November 30, 2010; Source: Associated Press | The Lincoln Institute of Land Policy has just produced the definitive study of Payments in Lieu of Taxes (PILOTs) that are slapped on tax exempt nonprofits to help pay for municipal services. The report documents PILOTs in 117 municipalities in 18 states. The researchers say that Boston’s pilot program is among the nation’s most “revenue productive.”
So why don’t all municipalities eke PILOTs out of nonprofits? Well, they work best in municipalities that are heavily reliant on property taxes for government revenue and have a large amount of nonprofit-owned tax exempt property. The Lincoln Institute researchers note several significant PILOT problems and more generally tax-exempt property issues: the property tax exemption benefits nonprofits with the biggest holdings of valuable real estate “rather than those providing the greatest public benefit;” the cost of the property tax exemption is borne by the host community even if the nonprofit serves and benefits a regional or national population; PILOTs are often haphazard and calculated in an ad hoc manner, resulting “in widely varying payments among similar nonprofits;” and the methods used by taxing entities to negotiate PILOTs are often less than transparent and inconsistent.
The study isn’t against PILOTs and suggests for those municipalities with significant tax exempt property holders that they devise systematic PILOT programs that help create “horizontal equity.” The authors also suggest substituting user-fees for PILOTs in some cases. That is, having tax exempt property owners pay for some of the public services they consume and, as tax exempts, don’t pay for. And they laud states such as Connecticut that provide grants to municipalities that have sacrificed, so to speak, some of their tax base to tax exempt property owners.
NPQ has published its own treasure trove of articles and newswires about nonprofits’ experiences with municipal PILOTS:
- Turning Tax Exemption on Its Head
- Canadian Court Tells Feds to Pay Up
- City Proposes 3-Year Tax Exemption to Business
- Who’s on First? Who Cares, Give Us Your PILOTs
- No PILOTs Yet for Philadelphia
- Pittsburgh Promise Scholarship Raises $11.3 M in Year
- Colleges and City Finding Common Ground on PILOTs
- No Hurt, No Blues, No Service: Taxing Nonprofits in Oak Bluffs
- Why Doesn’t City Hall Pay Taxes?
- No PILOTs Yet for Philadelphia
These are just a sampling of our coverage of the PILOT story in 2010.
Supplementing studies like the Lincoln Institute report, NPQ’s stories track the politics of PILOTs in large and small communities and tell about what actually happens in negotiations between nonprofit property owners and revenue-starved local governments. Tell us what you’re seeing and hearing about PILOTs during this time of prolonged and unshakeable economic recession.—Rick Cohen