GASB Statement No. 77 and what it means for your government

In 2008, the Governmental Accounting Standards Board (GASB) was asked to develop standards that require state and local governments to disclose information about tax abatements. Since that time, GASB research determined the extent of tax abatement use by governments as well as the level and depth of financial statement disclosures. GASB concluded financial statement users needed additional information to assess how tax abatements affect their financial position and results of operations. In August 2015, the GASB issued Statement No. 77, Tax Abatement Disclosures, effective for periods beginning after December 15, 2015. This statement requires disclosure of tax abatement information about 1) a reporting government’s own tax abatement agreements and 2) agreements that are entered into by other governments that reduce the reporting government’s tax revenues.

What is tax abatement?

For the purpose of GASB Statement No. 77, tax abatements are a reduction in tax revenue that has the following characteristics:

  • An agreement between one or more governments and an individual or entity in which:
    • one or more governments promise to forgo tax revenues to which they are otherwise entitled and;
    • the individual or entity promises to take specific action after the agreement has been entered into that contributes to economic development or otherwise benefits the governments or the citizens of those governments.

This definition is limited and excludes many incentive and other programs because they do not meet one or more of the requirements. For example, a tax abatement program that relates to a certain geographic area would not meet the definition if an agreement between the government and individual entities that requires specific action does not exist. A tax increment finance (TIF) district would also not be included if the local government that established the TIF is not actually forgoing tax revenue. In addition, TIF districts often to do not have specific agreements with the required agreement components. Furthermore, a transaction’s substance, not its form or title, is a key factor in determining if the transaction meets the definition of tax abatement for GASB Statement No. 77.

Disclosures required

If your government has programs that meet the tax abatement definition, certain disclosures are required. The disclosures are extensive and should be organized by each major type of tax abatement program. A portion of the disclosures required include a description of the program, amount of the tax that is reduced, the mechanism by which the taxes are reduced, provisions for recapture (if any), and the types of commitments made by the recipients of the tax abatement.

View additional details regarding required disclosures on page three of the standard >

For more information on this topic, or to learn how Baker Tilly state and local government specialists can help, contact our team.


The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely.  The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.