13 Democratic Senators Urge FASB to Expand Income Tax Disclosures

By:
Chris Gaetano
Published Date:
Oct 7, 2019
Congress

Thirteen Democratic U.S. senators have co-authored a comment letter to the Financial Accounting Standards Board (FASB), calling for its proposed update on income tax disclosures to be expanded to mandate country-by-country disclosures of of income, assets, number of employees and taxes paid, according to Accounting Today

The senators, who include presidential candidates Bernie Sanders, Elizabeth Warren and Amy Klobuchar, noted that despite measures in the recent Tax Cuts and Jobs Act to discourage offshoring and profit shifting, it remains a common practice in the corporate world. They cited a study that found that 60 profitable Fortune 500 companies avoided all federal income tax in 2018. Given this level of tax avoidance, they said that the FASB should require entities to disclose a country-by-country accounting of their tax payments, which is consistent with requirements not only at the IRS but at tax authorities across the world: "Without further disclosure, lawmakers, the public, and investors are unable to ascertain whether these zero percent rates can be explained by tax breaks that are widely construed to be serving important public purposes or if they merely reflect unsustainable tax practices that exploit unintended loopholes."

The letter expressed concern that the FASB appears to be trending in the direction of less, not more, disclosure. The exposure draft, Income Taxes (Topic 740): Disclosure Framework—Changes to the Disclosure Requirements for Income Taxes, contains provisions that: 

* State that an entity need not provide required disclosures if they are immaterial; 

* Eliminates phrases such as "an entity shall disclose at a minimum," which the FASB said makes it difficult to justify omitting immaterial disclosures; and 

* Refers readers to existing literature on notes to financial statements for discussion of the appropriate exercise of discretion. 

While the proposed amendment does contain additional disclosures for entities, this never included a country-by-country analysis of tax burdens. The senators urged the FASB to include it in the final draft. 

"Instead of moving forward with the scaled-back approach, we urge you to adopt revised rules that require companies to disclose—at a minimum—the information companies currently file with the IRS on the agency's country by country tax reporting document ... with appropriate protections for certain sensitive business information," said the letter. 

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