Are PILOTs property taxes for nonprofits? |
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| Institution: | 1. Department of Economics, University of Michigan, Lorch Hall, 611 Tappan Street, Ann Arbor, MI 48109, United States;2. School of Law and NBER, UCLA, P.O. Box 951476, Los Angeles, CA 90095, United States\n;1. Dept. of Economics, Texas Christian University, 2855 Main Drive, Fort Worth, TX 76129, United States;2. Dept. of Economics, Reed College, 3203 SE Woodstock Blvd., Portland, OR 97202, United States;1. University of Vienna, Department of Economics, Oskar-Morgenstern-Platz 1, Vienna 1090, Austria;2. University of Hannover, School of Economics and Management, Koenigsworther Platz 1, Hannover 30167, Germany;1. Community and Regional Planning Program, School of Architecture, The University of Texas at Austin, United States;2. E.P. Schoch Professor in Engineering, Department of Civil, Architectural and Environmental Engineering, The University of Texas at Austin, 6.9 E. Cockrell Jr. Hall, Austin, TX 78712-1076, United States |
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| Abstract: | Nonprofit charitable organizations are exempt from most taxes, including local property taxes, but U.S. cities and towns increasingly request that nonprofits make payments in lieu of taxes (known as PILOTs). Strictly speaking, PILOTs are voluntary, though nonprofits may feel pressure to make them, particularly in high-tax communities. Evidence from Massachusetts indicates that PILOT rates, measured as ratios of payments to the value of local tax-exempt property, are higher in towns with higher property tax rates: a one percentage point higher property tax rate is associated with a 0.2 percentage point higher PILOT rate. PILOTs appear to discourage nonprofit activity: a one percentage point higher PILOT rate is associated with 0.8% lower real property ownership by local nonprofits, 0.2% lower total assets, and 0.2% lower revenues of local nonprofits. These patterns are consistent with voluntary PILOTs acting in a manner similar to low-rate, compulsory real estate taxes. |
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