What it is
A rate reconciliation explains why income tax expense differs from the amount you get by applying the statutory rate to pretax income. This template lists each reconciling item with a pretax amount and rate or a direct tax amount, tags it to a category, and totals the effect.
It flags items at or above a separate-disclosure threshold, ties the total to the provision on the books and summarizes by category. The categories follow ASU 2023-09 (state and local, foreign, tax law changes, cross-border, credits, valuation allowance, nontaxable or nondeductible items, unrecognized tax benefits). The threshold is an input. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024, and for other entities for annual periods beginning after December 15, 2025.
When to use it
- Drafting the rate reconciliation or the nature-of-reconciling-items disclosure for the income tax note.
- Checking a client’s reconciliation against the recorded provision.
- Preparing for the ASU 2023-09 disclosures for a public business entity.
What’s inside
- Inputs: pretax income, federal rate, provision per books and the disclosure threshold
- Twenty reconciling item rows with category, pretax amount or direct tax effect and support reference
- Threshold flag, percent of pretax income and effective rate
- Unreconciled-difference check and summary by category
Standard cited
This template follows ASC 740 / ASU 2023-09. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use.
Questions
Is a numerical reconciliation required for a private company?
Under ASU 2023-09, public business entities present a tabular reconciliation in amounts and percentages, with specific categories and with items at or above 5% of the expected tax broken out further. Other entities give a qualitative disclosure of the nature and effect of significant reconciling items by specific category and individual jurisdiction. The ASU is effective for public business entities for annual periods beginning after December 15, 2024, and for other entities for annual periods beginning after December 15, 2025.
How is the threshold computed?
The sheet compares each item with a percentage of the tax at the statutory rate (the input defaults to 5%, the ASU 2023-09 threshold for public business entities). Items at or above it are flagged for separate presentation.
What if the check does not reach zero?
An item is missing or double counted. Add the missing reconciling item and its support, or look for a direct tax amount that was also entered as a pretax amount.
Related templates
- Income Tax Provision Workbook (ASC 740)
- Deferred Tax Rollforward and Valuation Allowance Worksheet
- GAAP Disclosure Checklist (Private Company, Short Form)
Last updated 11/05/2026. All free templates.