Are PILOTs Property Taxes on Nonprofits?
Document Type
Article
Publication Date
2016
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 PILOTs to the value of local tax-exempt property, are higher in towns with higher property tax rates: a one percent higher property tax rate is associated with a 0.2 percent higher PILOT rate. PILOTs appear to discourage nonprofit activity: a one percent higher PILOT rate is associated with 0.8 percent reduced real property ownership by local nonprofits, 0.2 percent reduced total assets, and 0.2 percent lower revenues of local nonprofits. These patterns are consistent with voluntary PILOTs acting in a manner similar to low-rate, compulsory real estate taxes.
Recommended Citation
Hines, James R. Jr. Fei, Fan, James R. Hines Jr., and Jill R. Horwitz. "Are PILOTs Property Taxes on Nonprofits?" Journal of Urban Economics 94 (2016): 109-123.
Comments
NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
© 2015 by Fan Fei, James R. Hines Jr., and Jill R. Horwitz. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.
The publisher's final version may be found at Hines, James R. Jr. Fei, Fan, James R. Hines Jr., and Jill R. Horwitz. "Are PILOTs Property Taxes on Nonprofits?" Journal of Urban Economics 94 (2016): 109-123.