A company with a low effective tax rate may be using tax credits and deductions created by lawmakers, carrying forward previous losses or operating in businesses with different tax treatments. Effective and statutory tax rates are differentThe US federal corporate income tax rate has been 21% for tax years beginning after 2017, according to the Internal Revenue Service. The GAAP effective tax rate compares the tax expense reported in financial statements with pretax income. Financial pressure may affect cash tax planningFinancial constraints accounted for about one-fifth of the explained variation in cash effective tax rates in the published research summary. The results explain statistical patterns in effective tax rates, not the legality or fairness of an individual company’s tax bill.