2023 Marcum Year-End Tax Guide

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THE MARCUM YEAR-END TAX GUIDE 2023

WHAT THE NEW FASB DISCLOSURE RULES COULD MEAN FOR YOUR COMPANY BY MARTIN MARTINEZ

On March 15th, 2023, The Financial Accounting Standards Board (“FASB”) proposed enhancements related to income tax disclosures (otherwise known as the “Improvements to Income Tax Disclosures). On August 30, 2023, the Board unanimously voted to finalize the proposed Accounting Standards Update (“ASU”) disclosure rules in income taxes. The proposed ASU is part of the FASB’s broader disclosure frame work project aimed at enhancing the transparency and decision usefulness of annual and interim income tax disclosures. Various stakeholders indicated that the existing income tax disclosures should be improved to provide information to better assess how an entity’s multi-jurisdictional operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows.

These enhancements were primarily focused on the following income tax information: Income taxes paid and the rate reconciliation table. The final standard will require entities to disclose more detailed information in reconciling their statutory tax rate to their effective tax rate. Public business entities (“PBEs”) will be required to provide this incremental detail in a numerical, tabular format, while all other entities will do so through enhanced qualitative disclosures. RATE RECONCILIATION DISCLOSURE The final standard will require PBEs to disclose the following specific categories: 1. State and local income tax, net of federal (national) income tax effect

2. Foreign tax effects 3. Enactment of new tax laws 4. Effect of cross-border tax laws 5. Tax credits 6. Valuation allowances 7. Nontaxable or nondeductible items 8. Changes in unrecognized tax benefits. The Board affirmed its decision to require that an entity use 5 percent of the amount computed by multiplying the income (or loss) from continuing operations before tax by the applicable statutory income tax rate as the threshold (5 percent threshold) for further disaggregation of reconciling items.

INCOME TAXES PAID Under the final standard, all entities will be required to make additional disclosures on the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign. The Board affirmed its decision to require that all entities disclose the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The Board decided to require that all entities disclose income taxes paid disaggregated by federal(national), state, and foreign and individual jurisdiction on an annual basis.

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