Charities Making Payments in Lieu of Property Taxes

Urban Institute recently held a conference on “State and Local Budget Pressures: The Charitable Property-Tax Exemption and PILOTs” which explored how increasing fiscal pressure on governments on the state and local level has led governments to re-examine which charities should be exempt from property taxes, and in some cases to ask for Payments in Lieu of Taxes (PILOTs), a voluntary payment of portion of their exempt property taxes from nonprofits.

The first panel “The Current Landscape” looked at costs and benefits of the current exemption; the second “Focus on Eds and Meds” took a closer look at the largest and most controversial beneficiaries of the exemption, nonprofit hospitals and colleges and universities; and the third “Negotiated Payments in Lieu of Taxes as Wave of the Future?” debated the use of Payments in Lieu of Taxes (PILOTs) and discussed how a well-designed PILOT program could be created.

The graph below, from a presentation by Daphne Kenyon of the Lincoln Institute of Land Policy, highlights the increasing prevalence of PILOTs as local governments seek new sources of revenue.

States with Jurisdictions Collecting PILOTs

Daphne Kenyon. 2012. “Payments in Lieu of Taxes: Balancing Municipal and Nonprofit Interests.” Urban Institute conference on “State and Local Budget Pressures: The Charitable Property-Tax Exemption and PILOTs,” on May 21, 2012 at the Urban Institute.

For more details I recommend reading the brief based off the conference, which describes the mechanics of governments asking for voluntary taxes from nonprofits in more detail, and gives an overview of the debate over such payments.

4 Comments on “Charities Making Payments in Lieu of Property Taxes”

  1. Michael Bindner says:

    They should also be able to provide services in lieu of local taxes for local residents, who should have the option of funding parochial schools instead with a portion of their tax bill, be it income or property or net business receipts taxes.

  2. Joe Guttentag says:

    I live in DC and have been trying to improve its revenue sources for many years beginning with an obviously unsuccessful commuter tax 40 years ago. I am now considering a letter to Harvard VP Finance urging a PILOT to DC with respect to the Dumbarton property. Once I get Harvard on line I will move to GW. Appreciate any thoughts.

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