United States

Tax abatement disclosures


Tax abatements are widely used by state and local governments, particularly to encourage economic development. Although many governments offer tax abatements and provide information to the public about them, they do not always provide the information necessary to assess how tax abatements affect their financial position and results of operations, including their ability to raise resources in the future. 

The Governmental Accounting Standards Board (GASB) recently issued GASB Statement No. 77, Tax Abatement Disclosures, which, for financial reporting purposes, defines a tax abatement as a reduction in tax revenues that results from an agreement between one or more governments and an individual or entity in which (a) one or more governments promise to forgo tax revenues to which they are otherwise entitled and (b) the individual or entity promises to take a specific action after the agreement has been entered into that contributes to economic development or otherwise benefits the governments or the citizens of those governments. Statement No. 77 requires governments that enter into tax abatement agreements to disclose the following, among other, information about the agreements:

  • Brief descriptive information, such as the tax being abated, the authority under which tax abatements are provided, eligibility criteria, the mechanism by which taxes are abated, provisions for recapturing abated taxes and the types of commitments made by tax abatement recipients
  • The gross dollar amount of taxes abated during the period
  • Commitments made by a government, other than to abate taxes, as part of a tax abatement agreement 

Disclosure is also required for tax abatements resulting from agreements entered into by other governments that reduce the reporting government’s tax revenues. For those tax abatement agreements, a reporting government should disclose the following, among other, information:

  • The names of the governments that entered into the agreements
  • The specific taxes being abated
  • The gross dollar amount of taxes abated during the period

Disclosure information for tax abatements may be provided individually or may be aggregated. Statement No. 77 is effective for financial statements for periods beginning after December 15, 2015. Earlier application is encouraged.