Tax Provision Services (ASC 740)

An income tax provision under ASC 740 refers to the impact of income-based taxes on the income statement, the balance sheet reported in a company’s financial statements and notes for the financial statements. This includes current and deferred income tax expense, current and deferred income tax assets and liabilities, and income tax receivable and payable, under U.S. GAAP. It ensures that companies accurately reflect their tax obligations in their financial statements and align with regulatory standards.

Tax provision services help companies calculate and manage the estimated amount of income tax they will owe for a financial period, as well as comply with ASC 740 by preparing accurate and defensible income tax provisions. These services include:

• Co-sourcing the income tax provision process
• Assistance with loan staff for the tax provision process
• Consultation and analysis for analysis of uncertain tax positions
• Assistance with computations of uncertain tax positions
• Assistance with file memorandums documenting uncertain tax positions
• Implementing and assisting with income tax provision software
• Assisting with financial statement disclosures
• Assisting with file memorandums to document tax accounting policies or other positions taken in the income tax provision
• Assistance with design, implementation and operation of internal controls under Sarbanes-Oxley
• Assistance with resolving deficiencies, significant deficiencies, or material weaknesses over the income tax processes and functions

The benefits of engaging with a qualified CPA and advisory firm for tax provision services include:

• Improved accuracy, timing and transparency in tax reporting
• Reduced risk for deficiencies or material weaknesses in the process or reporting function
• Streamlined external audits
• Enhanced and robust internal controls
• Increased readiness for accounting standard pronouncements and evolving disclosure requirements

ASC 740 applies to all entities subject to income taxes reporting under U.S. GAAP. It governs how income tax expenses and related income tax assets/liabilities and income tax receivables/payables are recognized and disclosed in financial statements issued under U.S. GAAP.

The new ASU 2023-09 reporting guidance is effective for public business entities for annual periods beginning after December 15, 2024. For entities other than public business entities the guidance is effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The guidance should be applied prospectively, but entities have the option to apply it retrospectively for prior periods presented.

ASU 2023‐09 amends FASB Accounting Standards Codification (ASC) Topic 740 and requires all entities to annually disclose federal, state and foreign income tax paid (net of refunds received). Business entities may be required to further disaggregate information by taxing jurisdictions when quantitative thresholds are exceeded. The guidance requires public business entities to expand the rate reconciliation table disclosures for additional categories of information about federal, state and foreign income taxes. More detailed information about reconciling items in some categories may be required based on a quantitative threshold.

ASU 2023‐09 eliminates certain existing requirements related to uncertain tax positions and unrecognized deferred tax liabilities. The guidance replaces the term “public entity” with “public business entity” and replaces the term “nonpublic entity” with “entities other than public business entities”.

OBBBA made 100% bonus depreciation permanent, restored immediate expensing of domestic research and experimental costs under new Section 174A, and reverted the Section 163(j) interest expense limitation to an EBITDA-based calculation. Because these are permanent changes to the tax law rather than temporary extensions, they affect the underlying book-tax basis differences that drive deferred tax assets and liabilities, valuation allowance conclusions and effective tax rate reconciliations — making current-year and roll forward provision analysis especially important for the 2025 and 2026 reporting cycles.

The rules governing the deductibility of charitable contributions have also become more complex, with new AGI- and income-based floors layered on top of existing limitations for both individual and corporate donors. Separately, OBBBA makes significant changes to the U.S. tax treatment of cross-border activity for companies with international operations, effective for tax years beginning after December 31, 2025 — changes complex enough that tax teams should perform fresh analysis for 2026 rather than assume the impact will mirror prior years.