Will PILOTs Take Off in Boston?

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January 3, 2011; Source: Boston Globe | The issue of nonprofits making payments in lieu of taxes (PILOTs) has been a Boston cause célèbre because of the city's generous supply of well endowed universities and hospitals such as Mass General, Boston University, Beth Israel Deaconess Medical Center, Boston College, and Brigham and Women's Hospital. A city task force examining the city's PILOTs suggested that these nonprofits were stingy and should be paying at least 25 percent of what they would have had to pay if their properties were fully taxable.

The Boston Globe editorialists (linked to above) helpfully point out that these institutions would have paid $345 million in taxes in 2009 had their properties been taxable, but they paid only $14.5 million in voluntary contributions. The Globe thinks that these institutions should be paying for the police, fire, snow removal, street repairs, and other safety and livability functions that their students and staff consume – roughly 25 percent of a property tax payer's tax payment. The Globe glosses over the fact that these institutions are tax exempt, that as 501(c) organizations, they provide services and functions that justify their tax exemptions.

According to the Globe, the task force's recommendations for nonprofit property owners were "generous to a fault, which is a lot more than can be said for some of the city's nonprofit institutions." Wait until the Boston Globe goes under as a for-profit entity and reemerges, as one of its suitors wanted last year, as a nonprofit journalistic enterprise. The beneficial effect of reducing the paper's property tax bill had to have been one of the factors in the potential sale and conversion to nonprofit status. Will it take the same position when the city eyes its then tax exempt property for a "voluntary" contribution?—Rick Cohen

  • Cathy St. Clair

    This issue of contributions for city services is a sore topic in many communities. I can’t say that I am acquainted with all of the issues to consider. But it does seem to me that while the larger educational institutions ARE nonprofits, they frequently also have huge endowment funds and operating reserves. It does seem fair for them to contribute to the costs associated with critical services they use. On the other hand, I know that our nonprofit and many others in the service sector are struggling to make it. I would hate to have all nonprofits subject to the same level of taxation or required contributions. It’s a difficult problem! But I think there could be some fair guidelines developed about who gets charged and how much they have to pay.

  • Kevin B. Gilnack

    One of the most disconcerting aspects of the Task Force report is the call to apply PILOTs to ALL types of nonprofits with more than $15m of property. This will include homeless shelters, disability providers, and others, who are largely funded by the state to fulfill the state’s commitment to providing services to the most vulnerable in our communities.

    Asking providers to take money away from their mission and cut staff or services in order to pay for city services that are not factored in to state contracts will ultimately do more harm to the community than good.

    Michael Weekes, the President/CEO of the nonprofit association I work for sums the issue up quite well in this statement: http://providers.org/content/boston-pilot-payments-could-harm-nonprofit-human-services-organizations

  • Bob Glowacki

    No one wants to say it and open a can of worms, but the non-profit exemption needs to be re-visited.

    Universities public and private charging tens of thousands of dollars for tuition with large endowments or a hospital system paying high salaries only building hospitals in suburban areas are different than homeless shelters,literacy center, Churches and elementary schools.

    But we treat them the same.

  • rick cohen

    Dear Bob: One of the members of the NPQ editorial team used to talk about degrees of nonprofitness. That’s essentially what was occurring, in a way, when Senator Grassley held hearings on nonprofit universities and nonprofit hospitals. I think the hospitals were much more challenged, in a way, than the universities, as both Grassley’s committee and other research sources suggested that in many cases, there was little to distinguish nonprofit and for-profit hospitals. There is of course another question to the tax exemption, related to the questioning of the charitable deduction itself. Congressman Becerra and others have in a way hinted about opening conversation about whether the charitable deduction should be the same for all charities, whether a dollar given to Harvard should get the same charitable deduction as a dollar to the homeless shelter or literacy center. Some of the dialogue in Pennsylvania that followed the battle over PILOTs in Pittsburgh had that kind of tone or content. The can of worms no one wants to touch is the church tax exemption. I remember one of the listening sessions IS held prior to its recommendations to the Senate Finance Committee in 2004 or thereabouts, and the question came up about whether tax exempt churches, for which donations get a charitable deduction, should have to file 990s like other 501(c) organizations. The answer from the crowd looked like a pretty resounding yes, but the appetite to look at the churches is a little limited too. I would love to see NPQ readers weigh in on this. Thanks for your comment.

  • Harmon Burstyn

    Churches file Form 990? There seems to be the issue of seperation of church and state. The IRS has a difficult time trying to audit churches that may be doing things that are “out-of-bounds” for tax-exempt status. It seems like the news is always reporting on church abuses (i.e. money mismanagement, fraud, political activities). Perhaps filing the Form 990 will improve churches transparency, governance, and management.