Payments in Lieu of Taxes by Nonprofits

This article was originally published in State Tax Notes, a journal by Tax Analysts, July 18, 2011.

Payments in lieu of taxes (PILOTs) are voluntary payments made by tax-exempt nonprofits as a substitute for property taxes. This article provides a brief overview of PILOTs and then focuses on six case studies. In Boston (MA), a task force made up of leaders from the city’s nonprofits and other key stakeholders agreed on an innovative new program that seeks to make PILOT contributions more consistent across nonprofits and increase PILOT revenue. In Worcester (MA), a 30-year impasse on PILOT negotiations was resolved when the city took a more collaborative approach to working with nonprofits and agreed to earmark PILOT revenue for certain nonprofit priorities. In Baltimore (MD), the city took a more contentious approach by threatening to impose a mandatory bed tax on the city’s universities and hospitals that was only dropped when they agreed to new PILOTs. In Princeton (NJ), the debate has also been contentious as Princeton University has threatened to stop making PILOTs unless the town approves a requested zoning change. In Providence (RI), a fiscal crisis has led the Mayor to seek additional PILOTs from the city’s nonprofits. In New Orleans (LA), a city task force rejected the idea of seeking PILOTs and instead focused on changing state law to narrow the nonprofit property tax exemption.