Abstract This study utilizes cross sectional regression analysis to examine the effect of the corporate alternative minimum tax book income adjustment (AMTBIA) on corporate accrual decisions. Results indicate significant income-decreasing accrual behavior in 1987, the initial year of the book income levy. Further, the evidence generally supports a "big boom" hypothesis in which managers chose income-increasing accruals in 1986, the final year preceding the tax on book income. In both years, transportation and communication firms and financial service organizations exhibited the greatest modification of accruals.
Jeffrey D. Gramlich (Fri,) studied this question.