The Governmental Accounting Standards Board (GASB) proposed an implementation guide on Nov. 30 that is designed to clarify, explain, or elaborate on several of the accounting and financial reporting standards the board has recently issued for state and local governments.
Comments on Implementation Guide No. 201X-Y, Implementation Guidance Update—201X, are due by Jan. 31, 2017, and should be emailed to [email protected].
The proposed implementation guide addresses a wide variety of practice issues, including questions related to GASB standards on:
- Cash flow statements
- The financial reporting entity
- Certain investments
- External investment pools
- Fund balance
- Tax abatements
Here’s an example of one of the tax abatement questions and answers in the proposed implementation guide:
Question: A local government enters into an agreement with a real estate developer for the purpose of stimulating economic growth. Under the terms of the agreement, the developer will construct a building. The government will rebate to the developer incremental property tax revenues generated above a baseline established prior to the agreement, based on certain costs incurred by the developer related to the new building. The rebate to the developer is limited to no more than the amount of the incremental property tax revenues. Does this agreement meet the definition of a tax abatement in Statement No. 77, Tax Abatement Disclosures?
Answer: Yes. This agreement meets the definition of a tax abatement in Statement 77. The developer is promising to take the specific action of constructing a building for purposes of economic development, and the government is forgoing tax revenues to which it is otherwise entitled by returning some or all of the incremental property tax revenues to the developer. Although many tax abatements directly reduce the amount of taxes paid and do not involve the actual collection and return of taxes, the mechanism used to transact the abatement is not relevant to determining whether a transaction meets the definition of an abatement. Therefore, the fact that the government receives property taxes and subsequently rebates those tax receipts to the developer means that the government did, in substance, forgo tax revenues.
The proposed implementation guide also includes amendments to previously issued implementation guidance.