Net Operating Loss Carryforwards and Corporate Tax Policy

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dc.contributor.authorBarro, Jorgeen_US
dc.contributor.orgJames A. Baker III Institute for Public Policyen_US
dc.date.accessioned2019-05-29T15:36:14Zen_US
dc.date.available2019-05-29T15:36:14Zen_US
dc.date.issued2018en_US
dc.descriptionThis working paper explores the role of net operating loss carryforwards (NOLCFs) in the decision-making and valuation of large firms.ﾠen_US
dc.description.abstractThis paper explores the role of net operating loss carryforwards (NOLCFs) in the decision-making and valuation of large firms. NOLCFs allow firms to carry losses or negative profits into the future and deduct them from taxable income in a future period. To understand how this tax deduction affects key variables, such as investment, equity distributions, and corporate income tax revenue, I estimate a dynamic firm investment model using simulated method of moments. After determining the deep parameters of the model, I vary policy parameters and evaluate the effects of policy changes on the key moments. For a firm with average assets, the results show that the average NOLCF stock before the 2017 U.S. federal tax reform improved corporate valuation by approximately 5-6%. Further, the 40% decline in the corporate tax rate in 2017 reduced the impact of NOLCFs on corporate valuation roughly proportionally.en_US
dc.identifier.citationBarro, Jorge. "Net Operating Loss Carryforwards and Corporate Tax Policy." (2018) James A. Baker III Institute for Public Policy: <a href="https://www.bakerinstitute.org/research/net-operating-loss-carryforwards-and-corporate-tax-policy/">https://www.bakerinstitute.org/research/net-operating-loss-carryforwards-and-corporate-tax-policy/</a>.en_US
dc.identifier.urihttps://hdl.handle.net/1911/106070en_US
dc.publisherJames A. Baker III Institute for Public Policyen_US
dc.rightsThis material may be quoted or reproduced without prior permission, provided appropriate credit is given to the author and Rice University’s Baker Institute for Public Policy.en_US
dc.subject.keywordloss carryforwardsen_US
dc.subject.keywordfirm heterogeneityen_US
dc.titleNet Operating Loss Carryforwards and Corporate Tax Policyen_US
dc.typeWorking paperen_US
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