New GASB Rule Requires Disclosure of Economic Incentives

A new rule from the Government Accounting Standards Board (GASB), Statement No. 77 will now require state and local governments to disclose tax incentives and subsidies given to businesses for economic development purposes.

As reported by the NACo County News,

It requires, for the first time, that state and local governments disclose information about tax abatement agreements, such as the purpose of the tax abatement program, which tax is being abated and the dollar amount of taxes abated. State and local governments across the United States spend an estimated $70 billion a year for economic development — “most of it through tax expenditures,” according to Good Jobs First, a Washington, D.C.-based national policy research center. It tracks economic development subsidies and other types of government financial assistance to business.
NACo and local governments expressed concern during the comment period prior to the rule being finalized.

…several local government organizations, including NACo, jointly sent written comments to the GASB. They noted that governments might be prevented by non-disclosure agreements from revealing the amount of tax abatements. “In addition, some income tax abatements would require disclosure — contrary to state law — of what is often considered to be confidential information.”

For governments with few tax abatements, disclosure could be tantamount to violating confi­dentially agreements, because the small number of abatement recipients would make it easier to identify them, they wrote. GFOA, International City/ County Management Associa­tion, National League of Cities and U.S. Conference of Mayors also signed on to the comments.

However, proponents of the new rule see it as providing transparency.

“Our reaction is very posi­tive,” said Greg LeRoy, executive director of Good Jobs First. “This is very tectonic good news for taxpayers. We’ve been critical of GASB for many years for being missing in action on these huge tax expenditures.” He added that the new reporting requirements will allow taxpayers and policy­makers to see the real costs of economic development.

“Given the squeeze on munici­pal and local finance these days, we think everybody deserves to know how much revenue is being lost this way,” LeRoy said, “so people can make prudent, bal­anced decisions about spending priorities.”

The final rule applies to budgets that begin after December 15. The new data will start appearing in 2017.