Corporate tax breaks cause cities, counties and school districts to lose tax revenue they might have better spent on improving public services. TAX BREAK TRACKER collects and organizes the official records of these annual losses.
Governments that comply with the generally accepted accounting principles (GAAP) set forth by the Governmental Accounting Standards Board (GASB) are required to provide this information in the Notes section of their annual financial reports or audited financial statements. The GAAP rule is called Statement No.77 on Tax Abatement Disclosures (hereafter “GASB 77”). GASB 77 was widely implemented starting in Fiscal Year 2017, although a few jurisdictions started reporting earlier. As of August 2022, Tax Break Tracker includes five years of tax abatement disclosures for jurisdictions, enabling users to analyze spending trends over time.
Compliance with the new rule is uneven, resulting in uneven data quality. Some state officials, inexplicably, take a lax attitude about enforcing GASB 77. School districts in some states are component units of counties or cities, so the schools don’t have stand-alone abatement disclosures. Not every government adheres to GAAP. We estimate that 50,000 to 60,000 of the nation’s 90,000 localities should be reporting this lost revenue. Tax Break Tracker aims to document lost tax revenue for at least the five most populous cities and counties in each state. In some states, we have done deeper dives, especially into school district data.
From each audited financial report, Good Jobs First extracts key fields (to the extent they are available), including fiscal year, program name, reporting jurisdiction, statutory authority, and the amount of taxes abated. Individual entries are summarized for states and localities.
HOW TO USE TAX BREAK TRACKER
On the main Tax Break Tracker page, use the drop-down menu to select a state and year, or leave "All Years” selected.
• Select “Search” to get to the state summary page – a list of state programs and a list of localities in that state, OR
• Refine the search by jurisdiction type and select “Search” to get to the jurisdiction summary page – a list of local programs.
Clicking on each program name redirects users to the individual entry page, which provides details about the tax abatement program and its cost as reported by the jurisdiction selected.
If you do not see a locality in the drop-down menu, either we have not yet retrieved the data, or it failed to disclose any revenue losses in accordance with GASB 77.
There is no negative reporting obligation under GAAP. That is, if a government has no revenue losses due to abatements, it is not obligated to file a Note documenting that. You can access the list of non-reporting jurisdictions here: Download the list of non-compliant localities (xlsx, 823 KB).
Because of the uneven quality of disclosure among local governments, the revenue losses reported by local jurisdictions may or may not be comparable across states — or even within a given state. Before attempting any interstate comparisons, look at data such as the percentage of local jurisdictions in a state that disclosed. For intrastate comparisons, we suggest focusing on state-enabled programs that are commonly reported by localities.
NOTES ON INDIVIDUAL ENTRY PAGES
Program purpose: Economic development programs have widely varying statutory intentions, including capital investment, job creation, historic preservation, business expansion, and many more. The field “program purpose” displays the most emphasized or explicitly stated objective as reported in the financial reports. For example, if the stated purpose is to encourage businesses to relocate without explicitly mentioning job creation, the program purpose field would display “business incentive.” If no specific objective is provided, the field will display “general economic development”.
Type of loss displays either active or passive. Active losses occur when the reporting jurisdiction is the same as the abating jurisdiction. Passive losses happen when the reporting jurisdiction did not award the abatement (i.e. when a government loses revenue due to actions of another government; this is very common with school districts losing revenue to city-awarded abatements).
For active losses reported, applicable tax(es) refers to the types of revenue to which a tax credit, rebate, or abatement can be applied. For passive loss reporting, applicable tax(es) refers to the type(s) of tax revenue (property tax or sales tax, etc.) that was reduced for the reporting jurisdiction. When a government reports a passive loss, less detail is required, therefore Tax Break Tracker, will display many fields as “not specified” to denote that information is not provided. If an Industrial Development Agency or other kind of economic development authority affiliated with a city makes abatement agreements, Tax Break Tracker considers that an active revenue loss for the city.
Provisions for recapture: GASB 77 requires the program description to indicate whether it has a provision enabling a jurisdiction to recapture the incentive and/or terminate agreements should a company fail to meet its obligations in the abatement agreement. These provisions are also known as “clawbacks.”
Gross revenue loss is the dollar amount of taxes abated.
Reimbursement/offset typically take the form of state aid (it may also come from a Payment In Lieu of Taxes, or PILOT).
Net revenue loss is the difference between gross revenue loss and reimbursement/offset.
In some cases, a jurisdiction with multiple programs reports just a single dollar figure for reimbursement/offset – usually from the state government. Tax Break Tracker displays this figure under the costliest program in this jurisdiction and mentions it in the notes of other programs. If the reimbursement is larger than the cost of the costliest program, the “spillover” is displayed under the second costliest program, and so on.
SUPPORTING RESOURCES
Good Jobs First obtains many audited financial statements through a centralized library hosted by the Center for Municipal Finance, and we gratefully acknowledge CMF’s assistance. We also use government websites, including the Electronic Municipal Market Access (EMMA®) website of the Municipal Securities Rulemaking Board (MSRB). For more information on GASB77, visit our Tax Abatement Disclosures (GASB 77) Page.
