New Tax Abatement Disclosure Requirements for State & Local Governments
On August 14, 2015, the Governmental Accounting Standards Board (GASB) issued its final guidance on tax abatement disclosures. Statement No. 77, Tax Abatement Disclosures, requires governments granting tax abatements to individuals and businesses to disclose program information in the notes to the financial statements through the duration of the agreement. Extant standards do not require state and local governments to disclose information related to tax abatement programs, although many governments do provide information to the public about them. Statement 77 changes this; governments soon will be required to provide information to help users assess the government’s accountability over authorized abatements and the effects of these agreements on a government’s financial health and ability to raise revenue. Disclosure requirements include information about revenues forgone as well as the mechanism by which the taxes are abated and the governmental entity’s abatement-related commitments other than to reduce taxes, if any. The guidance addresses tax abatement agreements entered into by the reporting government as well as those initiated by other governments that reduce the reporting government’s tax revenues.
The standard is limited to disclosures and doesn’t address recognition issues. It’s effective for periods beginning after December 15, 2015, with earlier adoption encouraged.