A payment in lieu of taxes (usually abbreviated as PILOT, or sometimes as PILT) is a payment made to compensate a
government
A government is the system or group of people governing an organized community, generally a state.
In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government is a ...
for some or all of the
property tax
A property tax or millage rate is an ad valorem tax on the value of a property.In the OECD classification scheme, tax on property includes "taxes on immovable property or net wealth, taxes on the change of ownership of property through inheri ...
revenue lost due to tax exempt ownership or use of
real property
In English common law, real property, real estate, immovable property or, solely in the US and Canada, realty, is land which is the property of some person and all structures (also called improvements or fixtures) integrated with or affixe ...
.
Canada
The federal government of
Canada
Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by tot ...
makes payments in lieu of taxes to local governmental entities (including
First Nations
First Nations or first peoples may refer to:
* Indigenous peoples, for ethnic groups who are the earliest known inhabitants of an area.
Indigenous groups
*First Nations is commonly used to describe some Indigenous groups including:
**First Natio ...
) where the federal government owns
real property
In English common law, real property, real estate, immovable property or, solely in the US and Canada, realty, is land which is the property of some person and all structures (also called improvements or fixtures) integrated with or affixe ...
.
United States
In the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
, payment in lieu of taxes can arise in several ways:
* Land owned by the
federal government
A federation (also known as a federal state) is a political entity characterized by a union of partially self-governing provinces, states, or other regions under a central federal government (federalism). In a federation, the self-governin ...
is generally not subject to taxation by
state
State may refer to:
Arts, entertainment, and media Literature
* ''State Magazine'', a monthly magazine published by the U.S. Department of State
* ''The State'' (newspaper), a daily newspaper in Columbia, South Carolina, United States
* ''Our S ...
or local governments. Under Public Law 94-565, enacted in 1976, the federal government began making payments in lieu of taxation to local governments affected by this reduction in their tax bases.
* In some states where land owned by
college
A college (Latin: ''collegium'') is an educational institution or a constituent part of one. A college may be a degree-awarding tertiary educational institution, a part of a collegiate or federal university, an institution offering ...
s and
universities
A university () is an institution of higher (or tertiary) education and research which awards academic degrees in several academic disciplines. Universities typically offer both undergraduate and postgraduate programs. In the United States, t ...
is not subject to local property taxes, the state government reimburses the local governments for part of the tax revenue that the local government would otherwise have collected. In other cases, the institution makes a direct payment to the local government (which would not otherwise be reimbursed) simply to maintain good relations.
* PILOTs may be negotiated in specific circumstances, as when an arrangement is made for a
corporation
A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and r ...
or institution to build a facility on public land without assuming ownership of the land. For example,
New York state
New York, officially the State of New York, is a state in the Northeastern United States. It is often called New York State to distinguish it from its largest city, New York City. With a total area of , New York is the 27th-largest U.S. stat ...
has several such programs. In conjunction with the proposal to build a
West Side Stadium
West Side Stadium (also known as the New York Sports and Convention Center) was a proposed football and Olympic stadium to be built on a platform over the rail yards on the West Side of Manhattan in New York City.
The stadium would have been ...
in
New York City
New York, often called New York City or NYC, is the List of United States cities by population, most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the L ...
for use by the
New York Jets
The New York Jets are a professional American football team based in the New York metropolitan area. The Jets compete in the National Football League (NFL) as a member club of the league's American Football Conference (AFC) East division. The J ...
, there was controversy over the proposal by the
Mayor
In many countries, a mayor is the highest-ranking official in a municipal government such as that of a city or a town. Worldwide, there is a wide variance in local laws and customs regarding the powers and responsibilities of a mayor as well a ...
,
Michael Bloomberg
Michael Rubens Bloomberg (born February 14, 1942) is an American businessman, politician, philanthropist, and author. He is the majority owner, co-founder and CEO of Bloomberg L.P. He was Mayor of New York City from 2002 to 2013, and was a ca ...
, to use PILOT money from the Jets to help finance the project rather than applying it to other municipal expenses. The
Port Authority of New York and New Jersey
The Port Authority of New York and New Jersey, PANYNJ; stylized, in logo since 2020, as Port Authority NY NJ, is a joint venture between the U.S. states of New York and New Jersey, established in 1921 through an interstate compact authorized ...
, a bi-state public authority, makes payments in lieu of taxes to New York City under an agreement relating to its ownership of the
World Trade Center site
The World Trade Center site, often referred to as "Ground zero#World Trade Center, Ground Zero" or "the Pile" immediately after the September 11 attacks, is a 14.6-acre (5.9 ha) area in Lower Manhattan in New York City. The site is bounde ...
.
* Similarly, where a
non-profit organization
A nonprofit organization (NPO) or non-profit organisation, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in co ...
may be exempt from equipment taxes and sales taxes, its mission may permit payment of an agreed PILOT to the local tax authorities, to offset the impact upon local services funded by town residents. The size of such payments can be controversial, especially where the organization appears to have federal income from taxable activities. For example, the tax-exempt
Appalachian Mountain Club
Appalachian Mountain Club (AMC) is the oldest outdoor group in the United States. Created in 1876 to explore and preserve the White Mountains in New Hampshire, it has expanded throughout the northeastern U.S., with 12 chapters stretching from Ma ...
operates a modern hotel for its members in
Carroll, New Hampshire
Carroll is a town in Coös County, New Hampshire, United States. The population was 820 at the 2020 census. The two largest villages are Twin Mountain and Bretton Woods. Carroll is an important access point for recreational areas in the White M ...
, paying a negotiated PILOT amount to the town. A competing commercial hotel would also pay "meals and beds" taxes.
* As an incentive for investment in taxable infrastructure or other facilities that create a public benefit, a PILOT may be negotiated to limit or defer the property taxes on a developer, striking a balance between public and private economic needs. In effect, the local taxpayers are subsidizing the development, which might otherwise have gone elsewhere. This has occurred in poor rural areas where large
wind energy
Wind power or wind energy is mostly the use of wind turbines to electricity generation, generate electricity. Wind power is a popular, sustainable energy, sustainable, renewable energy source that has a much smaller Environmental impact of wi ...
systems are often placed, providing cost relief to the owner and a limited tax payment to the locals.
Payments in lieu of taxes for nonprofit organizations are voluntary. However, some cities want this to change. At issue are the vast amounts of land owned by universities, hospitals, churches, and other nonprofit organizations. The tax-exempt status granted to these entities by the IRS means that property taxes that would have been paid to municipalities had this land been owned by private individuals or companies are not collected.
According to a 2010 report by the
Lincoln Institute of Land Policy
The Lincoln Institute of Land Policy is a think tank based in Cambridge, Massachusetts. The Lincoln Institute of Land Policy seeks to "improve quality of life through the effective use, taxation, and stewardship of land". A nonprofit private opera ...
, 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
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.
For many municipalities in the United States, property taxes are a 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
Baltimore ( , locally: or ) is the List of municipalities in Maryland, most populous city in the U.S. state of Maryland, fourth most populous city in the Mid-Atlantic (United States), Mid-Atlantic, and List of United States cities by popula ...
, MD, recently estimated that his city loses $120 million annually from these foregone taxes.
At the same time, these entities enjoy the same level of service the rest of the residents of the given city or county enjoy. These services include fire, police, sewer, trash collection, etc. 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.
Boston Tries Asking Nicely for More Taxes
/ref> This would be equivalent to increasing the tax base in these areas. Many nonprofits, whose own budgets are dwindling, fear this trend.
See also
*Tenement
A tenement is a type of building shared by multiple dwellings, typically with flats or apartments on each floor and with shared entrance stairway access. They are common on the British Isles, particularly in Scotland. In the medieval Old Town, i ...
for legal reasons
*Endowment tax
Endowment tax is the taxation of financial endowments that are otherwise not taxed due to their charitable, educational, or religious mission. Endowments can be up to several billion dollars at some universities, some charitable foundations, and ...
References
{{Reflist
External links
"Payments in Lieu of Taxes"
- explanation of the U.S. program, by the Bureau of Land Management
The Bureau of Land Management (BLM) is an agency within the United States Department of the Interior responsible for administering federal lands. Headquartered in Washington DC, and with oversight over , it governs one eighth of the country's la ...
PILT (Payments in Lieu of Taxes): Somewhat Simplified
Congressional Research Service
The Congressional Research Service (CRS) is a public policy research institute of the United States Congress. Operating within the Library of Congress, it works primarily and directly for members of Congress and their committees and staff on a c ...
Connecticut's PILOT Program
(in PDF
Portable Document Format (PDF), standardized as ISO 32000, is a file format developed by Adobe in 1992 to present documents, including text formatting and images, in a manner independent of application software, hardware, and operating systems. ...
)
Canada's PILT Program
Property taxes
Real property law