A review for practitioners of select 2025 academic tax research

Editor: Annette Nellen, Esq., CPA, CGMA

The External Relations Committee of the American Taxation Association (part of the American Accounting Association) is pleased to continue a tradition started in 2020 to share academic tax research of particular interest to tax practitioners. Academics readily find many topics for research and writing from tax law changes, effects of taxes on accounting and personal finances, how tax incentives affect (or do not affect) business practices, how technology may change tax practice, and much more.

Following is a summary of five articles published in 2025 in academic journals focused on accounting and taxation research, with insights we think readers will find helpful in their tax work. For one of the articles, we also explain the experiments conducted to test the authors’ hypothesis.

Donations of inventory to charity

In “Inventory Planning and Tax Incentives for Charitable Giving” (30 Review of Accounting Studies 287 (March 2025)), authors Anil Arya, Tyler Atanasov, Brian Mittendorf, and Dae–Hee Yoon examine positive spillovers related to government incentives for charitable donations of inventory. Using a theoretical model of inventory choice under uncertain demand, the authors found that in addition to the direct public benefit of donations used by charitable organizations to support their public mission, this incentive also benefits the donor company in an unexpected way.

When a business donates excess inventory to a charitable organization, it usually receives a deduction for that donation and, as a result, a lower tax bill at the end of the year. However, in addition to the tax incentive, the lower cost of holding excess inventory also allows the company to obtain more information than it otherwise would about its market and customer demand. This is because when a business runs out of inventory, the manager observes only that customer demand exceeded inventory. But for a business that does not run out of inventory, the manager fully observes the extent of customer demand. Full knowledge of customer demand can help the manager make better production and pricing decisions. This benefits the business, its customers, and society at large, as it lowers the probability that the business will run out of stock in the current and future periods.

A practical implication of this research is that incorporating the value of excess inventory in business planning can benefit donors directly (value of the tax deduction) and indirectly through information spillovers about actual customer demand.

Noncash awards taxation and employee effort

According to a survey by the Incentive Federation, the use of noncash rewards as incentives for employees, customers, salespeople, and business partners by U.S. companies was a $176 billion industry in 2022. An estimated 84% of companies with $1 million or more in revenues used some form of noncash incentive program.

Academic research supports the efficacy of using noncash rewards as part of incentive programs, having found that a hedonic noncash reward increases employees’ positive affect/feelings about the reward. This leads to increased employee effort toward goal attainment (Choi and Presslee, “When and Why Tangible Rewards Can Motivate Greater Effort Than Cash Rewards: An Analysis of Four Attribute Differences,” 104 Accounting, Organizations and Society 101389 (January 2023)).

In “Reward Taxation, Reward Type, and Employee Effort” (100–5 The Accounting Review 55 (September 2025)), authors Tim D. Bauer, Aishwarrya Deore, Adam Presslee, and Joanna Shaw examine how reward taxation affects the motivational effectiveness of noncash rewards. The authors hypothesized that the positive affect associated with noncash rewards would diminish when the reward is subject to tax. This is because the tax associated with noncash rewards must be taken from employees’ cash earnings, which likely would lead to feelings of unfairness as employees evaluate cash and noncash earnings through different lenses (calculative versus affective). Previous research has found that when taxes seem unfair to employees, they put forth less effort (Lévy–Garboua, Masclet, and Montmarquette, “A Behavioral Laffer Curve: Emergence of a Social Norm of Fairness in a Real Effort Experiment,” 30 Journal of Economic Psychology 147(2009)).

The authors develop a theoretical framework to test their prediction of diminished positive affect when tangible rewards are subject to taxation. This change in affect will also decrease the attractiveness of the award, and, therefore, employees will reduce their effort toward goal attainment. The authors conducted two experiments to find empirical evidence supporting their hypothesis.

Experiment 1 tested the authors’ predictions of the interactive effect of reward type and taxation on affect and reward attractiveness. The authors manipulated whether participants’ earnings (including rewards) were subject to taxation and whether their performance reward was paid in cash or tangible property. Participants were presented with a scenario where they assume they are employed by a company and receive a bonus for achieving their performance goal. The bonus is either $500 in cash or a package for a night on the town with a value equal to $500. They were shown a pay statement that incorporated the result of the reward and taxation (if applicable) and were asked a series of questions related to how they felt about the reward and if they found the reward attractive. After compiling the data, the authors found that taxation of tangible rewards reduced positive affect, increased negative affect, and reduced reward attractiveness, which was consistent with their predictions.

Next, the authors examined how taxation and reward type interact to influence employee effort. In Experiment 2, the authors again manipulated whether participants’ earnings (including rewards) were subject to taxation and whether their performance reward was paid in cash or tangible property. Participants were asked to assume they are paid a salary and are given a real-effort–intensive decoding task where they can earn a $5 cash reward or a $5 gift card for achieving their performance goal. The authors found that participants in the tangible reward condition reduced their effort when their reward was subject to taxation. The authors conducted additional analysis to identify the mechanism for the differences between cash and tangible conditions and found that employees value tangible rewards using their feelings, while they are more calculative when valuing cash rewards.

Tax effects on spending during retirement

Taxes play an important role in retirement planning regarding both retirement saving and spending. Much is made of the decision to invest in tax–deferred retirement accounts, such as traditional IRAs and 401(k)s, or in currently taxable retirement vehicles such as a Roth IRA, with the deductibility or exclusion of current contributions for the former compared with the tax–free withdrawals offered by the latter. In both cases, the government encourages retirement savings via offering a tax benefit, but the timing of the benefit varies depending on the type of account. A wide body of research exists on taxpayer preferences toward saving in tax–deferred or currently taxable plans. Less attention, though, has been given to the withdrawal choices faced by many retirees who have funds in both tax–deferred accounts and accounts offering tax–free distributions.

Authors Chelsea Rae Austin, Donna D. Bobek, Marcus M. Doxey, and Shane R. Stinson explore this choice in their article “How Does Tax Timing Affect Spending in Retirement?” (47–1 Journal of the American Taxation Association 31 (Spring 2025)). In the article, the authors detail an experimental study that investigates how the timing of taxes on retirement savings affects retirement spending. For the experiment, participants were assigned either a tax–deferred account, with taxes owed as monies are withdrawn, or a currently taxed account where funds were taxed prior to deposit so no tax was due on withdrawal. Participants with deferred–tax accounts consumed savings faster than those whose accounts had no taxes owed on withdrawals when the two accounts had equivalent after–tax spending power. Further, when the balances in the retirement accounts were held equal, participants in the two types of accounts spent similar amounts, even though deferred–tax account holders faced an overall larger reduction in their account balance post–spending, due to also paying income taxes on the withdrawal. The authors conclude that deferred–tax account holders fail to fully adjust for the cost of taxes and thus consume their retirement savings faster.

In conjunction with other research that consistently finds taxpayers prefer currently taxable retirement savings plans, these results show that taxpayers also appear to spend their accumulated wealth more slowly when compared with the deferred–tax accounts. This slower spending rate may ease retiree concerns of outliving retirement savings, furthering the case for the use of currently taxable accounts in retirement planning.

Local versus state-level administration of tax

In “Real Effects on Non–Streamlined Sales Tax Administration: Evidence From the Florida Hotel Industry” (63 Journal of Accounting Research 1917 (2025)), authors Jennifer L. Brown, Pablo Casas–Arce, David G. Kenchington, and Roger M. White examine whether administration of sales tax by local counties versus by states has an effect on companies. By examining the Florida hotel industry, they find that there are significant costs to local administration that may offset the benefits. While local administration of sales taxes has been promoted as making government more efficient, the authors provide evidence that local administration also resulted in significant compliance costs that slowed economic growth.

Although there are downsides to sales tax collection at the local level, such as filing two sales tax returns (county/city and state) every month rather than one, the programs were promoted as benefiting local governments. Cities would not have to wait for the state to remit their share of the collected sales tax, which might take months. Also, local sales tax auditors may know the city or county better than state auditors do. This may reduce sales tax evasion by small businesses that state auditors might not detect. Yet, the authors find that these benefits come with costs.

When examining hotel taxes in Florida, the authors documented slower growth in the number of hotel workers and in hotel payrolls when the hotels are in counties that have locally administered local hotel taxes. They further found that this employment reduction is associated with increased prices and lower bookings. This indicates that hotels may pass the costs of compliance on to customers. The authors also found that some of the benefits of local tax administration may be overstated. After switching to local tax administration, counties reported that hotel revenue remained flat, indicating the increased enforcement may not produce increased revenue.

Currently, 10 states allow local administration of hotel taxes, and four states also require local administration of general sales taxes. With recent and continued expansion of state sales tax collection by sellers after the U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018), the importance of efficiency in sales tax administration has increased. As tax compliance continues to become more complex, this paper offers one suggestion for streamlining tax reporting and lowering burdens on businesses even while keeping the tax rate the same.

Technology for tax advisory services

While tax practitioners have largely embraced technology–based solutions for compliance work (tax returns, etc.), the adoption of similar tools for tax advisory services has been slower. In “Tax, Technology, and Craftsmanship” (100 The Accounting Review 293 (2025)), authors Vaughan Radcliffe, Crawford Spence, and Mitch Stein explore this difference by conducting semi–structured interviews with 33 tax practitioners in Canada and the United Kingdom. Their study provides insight into the divergence of technology use between tax compliance and tax advisory work and considers potential issues that new technology may bring.

The authors view tax advisory work through the perspective of craftmanship, the notion that a part of the satisfaction of performing tax advisory work is the “desire to do a job well for its own sake.” In other words, tax advisers take pride in the quality of their work, and as such, they recognize that giving the proper advice requires much more than simply understanding the relevant tax law. High–quality tax advisory work requires understanding the client’s risk tolerance, the client’s internal capabilities to execute the tax plan, the likely reputational effects on the business, etc. These social aspects, which are not included in the typical artificial intelligence (AI) tax research tool, are critical to the advisory process.

Practitioners also expressed concern about the future of tax advisory practitioners. In the past, staff learned about the tax world via tax compliance work. As this work becomes increasingly automated, current and future tax staff might not receive the same benefit of “mastery through osmosis and hands–on problem–solving.” In other words, the efficiency gains from AI–driven compliance may reduce the opportunity for tax staff to learn the fundamentals of their craft, which might make them less proficient advisers later in their career.

Further concerns voiced by practitioners were the current accuracy of AI tools with respect to interpreting tax law and senior practitioners’ belief that less–experienced tax staff may be willing to accept AI–generated answers without sufficient skepticism. Hannah Smith Antinozzi and Lauren A. Cooper, in “Is ChatGPT an Accurate Source of Information for Uninformed Taxpayers?” (22 Journal of Emerging Technologies in Accounting 23 (Spring 2025)), examine this accuracy issue by asking ChatGPT a series of tax compliance questions based on the IRS’s frequently asked questions. Regardless of the version of ChatGPT used, the study found the versions tested provided the correct answer less than half the time.

Practice relevance

The five articles from academic tax and accounting journals are a small subset of such research published annually and of the amount of behavioral, quantitative, legal, and longitudinal research conducted annually. As noted in some of the research summarized here, practitioners can provide helpful insights for identifying current research needs and can assist with providing data or personnel to answer survey questions or share responses from researchers’ experiments. When visiting a college classroom, consider asking the professor about their research and note areas where you find a need for answers to the likely effects of tax incentives, compliance approaches, and the use of technology.

Contributors

Nathan Born, Ph.D., is a financial economist with the U.S. Department of the Treasury in Washington, DC; Russ Hamilton, CPA, Ph.D., is clinical professor of accounting in the Cox School of Business at Southern Methodist University in Dallas; Tyler Menzer, CPA, Ph.D., is an assistant professor in the Neeley School of Business at Texas Christian University in Fort Worth, Texas; Joanna Shaw, CPA, Ph.D., is an assistant professor in the Philip L. Kintzele School of Accounting at Central Michigan University in Mount Pleasant, Mich.; and Jason Stanfield, CPA, Ph.D., is an associate professor of accounting in the Paul W. Parkison Department of Accounting at Ball State University in Muncie, Ind. Annette Nellen, Esq., CPA, CGMA, is a professor in the Department of Accounting and Finance at San José State University in San José, Calif., and a past chair of the AICPA Tax Executive Committee. For more information about this column, contact thetaxadviser@aicpa.org.