National Tax Journal

Abstract- Using a matched sample of financial data on foreign multinationals and confidential income tax return data on U.S. foreign–controlled corporations (FCCs) during 1987–1996, we ex-amine whether the tax incentives of foreign multinationals influence their U.S. tax reporting. We find that foreign multinationals with relatively low average foreign tax rates report less taxable income and use more debt in their FCCs than those with relatively high average foreign tax rates. Our findings provide insights regarding the complex reporting behavior of FCCs and have implications for U.S. tax policy