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
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