New accounting standard will require governments to reveal the annual cost of tax breaks.
BY JACOB PALMER | DIGITAL NEWS EDITOR
A new accounting standard will mandate governments to reveal the annual cost of the tax breaks they give companies.
Among the information to be disclosed: “Value of property, sales and income taxes that have been waived under agreements with companies or other taxpayers,” according to Nasdaq.
The numbers show how the costs of discounted tax bills, special tax zones or outright waivers are piling up for local governments that in some cases have pressing problems with pensions and other budgetary issues. Deals like Nevada’s promise last fall to give Tesla Motors Inc. up to $1.3 billion in tax breaks for building a battery plant there and the $8.7 billion of incentives Washington offered Boeing Co. and its suppliers to expand jetliner production in the state have long been subject to complaints that they increase the burden on existing businesses and individual taxpayers while creating too few jobs.
Now, investors, some government officials and others are becoming concerned that the combined effect of such deals over the years may be significantly limiting the financial flexibility of some cities. Governments rarely sum up the value of the tax breaks they have granted, and the accounting board worries that this leaves investors in the dark about the toll.
Local companies that will be subjected to the deal include Nike and Intel.
In Oregon, Nike received an assurance in 2012 that the state wouldn’t change its taxation modes. In exchange, Nike promised to spend at least $150 million and add 500 Oregon jobs. Nike has far exceeded both goals.
Washington County and Intel Corp. (Nasdaq: INTC) agreed last year on a sweeping 30-year incentives plan.
(SOURCE: Portland Business Journal)