If a valuation allowance is decreased (released) in the current year, the corporation's effective tax rate is higher than if the valuation allowance had not increased.

Question

Quizplus · Accepted Answer

A decrease in the valuation allowance typically results in a lower effective tax rate because it indicates that the company expects to utilize more of its deferred tax assets, reducing taxable income.

If a Valuation Allowance Is Decreased (Released) in the Current