Are PILOTs Property Taxes for Nonprofits?

Fan Fei, James Hines and Jill R. Horwitz

No 21088, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: H25 L31 (search for similar items in EconPapers)
Date: 2015-04
New Economics Papers: this item is included in nep-acc, nep-pub and nep-ure
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Published as Fan Fei & James R. Hines & Jill R. Horwitz, 2016. "Are PILOTs Property Taxes for Nonprofits?," Journal of Urban Economics, .

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