FASAB seeks transparency on government tax expenditures

The Federal Accounting Standards Advisory Board (FASAB) proposed a standard intended to give the public more information about the U.S. government’s tax expenditures.

FASAB defines tax expenditures as provisions in the tax law available to subsets of taxpayers who engage in certain activities, face special circumstances, or meet specified criteria. They include deductions, credits, and other tax provisions used by the government to encourage behavior that will accomplish public policy goals such as facilitating home ownership, reducing the cost of borrowing for state and local governments, and encouraging higher education and domestic energy production.

Proposed Statement of Federal Financial Accounting Standards, Tax Expenditures: Management’s Discussion and Analysis and Disclosure Requirements, is designed to improve financial statement users’ awareness and understanding of tax expenditures.

The proposal is designed to require the consolidated financial report of the U.S. government to include information to assist users in understanding the existence, purpose, and impact of tax expenditures on federal revenues and the overall financial position of the federal government.

“The government can and does use tax expenditures as an alternative to other policy instruments—such as spending or regulatory programs—to address and hopefully accomplish policy objectives. Because tax expenditures are not explicitly reported as appropriations or displayed in the statements of net cost or changes in net position, we need to shine a light on them,” FASAB Chairman Scott Showalter said in a news release.

FASAB is requesting comments on the exposure draft by Sept. 15 to fasab@fasab.gov.