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Governments Face New Tax Abatement Disclosure Requirements

By MarksNelson on September 2, 2015 in Articles, Josh Beck EDFP, Location Strategies
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On August 14, 2015, the Government Accounting Standards Board (GASB) issued Statement No. 77 providing new disclosure guidance to governments related to tax abatement agreements. The statement requires the growing number of governments offering tax abatement, often to encourage business investment, to disclose certain details in their financial statements.

What is the purpose?
The GASB intends the new requirements to address the lack of information available to those interested in evaluating the financial strength of a government, including municipal bond analysts, elected officials and citizens.

What is required?
Statement No. 77 requires the reporting government to include certain details in the notes to their financial statements. This includes, the tax being abated, the eligibility criteria, any recapture provisions, the financial impact of the abatement, any other commitments made by the recipient or the government as part of the deal, and more. Governments will also be required to report on tax abatements being offered by other governments that affect their revenue. For example, a county government will need to disclose tax abatement agreements entered into by municipal governments that affect that county’s revenue.

When does it go into effect?
The new requirements affect financial statements for periods beginning after December 15, 2015.

The GASB elected not to require details related to specific agreements, but rather reporting grouped by major tax abatement program and abatements offered by other governments. Statement No. 77 also defines “tax abatement” and makes a distinction from other tax expenditures, such income tax deductions for charitable contributions or lower property taxes for senior citizens, which are not included.

To keep informed or to learn more about Statement No. 77 and compliance methods, contact Josh Beck with the MarksNelson Location Strategies Practice at jbeck@mnlocationstrategies.com or 816-743-7700.

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About the author

Josh Beck provides location strategy, credits and incentives, and economic development consulting to companies and communities of all sizes. His experience, holding key positions for economic development organizations at both the state and local level, along with private-sector sales and marketing, provides Josh with the unique experience to help his clients shape, plan and implement a plan for growth


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MarksNelsonView all posts by MarksNelson
MarksNelson LLC works with clients to help safeguard and grow their businesses. Our ultimate goal is to help our clients to Move Forward. The firm provides Assurance, Accounting Services and Business Advisory, Business Valuation, Consulting, Cost Segregation, Employee Benefit Plan Audits, Litigation Support, Forensic Accounting, International Tax, State and Local Tax and Tax planning, advisory and compliance services. MarksNelson is a member of The Leading Edge Alliance, the second-largest international professional association of independently owned accounting and consulting firms, serving clients who need additional resources on a national or international level. MarksNelson has significant accounting and business advisory experience in the auto dealership, construction, insurance, manufacturing, distribution and real estate sectors. The firm was named among the 2014 Best Accounting Firms for Leadership Equity by the 2014 Accounting MOVE Project for its dedication to gender equity.