Research

Working Papers

1. "Does Private Voluntary Disclosure Affect Audit Risk?" with Andrew Belnap and Jeff Hoopes

Status: Preparing for submission

Presentations: BYU Accounting Symposium 2025; 118th NTA's Annual Conference on Taxation 

Abstract: This paper examines the trade-off between private tax disclosure and audit risk associated with firms’ use of private letter rulings (PLRs). PLRs allow firms to seek binding guidance from the Internal Revenue Service (IRS) on the tax treatment of specific transactions, reducing uncertainty but requiring voluntary disclosure of sensitive tax information to the IRS. Using a novel dataset of PLRs disclosed in public firms’ SEC filings, we find that firms receiving a PLR for the first time experience a decrease in their audit likelihood. These results are concentrated in small firms, and those with low levels of tax avoidance. We find no other change in tax outcomes—GAAP ETRs, Cash ETRs, or UTBs, suggesting that firms’ tax behavior does not change following receipt of the PLR. We find firms that disclose PLRs also change tax disclosure, suggesting they perceive and want to convey to stakeholders this decreased risk. Our study contributes to the literature on corporate tax strategy, voluntary disclosure, and tax enforcement by providing large-sample empirical evidence on the effects of PLRs. For policymakers, our results suggest that expanding the availability of PLRs or similar programs could improve tax compliance and reduce enforcement costs for both firms and the IRS.