Corporate Income Tax Disclosure Deadline Nears Amid GOP Pushback

Companies are racing to meet a mandate to divulge more details about their tax obligations in financial statements starting early next year, even as the requirement continues to face congressional opposition.

Publicly traded companies face a deadline to start complying with Financial Accounting Standards Board requirementsthat ask businesses to break down their state, federal, and international income taxes paid in their annual filings with the SEC.

The rules, finalized in 2023, cover annual periods beginning after Dec. 15, 2024, meaning that the 2025 10-K reports calendar year-end companies file with the Securities and Exchange Commission early next year will include the expanded reporting.

Income taxes often represent a large portion of companies’ cash outflow, and expanded disclosures will help investors value businesses more accurately, said California State University, Fullerton assistant professor Sabrina Chi. From a company’s perspective, however, the more detailed disclosures require a significant data collection effort.

Business groups pushed back as the requirements were developed before being finalized in 2023. Republican lawmakers also objected; the GOP-led House Appropriations Committee’s fiscal 2026 spending proposal includes a provision that would bar the SEC from approving FASB’s budget until the board withdraws the disclosure requirements. House lawmakers advanced a bill with this provision out of committee last year but it wasn’t ultimately enacted.

This latest attempt, nearly two years after the requirements were finalized, comes as companies prepare for next year’s filings—including the tax disclosures.

“Generally, you see mobilization efforts like this kind of happen when a project is still at the proposal phase,” Ohio State University assistant professor Brian Monsen said.

The congressional effort also comes amid a broader Republican assault on independent measurements of the US economy—including President Donald Trump firing the head of the Bureau of Labor Statistics, threatening the credibility of federal data businesses and investors rely on.

Accounting firms like PwC and BDO USA have urged their clients to beat the end-of-year compliance crunch in meeting the new standard by doing dry runs of data gathering.

Sorting and labeling the required data is like untangling a “big bowl of spaghetti,” PwC US Chief Accountant Thomas Barbieri said.

“What people are finding is it’s a massive data exercise to uncover ‘what are the nature of all the taxes? Where are they being imposed?’” Barbieri said.

Lawmaker Pressure

House Republicans’ criticism of FASB’s income tax disclosure project stretches back to the public comment phase.

Rep. French Hill (R-Ark.), now chair of the House Financial Services Committee, joined other Republican leaders in a July 2023 letter opposing the proposal. The disclosures would put US multinationals at a competitive disadvantage by revealing too much about their tax strategies, the letter said.

FASB acknowledged this in its final update, noting it decided to allow companies to aggregate changes in unrecognized tax benefits for all jurisdictions. Companies must list jurisdictions that account for more than 5% of their total tax obligation.

The required disclosures are at a “sufficiently high level,” to diminish concerns, and many taxing authorities already accumulate information well beyond the disclosures, FASB’s update said.

Board member Christine Ann Botosan declined to comment on the congressional opposition, but said the project underwent “our regular, very extensive due process” involving public feedback.

“We started with a certain set of plans but then scaled it back in response to the cost concerns,” Botosan told Bloomberg Tax at a Chicago accounting conference earlier this month.

A House appropriations subcommittee advanced the legislative provision to the full appropriations committee July 21 as part of the broader Financial Services and General Government spending measure.

There’s precedent for Congress getting involved in accounting standards. In 2020, lawmakers took the rare step of intervening in accounting rules by giving banks more time to overhaul how they account for bad loans.

FASB and the SEC declined to comment on the provision to halt expanded tax disclosures and their next steps.

Disaggregated Data

Compliance may be a heavy lift for companies that haven’t previously provided granular tax details, said Scott Ehrlich, founder and managing director of educational organization Mind the GAAP LLC.

Public companies will need to identify in a table at the back of their financial statements how deductions, credits, and other required items helped them calculate their effective tax rate, in contrast to their statutory rate.

“In the past, public companies would have to do that walk for investors—they would have to do that reconciliation—but it wasn’t always done consistently,” Ehrlich said.

Now, investors pulling up 10 companies’ annual reports will know the categories are consistent, Ron Graziano, director of accounting research at LSV Asset Management, said.

“It’s a lot to pull together in a short amount of time,” said Dawn Reynolds, vice president of global tax at publicly traded, multinational industrial packaging company Greif Inc.

Still, several of Greif’s prior concerns were alleviated, Reynolds said. FASB opted for annual disclosures rather than the heavier lift of interim ones.

Final Stretch

Instead of waiting until the fourth quarter, companies should start the new compliance work now, Michael Williams, Income Tax Provision Services (ASC 740) principal and national practice leader at BDO USA, said.

Williams recommended dry runs using previous years’ information to test new processes or data models.

Greif has a longer timeline to comply with the updated standard because it doesn’t follow the calendar year. The company’s staff is getting familiar with tools to organize data, Reynolds said.

Ultimately, difficulties meeting the standard may reflect a growing need for companies to improve their data gathering processes, said Steve Soter, vice president and industry principal at financial compliance platform Workiva.

“Regardless of what happens with this appropriations bill, the challenge will remain for companies to find the most efficient, least risky way to get that data through audit and out to the market,” he said.