Payment in lieu of taxes

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A payment in lieu of taxes, abbreviated as PILT or PILOT, [1] [2] [3] is a payment made to compensate a government for some or all of the property tax revenue lost due to tax exempt ownership or use of real property.

Contents

Canada

In Canada, payment in lieu of taxes are made in place of property taxes on real property owned by federal, provincial, and municipal governments and government agencies to local governments and reserves. [4] They need for PILTs arises from Section 125 of the Constitution Act, 1867 which prohibits levels of government from taxing real property owned by federal and provincial governments. [5] [6] Federal PILTs were introduced by the Payments in Lieu of Taxes Act of 1985 and PILTs by the Government of Ontario were introduced by the Municipal Tax Assistance Act of 1990. [4] [7] [8]

PILTs are made on a volunteer basis, leading situations where local governments receive smaller payments than requested based on property tax assessments. [9] In 2024, the government of Ottawa, the local government of the capital of Canada, estimated it received CA$95 million less in PILTs than it should have from the federal government. [10]

United States

In the United States, payment in lieu of taxes can arise in several ways:

Payments in lieu of taxes for nonprofit organizations can be contractual arrangements between the organization and the municipality or simply an organization's voluntary gesture of goodwill. However, all local governments must provide municipal services such as sewer and water, roads and transit, schools, police, fire departments to these properties. [14] [15] Universities, hospitals, churches, charter schools, and other nonprofit organizations own large amounts of property in many cities but avoid paying property taxes that fund these essential services. The tax-exempt status granted to these entities by the IRS allows these organizations to largely avoid paying for the public services they benefit from. Their services are instead paid for by taxing other property owners in the city's jurisdiction such as homeowners and for-profit businesses.

For many municipalities in the United States, property taxes are the 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, MD, recently estimated that his city loses $120 million annually from these foregone taxes. [16] According to a 2010 report by the Lincoln Institute of Land Policy, [17] 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 Massachusetts 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.

Non-profits enjoy the same level of service the rest of the residents of the given city or county enjoy. 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. [18] This would be equivalent to increasing the tax base in these areas.

See also

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References

  1. ↑ "Payments in Lieu of Taxes". U.S. Department of the Interior. 9 June 2015. Retrieved 2018-10-25. Payments in Lieu of Taxes (PILT).
  2. ↑ Canada, Public Services and Procurement (2024-03-19). "Payments in lieu of taxes for federal properties". www.canada.ca. Retrieved 2024-08-11.
  3. ↑ "General Payment in Lieu of Taxes (PILOT) | Department of Taxes". tax.vermont.gov. Retrieved 2024-08-11.
  4. 1 2 "Status of Outstanding Payments in Lieu of Tax Amounts for Federal, Provincial and Municipal Properties" (PDF). City of Toronto . September 11, 2023.
  5. ↑ Crawford, Blair (Aug 10, 2024). "Explainer: What's a PILT and why does the mayor think Ottawa is getting shafted". Ottawa Citizen .
  6. ↑ Branch, Legislative Services (2024-04-09). "Exemption of Public Lands, etc., THE CONSTITUTION ACTS 1867 to 1982". laws-lois.justice.gc.ca. Retrieved 2024-08-11.
  7. ↑ Branch, Legislative Services (2023-09-01). "Consolidated federal laws of Canada, Payments in Lieu of Taxes Act". laws-lois.justice.gc.ca. Retrieved 2024-08-11.
  8. ↑ "Municipal Tax Assistance Act, R.S.O. 1990, c. M.59". Ontario.ca. 2014-07-24. Retrieved 2024-08-11.
  9. ↑ Moloney, Paul (January 27, 2009). "City's return on island airport nosedives". Toronto Star. Archived from the original on January 31, 2009. Retrieved January 30, 2009.
  10. ↑ White-Crummey, Arthur (Aug 8, 2024). "Mayor says Ottawa facing 'financial crisis,' blames feds for shortchanging city". CBC News .
  11. ↑ Tufts' Contribution Archived 2015-12-22 at the Wayback Machine , City of Somerville, July 6, 2010. Retrieved 2011-04-27.
  12. ↑ Obstacle Rises for Bloomberg on West Side Stadium Plan, New York Times, March 3, 2005. Retrieved 2011-04-27.
  13. ↑ WTC's taxes down to trickle, New York Daily News, December 7, 2002. Archived February 11, 2006, at the Wayback Machine
  14. ↑ Some Indiana mayors want that state's legislature to examine who should be exempt from property taxes
  15. ↑ Camden to require nonprofit day care centers to pay property taxes
  16. ↑ Young: Reducing Property Tax Requires Federal Aid
  17. ↑ Payments in Lieu of Taxes Balancing Municipal and Nonprofit Interests
  18. ↑ Boston Tries Asking Nicely for More Taxes
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