Will permanent differences cause the effective tax rate to be lower than the statutory rate?

A. Permanent differences can result in taxable income that is higher or lower than book income before taxes. Thus, the effective tax rate may be higher or lower than the statutory rate. For instance, state or local interest income is not taxed at the federal level, causing the effective tax rate to be lower relative to the statutory rate. Certain penalties or fines are not tax deductible, so the effective tax rate will be higher relative to the statutory rate in this case.

No. Permanent differences do not cause the effective tax rate to be lower than the statutory rate because both rates are always the same.

C.

Permanent differences can result in taxable income that is higher or lower than book income before taxes. Thus, the effective tax rate may be higher or lower than the statutory rate. Forinstance, state or local interest income is taxed at the federal level, causing the statutory tax rate to be higher relative to the effective rate. Certain penalties or fines are tax deductible, so the statutory tax rate will be higher relative to the effective rate in this case. For instance, state or local interest income is taxed at the federal level, causing the statutory tax rate to be higher relative to the effective rate. All penalties and fines are tax deductible, so the effective tax rate will be higher relative to the statutory rate in this case.

D.

Yes. Permanent differences are always taxed at at a lesser tax rate that is always lower than the statutory rate.