Tax Abatement Disclosures

36 Pages·2016·5.92 MB·English

Give Me a Break!: How to Report Tax Abatements
Monday May 23, 2016 | 1:30pm – 2:20pm | 1 CPE
David A. Vaudt, Chairman, Governmental Accounting
Standards Board
Stephen W. Blann, Director of Governmental Audit Quality,
Rehmann
Frank C. Gambosi, Director of Finance, City of Bedford, OH
Government
 Finance
 Officers
 Association

Give Me a Break!: How to Report Tax Abatements
David A. Vaudt—GASB Chair

The views expressed in this presentation are those of Mr. Vaudt. Official
positions of the GASB on accounting and financial reporting matters are
determined only after extensive due process and deliberation.
© Copyright 2015 by Financial Accounting Foundation, Norwalk, CT

2
Statement
 77
 –
 Tax
 Abatement
 Disclosures

v  Governments employ various programs to lower taxes
– broadly referred to as “tax expenditures”
v  Tax expenditure programs include, among others:
ü Tax exemptions
ü Tax deductions
ü Tax abatements
v  Statement 77 focuses on one subset – tax
abatements

3
The
 GASB
 Timeline
 and
 Due
 Process
 for
 Statement
 77

Ø Pre-agenda research initiated in April 2012
Ø Added to Agenda in December 2013
Ø Exposure Draft issued October 2014
Ø 297 Comments received to Exposure Draft
Ø GASB Statement 77 approved in August 2015
4
Statement
 77
 –
 Definition

v  Important components of the definition of a tax abatement:
ü  Existence of an identifiable agreement between a
government and a specific individual or entity
o  Promise by government to reduce individual’s/entity’s taxes
o  Promise by individual/entity to subsequently perform certain beneficial
action
v  Agreement maybe in writing or may be implicitly
understood
v  Program label not important – key is if it meets the
definition
5
Tax
 Abatements
 Granted

v Taxes can be abated by:
ü  Reporting government
ü  Other government(s)
v Disclosures are separated
v The level of disclosure details differ depending on the
granting government

Own Government Other Government(s)
6
Statement
 No.
 77—Other
 Matters
 Addressed

v Confidential information
v Component Units
v Effective date – for periods ending December 31, 2016
and later
7
GASB Statement 77
Tax Abatement Disclosures
•  Effec%ve
 12/15/2016

–  State
 and
 local
 governments
 employ
 a
 variety
 of

programs
 and
 policies
 that
 reduce
 the
 taxes
 an

individual
 or
 en%ty
 otherwise
 would
 owe,
 with
 the

intent
 of
 encouraging
 those
 individuals
 or
 en%%es

to
 engage
 in
 certain
 behaviors

–  GASB
 77
 provides
 “essen%al
 informa%on
 about

the
 nature
 and
 magnitude
 of
 the
 reduc%on
 in
 tax

revenues
 through
 tax
 abatement
 programs”

8
GASB Statement 77
Tax Abatement Disclosures
•  Tax
 expenditures

–  Governmental
 programs
 employed
 to
 lower
 the

taxes
 of
 broad
 classes
 of
 taxpayers,
 or
 the
 taxes
 of

individuals
 or
 en%%es
 based
 on
 the
 performance

of
 specific
 ac%ons

–  Includes
 tax
 exemp%ons,
 tax
 deduc%ons,
 and
 tax

abatements

–  Based
 on
 the
 substance
 of
 an
 agreement,
 not
 its

%tle
 or
 legal
 form

9
GASB Statement 77
Tax Abatement Disclosures
•  Tax
 abatements
 defined:

–  A
 reduc%on
 in
 tax
 revenues
 that
 results
 from
 an

agreement
 between
 one
 or
 more
 governments
 and
 an

individual
 or
 en%ty
 in
 which
 (a)
 one
 or
 more

governments
 promise
 to
 forgo
 tax
 revenues
 to
 which

they
 are
 otherwise
 en%tled
 and
 (b)
 the
 individual
 or

en%ty
 promises
 to
 take
 a
 specific
 ac%on
 aPer
 the

agreement
 has
 been
 entered
 into
 that
 contributes
 to

economic
 development
 or
 otherwise
 benefits
 the

governments
 or
 the
 ci%zens
 of
 those
 governments

10