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 demanding 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)

• US: A report from the Lincoln Institute of Land Policy has confirmed that demanding payments in lieu of taxes (PILOTs) from nonprofits fails to provide the budget solutions that municipalities need. According to the report, such payments account for an average of only 0.13 percent of the general revenue where they are collected. “PILOTs will never be a panacea for cash-strapped governments – they simply do not generate enough revenue," the report said. Up to 80 percent of the 117 municipalities implementing some form of PILOT since 2000 are in the Northeast, according to the study.
• Massachusetts (2014): Legislation is pending that would create a commission to study and establish a payment in lieu of taxes mechanism for nonprofit group homes.  Legislation was also proposed that would allow municipalities to adopt laws that would allow them to charge nonprofits PILOTs for up to 25% of what they would actually pay in property taxes if they were not tax-exempt.
• North Carolina (2014): Proposed legislation aimed to create a new commission to study payments in lieu of taxes (PILOTs) for state properties. The commission would have had broad authority to study other PILOT proposals, including those targeting nonprofits.

Additional Resources

• "From the Fault Line on Nonprofit Property-Tax Exemptions," David L. Thompson, National Council of Nonprofits Blog, February 9, 2015.
• "Bryant's Mandatory Payment Another Black Eye for State," David L. Thompson, The Valley Breeze, July 31, 2013.
• Providers' Council Testimony on bill creating a PILOTs Commission (2013)
• Providers' Council Testimony on bill authorizing taxes, fees, or PILOTs (2013)
• 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 Money,” New York Times (2011)
• State Budget Crises: Ripping the Safety Net Held by Nonprofits, National Council of Nonprofits (2010)
• PILOTS & SILOTS, Maine Association of Nonprofits (2010)