There are, however, Federal subsidy payments to non-public bodies also. These include Federal subsidy payments for land conservation, for purchases of farms and equipment, and for construction of ships in U.S. shipyards. Conceptually, the Board agreed these subsidies should be included as an investment expenditure. However, because of the small amounts involved, inclusion may not be necessary. The members will focus on material items such as public physical property financed from Federal grants.
Tax expenditures are subsidies provided through the tax system.
From its discussions, the Board agreed that Federal tax expenditures which subsidize the cost of state and local physical property should not be considered the equivalent of grants in acquiring non-Federal physical property. In addition, it was noted that the Revenue Recognition project is currently addressing tax expenditures and is now considering some high-level disclosure requirements for them. Generally, Federal law prescribes the use of the grants in sufficient detail that one can readily decide whether it is for capital investment or consumption. However, cases exist in which the law allows the recipient unit flexibility to use grants for either purpose. Since it is up to the recipient jurisdiction to decide how to spend the money, the Federal program agency may not even know in detail what the money was spent on.