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 email@example.com or 816-743-7700.