelihood of selection, such as lower income levels and improving local conditions. These results provide evidence relevant for current Congressional legislative proposals by informing the extent to which state-level politics and processes affected the implementation of this incentive. More

Unlocking Trapped Foreign Cash, Investor Types, and Firm Payout Policy

November 02, 2019

Erik Olson

I study whether trapped foreign cash levels and investor type explain variation in US-based multinationals’ payout policy responses to tax-repatriation-driven cash windfalls. To do so, I use the deemed mandatory repatriation of trapped foreign cash included in the 2017 Tax Cuts and Jobs Act (TCJA). I find my measure of the level of “unlocked” trapped foreign cash (UTC) is related to increases in repurchases and dividends observed post-TCJA. Motivated by prior research, I examine whether this increase in payout varies with institutional investor type: transient, dedicated, and quasi-indexers (Bushee 2001). I find that firms with high UTC and low (high) dedicated ownership see an increase (no change) in repurchases post-TCJA. I do not observe similar variation with investor type for dividends. More

Changes in CEO Compensation after the Tax Cuts & Jobs Act and the Impact of Corporate Governance: Initial Evidence

September 16, 2019

Luna, LeAnn and Schuchard, Kathleen, and Stanley, Danielle

The Tax Cuts and Jobs Act (TCJA) expanded the impact of IRC Section 162(m) by disallowing deductions for any compensation over $1 million paid to top executives. Under prior law qualified performance-based pay was exempt from the $1 million cap. We examine whether TCJA affected compensation decisions in the first year following enactment. More

Stock Repurchases and the 2017 Tax Cuts and Jobs Act

September 12, 2019

Bennett, Benjamin and Thakor, Anjan and Wang, Zexi

We study the effects of the 2017 Tax Cuts and Jobs Act (TCJA) on repurchases, leverage and investment. The TCJA generatestax windfalls through a repatriation tax cut and a corporate income tax cut. More

Where Is the Opportunity in Opportunity Zones? Early Indicators of the Opportunity Zone Program’s Impact on Commercial Property Prices

August 01, 2019

Sage, Alan and Langen, Mike and Van de Minne, Alex

In December 2017, the U.S. Congress passed into law the Opportunity Zone (OZ) program, offering significant tax benefits for property investments in designated low-income census tracts. More

Examining the Immediate Effects of Recent Tax Law Changes on the Structure of Executive Compensation

June 17, 2019

De Simone, Lisa and McClure, Charles and Stomberg, Bridget

We exploit a December 22, 2017 law change to examine the relation between corporate taxes and executive compensation. More

Debt and Taxes? The Effect of TCJA Interest Limitations on Capital Structure

June 14, 2019

Carrizosa, Richard and Gaertner, Fabio B. and Lynch, Dan

Using a difference-in-differences design, we show that new limitations on the deductibility of interest, enacted as part of the Tax Cuts & Jobs Act of 2017 (TCJA), significantly decrease corporate leverage. More

The Effect of the Tax Cuts and Jobs Act of 2017 on Multinational Firms’ Capital Investment: Internal Capital Market Frictions and Tax Incentives

May 01, 2019

Beyer, Brooke and Downes, Jimmy F. and Mathis, Mollie E. and Rapley, Eric T

The Tax Cuts and Jobs Act of 2017 (TCJA) imposes a mandatory repatriation tax on multinational firms’ unremitted foreign earnings. More

Making Only America Great? Non-U.S. Market Reactions to U.S. Tax Reform

March 30, 2019

Gaertner, Fabio B. and Hoopes, Jeffrey L. and Williams, Braden

We study foreign externalities of U.S. tax reform. Specifically, we examine foreign firms’ stock returns around key tax reform events. More

The Magnitude and Accuracy of Companies’ Estimates of the Immediate Financial Statement Impact of the Tax Cuts and Jobs Act

March 18, 2019

Chen, Shannon and Erickson, Matthew and Harding, Michelle and Stomberg, Bridget and Xia, Junwei

We provide evidence of the final, immediate financial statement impact of some of the major provisions of the 2017 U.S. tax law changes, commonly referred to as the Tax Cuts and Jobs Act (TCJA). More

Shareholder Wealth Effects of Border Adjustment Taxation

March 15, 2019

Gaertner, Fabio B. and Hoopes, Jeffrey L. and Maydew, Edward L.

Following two decades of discussion, the border adjustment tax briefly emerged as part of proposed U.S. corporate tax reform in early 2017. More

Tax Reform Made Me Do It!

November 05, 2018

Hanlon, Michelle and Hoopes, Jeffrey L. and Slemrod, Joel B.

This paper examines corporations’ actions, and statements about actions, following the tax law change known as the Tax Cuts and Jobs Act (TCJA). More

The Effects of the Tax Cuts & Jobs Act of 2017 on Defined Benefit Pension Contributions

October 24, 2018

Gaertner, Fabio B. and Lynch, Dan and Vernon, Mary

This study examines the effect of the Tax Cuts & Jobs Act of 2017 (TCJA) on corporate defined benefit pension contributions. More

A year of rising dangerously? The U.S. stock market performance in the aftermath of the presidential election

June 04, 2018

Blanchard, Olivier and Collins, Christopher G. and Jahan-Parvar, Mohammad R. and Pellet, Thomas and Wilson, Beth Ann

Immediately following the US presidential election in November 2016, many economists were concerned that increased uncertainty over economic policy would lead to a decline in the US stock market. From the time of the election to the end of 2017, however, the stock market, as measured by the Standard and Poor’s (S&P) 500 index, increased by about 25%. Price swings since then have led investors and economists to increasingly ask: was the stock market rise justified by an increase in actual and expected future dividends, or did it reflect unhealthy price developments, which may reverse in the future? More

The Immediate Impact of Tax Reform on Corporate Earnings: Investor Expectations and Reactions

June 01, 2018

Koutney, Colin Q. and Mills, Lillian F.

How quickly did investors react to the transitory earnings impact of the Tax Cuts and Jobs Act (TCJA)? More

Unequal Rewards to Firms: Stock Market Responses to the Trump Election and the 2017 Corporate Tax Reform

May 01, 2018

Wagner, Alexander F. and Zeckhauser, Richard J. and Ziegler, Alexandre

Massive dollars shuttled back and forth among firms on the twisted path to and passage of the 2017 tax reform. More

Company Stock Price Reactions to the 2016 Election Shock: Trump, Taxes and Trade

August 17, 2017

Wagner, Alexander F. and Zeckhauser, Richard J. and Ziegler, Alexandre

Donald Trump’s surprise election shifted expectations: corporate taxes would be lower and trade policies more restrictive. More