Tax abatements are a common method by which local governments attempt to attract and retain local businesses and the jobs they provide.
Recently, new guidelines related to tax abatements were approved by the Government Accounting Standards Board (GASB). Collectively called Statement 77, the new guidelines mandate that local governments must disclose information about tax-abatement agreements on financial statements
GASB officials said in a statement that while most government officials adhere to the rules of transparency where abatements are concerned, “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.”
Representatives of the Municipal Association of South Carolina have aligned with the National League of Cities to warn that to narrow the focus on the taxes abated would be misleading by painting an incomplete picture of the impact of the abatement on the local government’s overall financial position.
These concerns were voiced during a comment period on Statement 77.
The requirements of this Statement are effective for financial statements for periods beginning after Dec. 15.