Tax Abatement Disclosures

What Is A Tax Abatement?

Statement 77 applies to transactions involving an agreement between at least one government and a taxpayer. The government reduces—or, abates—the taxes the taxpayer otherwise would owe. The taxpayer, in turn, takes a specific action that contributes to economic development or otherwise benefits the government or its citizens.


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Why Do Governments Grant Tax Abatements?

Governments generally agree to abate or reduce the taxes of businesses and other taxpayers to promote economic development, job growth, redevelopment of blighted or underdeveloped areas, and other actions that are beneficial to the government or its citizens.


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Why Did the GASB Issue Guidance on Tax Abatement Disclosures?

The guidance is designed to improve financial reporting by giving users of financial statements access to useful information about government tax abatements that is generally not publicly reported.

Many state and local governments currently have tax abatement programs in place and the effects of tax abatements on their financial health and ability to raise revenue can be substantial. However, without the kind of required disclosures the GASB is requiring, it is difficult at present to discern the magnitude and nature of the effects of those agreements.

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What Is the GASB Requiring Governments to Disclose?

Statement 77 requires that governments disclose essential information about the tax abatement agreements they have entered into with businesses and other taxpayers.

Specifically, the tax abatement disclosure requirements include:
  • The purpose of the tax abatement program
  • The tax being abated
  • Dollar amount of taxes abated
  • Provisions for recapturing abated taxes
  • The types of commitments made by tax abatement recipients
  • Other commitments made by a government in tax abatement agreements, such as to build infrastructure assets.
The guidance addresses tax abatements resulting from agreements entered into by the reporting government, as well as those initiated by other governments that reduce the reporting government’s tax revenues.


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What Are the Next Steps?

Statement 77 is available for download at no charge from the GASB website. Printed copies of the Statement are also available for purchase in the GASB Store.

The requirements of the Statement are effective for financial statements for periods beginning after December 15, 2015 with earlier application encouraged.


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