Final answer:
Interest on municipal bonds is typically tax-exempt, so the presence of this $100,000 in interest as a permanent difference will cause the effective tax rate for Clerc Corp. to be lower than the statutory tax rate.
Step-by-step explanation:
Clerc Corp. has a permanent difference of $100,000 for interest on municipal bonds. This type of interest is often exempt from federal and possibly state income taxes, meaning that this $100,000 will not be taxed. A permanent difference affects the effective tax rate directly by changing the amount of income subject to tax. In this case, since the $100,000 is not subject to taxation, the overall taxable income is reduced which may result in the effective tax rate being lower than the statutory rate. The statutory rate is the rate imposed by law, while the effective tax rate is the average rate at which a corporation is taxed on earned income, accounting for all deductions and exemptions.
The presence of tax-exempt interest income, such as the interest on municipal bonds, makes the effective tax rate lower than it would be if this income were taxed. Therefore, the presence of this permanent difference means that the effective tax rate for Clerc Corp. is lower than the statutory tax rate.