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Proposed Rules Require Tax Abatement Disclosure

by Bill DuBois, President and Chief Operating Officer, December 2014

 

To promote economic development, it's common for state and local governments to offer property tax and other tax abatements. However, only six states have laws requiring any level of external reporting after tax abatements are granted.

 

The Governmental Accounting Standards Board (GASB) is proposing new rules that would require governments to issue detailed reports on tax abatements for the first time. Under the GASB plan, general descriptive information must be reported, including:

 

  • The tax being abated

  • Criteria that must be met for the taxpayer to be eligible for the abatement

  • Provisions for recapturing abated taxes

  • Types of commitments made by abatement recipients

  • Number of tax abatement agreements

  • Dollar amount of taxes abated

  • Other commitments made by a government, such as to build infrastructure assets

 

The goal is to provide increased transparency on the extent of tax abatements. Efforts to provide this information in the past have been largely initiated by the media. For example, The New York Times reported that state, county, and city tax abatements total more than $80 billion in 2012.

 

"Tax abatements can significantly reduce the amount of revenue a government receives," GASB Chairman David Vaudt said in a press release. "But in many cases, little is known publically about their total size or their terms and conditions."

 

Interested parties are encouraged to review the GASB project proposals and provide comments by January 30, 2015.