Tuesday, November 29, 2016

New Government Accounting Rules to Shine a Light on Corporate Tax Breaks

States and local governments that enter into tax-abatement agreements with businesses and others will soon be required to disclose more information to the public, as the result of new nationwide accounting rules that go into effect in 2017.

Under the new rules, state and local governments must report all economic development incentives as foregone tax revenue beginning with their fiscal year 2017 annual financial reports. Specifically, governments will have to disclose the gross dollar amount of corporate tax breaks for economic development and similar activities, any commitments agreed upon, and how the government will get the money back (clawback) if the goals are not achieved, among other things.

The amount of foregone tax revenues for tax deals with businesses and others is significant, with estimates for 2012 exceeding $80 billion.

The new rules from the Government Accounting Standards Board are designed to encourage transparency while “provid[ing] citizens and taxpayers, legislative and oversight bodies, municipal bond analysts, and others with information they need to evaluate the financial health of governments, make decisions, and assess accountability.”

Business tax abatements usually reduce tax revenues to local governments, which often turn to nonprofits to make up the some of the difference by demanding taxes, fees, or payments in lieu of taxes.

The new government disclosure rules should enable nonprofits to demonstrate their value to communities in comparison to economic deals struck by local policymakers.

More info here.
Source:  National Council of Nonprofits

Monday, November 14, 2016