A Norwalk-based entity that creates accounting standards for state and local governments around the country has issued final guidance that will push governments to annually disclose their respective rosters of tax abatement deals.
Connecticut and many other states use abatements, which are reductions or exemptions in taxes in exchange for construction of new facilities or job creation.
The Governmental Accounting Standards Board said it can sometimes be difficult to determine what effects abatements have on a town or state’s ability to meet financial obligations and raise future revenue.
At the direction of the state legislature, Connecticut began issuing a detailed report of its tax credit and abatement programs in 2010. The state Department of Economic and Community Development is required to publish a report every three years. The most recent was issued last year (see PDF link below).
One of Connecticut’s abatement strategies is the abatement zone program, which provides an 80 percent abatement on property tax, as well as other incentives, for five years, for qualifying corporations in certain areas.
Claims have averaged $7.1 million per year over the last decade, according to DECD’s 2014 report.
The GASB rule would require governments to disclose the purpose of their abatement programs, the amount abated, provisions for recapturing abated taxes, types of commitments made by beneficiaries and by government, among other details. The rule will take effect for budget years beginning after Dec. 15, 2015.
Good Jobs First, a Washington, D.C.-based nonprofit that tracks economic subsidies around the country, said the rule should allow for a true calculation of the cost of economic development.
But the group also criticized GASB for not requiring governments to name the specific corporate recipients of the abatements or that they break down the aggregate dollar figures by number of deals.
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