A payment in lieu of taxes (usually abbreviated as PILOT, or sometimes as PILT [1]) is a payment made to compensate a government for some or all of the property tax revenue lost due to tax exempt ownership or use of real property.
The federal government of Canada makes payments in lieu of taxes to local governmental entities (including First Nations) where the federal government owns real property.
In the United States, payment in lieu of taxes can arise in several ways:
Payments in lieu of taxes for nonprofit organizations can be contractual arrangements between the organization and the municipality or simply an organization's voluntary gesture of goodwill. However, all local governments must provide municipal services such as sewer and water, roads and transit, schools, police, fire departments to these properties. [5] [6] Universities, hospitals, churches, charter schools, and other nonprofit organizations own large amounts of property in many cities but avoid paying property taxes that fund these essential services. The tax-exempt status granted to these entities by the IRS allows these organizations to largely avoid paying for the public services they benefit from. Their services are instead paid for by taxing other property owners in the city's jurisdiction such as homeowners and for-profit businesses.
For many municipalities in the United States, property taxes are the primary source of revenue. The amount of forgone tax revenue as a result of these tax-exempt land parcels is significant. The president of the city council of Baltimore, MD, recently estimated that his city loses $120 million annually from these foregone taxes. [7] According to a 2010 report by the Lincoln Institute of Land Policy, [8] between 2000 and 2010 PILOTs were used in at least 18 states. Seventeen of those states account for 35 cities and towns with PILOTs. In addition, 82 out of a total of 351 municipalities in Massachusetts have collected PILOTs (Massachusetts Department of Revenue 2003). A map in this report also reveals that although these 18 states can be found scattered across the country, the vast majority of this activity seems to be concentrated in the northeast.
Non-profits enjoy the same level of service the rest of the residents of the given city or county enjoy. It is argued that asking some, or all, nonprofits to pay taxes, either voluntarily, or via statutory measures, would help offset some of these costs and ease the strain on local budgets. [9] This would be equivalent to increasing the tax base in these areas.
Payments in Lieu of Taxes (PILT).
A payment in lieu of taxes (usually abbreviated as PILOT, or sometimes as PILT [1]) is a payment made to compensate a government for some or all of the property tax revenue lost due to tax exempt ownership or use of real property.
The federal government of Canada makes payments in lieu of taxes to local governmental entities (including First Nations) where the federal government owns real property.
In the United States, payment in lieu of taxes can arise in several ways:
Payments in lieu of taxes for nonprofit organizations can be contractual arrangements between the organization and the municipality or simply an organization's voluntary gesture of goodwill. However, all local governments must provide municipal services such as sewer and water, roads and transit, schools, police, fire departments to these properties. [5] [6] Universities, hospitals, churches, charter schools, and other nonprofit organizations own large amounts of property in many cities but avoid paying property taxes that fund these essential services. The tax-exempt status granted to these entities by the IRS allows these organizations to largely avoid paying for the public services they benefit from. Their services are instead paid for by taxing other property owners in the city's jurisdiction such as homeowners and for-profit businesses.
For many municipalities in the United States, property taxes are the primary source of revenue. The amount of forgone tax revenue as a result of these tax-exempt land parcels is significant. The president of the city council of Baltimore, MD, recently estimated that his city loses $120 million annually from these foregone taxes. [7] According to a 2010 report by the Lincoln Institute of Land Policy, [8] between 2000 and 2010 PILOTs were used in at least 18 states. Seventeen of those states account for 35 cities and towns with PILOTs. In addition, 82 out of a total of 351 municipalities in Massachusetts have collected PILOTs (Massachusetts Department of Revenue 2003). A map in this report also reveals that although these 18 states can be found scattered across the country, the vast majority of this activity seems to be concentrated in the northeast.
Non-profits enjoy the same level of service the rest of the residents of the given city or county enjoy. It is argued that asking some, or all, nonprofits to pay taxes, either voluntarily, or via statutory measures, would help offset some of these costs and ease the strain on local budgets. [9] This would be equivalent to increasing the tax base in these areas.
Payments in Lieu of Taxes (PILT).