What the New Tax Disclosure Rules Can — and Can’t — Tell You
New accounting rules require publicly traded companies to provide more detailed tax disclosures, including rate reconciliations that explain why effective tax rates differ from the U.S. statutory rate of 21%. However, this reconciliation format was designed for the U.S. worldwide tax system and hasn’t been updated for the post-2017 territorial system, where foreign earnings are largely exempt from U.S. tax. This analysis examines how the outdated benchmark creates interpretive challenges and may lead to misunderstandings about what tax disclosures actually reveal.