GASB 77 Tax Abatement Disclosures
Below is a link to a 50-minute webinar from the Iowa Department of Management and the Iowa State Auditor’s Office. The webinar explains the requirements of GASB Statement No. 77, including the function of the GASB 77 tools discussed below.
This new reporting standard requires disclosure of tax abatement information for (1) a reporting government’s own tax abatement agreements and (2) those that are entered into by another government and that reduce the reporting government’s tax revenues. The required disclosures include the gross dollar amount of tax revenues diverted during the period due to tax abatement agreements. The following tools are provided to help determine the amount of diverted revenue and to facilitate communication of these amounts between the government who is party to a tax abatement agreement and the effected local taxing authorities.
The following reports from the Iowa Department of Revenue provide the amount of nonrefundable tax credits, which meet the definition of a GASB 77 tax abatement, claimed by Iowa residents in fiscal year 2017, by school district. The reports show the surtax value of the tax credits which represent the amount of surtax foregone by (diverted from) the school district as a result of the nonrefundable tax credits. The Auditor of State’s Office has verified the total amounts for each of these credits. Each school district is responsible for verifying the “Surtax Value of Tax Credit” amount by multiplying the specific district’s surtax rate times the “Tax Credit Amount”. The “Surtax Value of Tax Credit” for July to December 2016 (late filers for tax year 2015) and January to June 2017 (prompt filers for tax year 2016) should be added together to obtain the total diverted income surtax for disclosure.
Also provided below is a report of surtax rates by County, by School District. The 2015 and 2016 surtax rates are included in this report for use in verifying the “Surtax Value of Tax Credit”.
Each school district, along with their auditor, should determine whether the “Surtax Value of Tax Credit” (diverted revenue) is material and, accordingly, should be disclosed in accordance with GASB Statement No. 77.
GASB 77 DIVERTED INCOME SURTAX