Payments In Lieu of Taxes (PILOTs)

Every state exempts some or all of the properties owned by charitable nonprofits from property taxes. However, despite a lack of legal authority to do so, some municipalities attempt to impose discriminatory taxes or fees on nonprofits, or demand so-called “voluntary” payments in lieu of taxes (PILOTs). Different jurisdictions call the assessment different terms – taxes, fees, or PILOTs – but the goal is the same, to divert nonprofit resources away from mission and into government coffers.

Payments in Lieu of Taxes (PILOTs)

• Pennsylvania: Local governments in Pennsylvania are studying the status and potential revenue impact of Payments in Lieu of Taxes (PILOTs) in the Commonwealth. The goal of the research is to “be able to analyze the current status of PILOT agreements within Pennsylvania, and with other state case studies for comparison, prepare a ‘best practices’ guide for municipalities who may be considering starting a program,” according to a notice from the Local Government Commission, Pennsylvania Municipal League, and Pennsylvania State Association of Boroughs. The coalition has posted a survey for municipal representatives about fees, assessments, and PILOT programs for tax exempt properties (owned by churches, hospitals, schools, and other nonprofits) and immune properties (meaning government-owned). (8/26/2019)
• California: In July 2019, the Pasadena City Council in California approved a new policy for negotiating payments in lieu of taxes when nonprofits developing property in the city submit a Master Plan and Development Agreement. Nonprofits are not required to enter into these Development Agreements; however, the agreements allow for certain guarantees like consistent regulations for the term of the agreement. PILOTs can only be negotiated when a nonprofit developer requests an agreement. “I have concerns about this… This is dangerous because it gives so much discretion to impose taxes on institutions that are legally exempt from taxes,” said Councilmember Steve Madison, one of only two Councilmembers who opposed the policy. The City Council is scheduled in September to provide more details on the policy. (8/26/2019)

Additional Resources

• From the Fault Line on Nonprofit Property-Tax Exemptions, David L. Thompson, National Council of Nonprofits Blog, February 9, 2015.
• The Charitable Property-Tax Exemption and PILOTs, Urban Institute (2012)
• Letter from the Alliance for Nonprofit Excellence (Memphis, TN) regarding Payments in Lieu of Taxes and Nonprofits (2012) [pdf]
• Squeezed Cities Ask Nonprofits for More Mone, New York Times (2011)
• PILOTS & SILOTS, Maine Association of Nonprofits (2010)