What You Need to Know:
Tax Abatement Disclosures

The GASB recently approved final guidance on disclosures regarding the tax abatements that governments provide to companies and individuals. GASB Statement No. 77, Tax Abatement Disclosures, requires state and local governments to disclose key information about their tax abatement agreements that has not been consistently or comprehensively available before.
GASB Statement No. 77, requires state and local governments to disclose key information about their tax abatement agreements that has not been consistently or comprehensively available before.


Under a tax abatement agreement, a government reduces—or abates—the taxes a company or person otherwise would owe. The company or person, in turn, takes a specific action that contributes to economic development or otherwise benefits the government or its citizens. An example of this might be a corporation building a new headquarters that would house 1,000 new workers.

Why Did the GASB Embark on This Project?


Many state and local governments have tax abatement programs in place. These programs can have a substantial effect on the governments’ ability to generate revenue and their overall financial health. Without providing the kind of disclosures the GASB guidance will require, it can be difficult to determine the extent and nature of the abatements.

The project on tax abatement disclosures was added to the Board’s current technical agenda in late 2013 after being identified as a high priority of the GASB’s advisory group, the Governmental Accounting Standards Advisory Council (GASAC). The Board issued the Exposure Draft, Tax Abatement Disclosures, in October 2014

During the 100-day comment period, the Board received 298 letters from individual stakeholders and organizations.

What New Disclosures Are Required?


Statement 77 will lead to additional information and clarity around the tax abatements that governments provide. Those who use governmental financial statements will have access to information that will allow them to better assess a government’s financial health.
Those who use governmental financial statements will have access to information that will allow them to better assess a government’s financial health.

Under the new guidance, governments are required to disclose essential information about the tax abatement agreements they have entered into, including:
  • 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 that are initiated by other governments and reduce the reporting government’s tax revenues. Regarding the latter, the reporting government will disclose the governments entering into the agreements, the specific tax being abated, and the amount abated.

When Does the Statement Take Effect?


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

GASB Statement No. 77, Tax Abatement Disclosures,
is expected to be available on the GASB website on August 14.