As more local governments such as Mecklenburg County find themselves in intense revenue pain, more are looking to their well-funded nonprofit institutions, which don't pay property taxes. In programs called "payments in lieu of taxes," the nonprofits make voluntary contributions in recognition that they use local services but pay no property taxes.
A new report from the Lincoln Institute of Land Policy on "Payments in Lieu of Taxes" finds at least 117 municipalities in at least 18 states are using them. Large cities collecting PILOTs, as they're called, include Baltimore, Boston, Philadelphia and Pittsburgh.
The report notes that PILOTs aren't appropriate for all types of nonprofits. They're most appropriate, the report says, in local governments that rely heavily on property taxes, and for nonprofits owning large amounts of tax-exempt property and that provide modest benefits to local residents.
Some PILOT programs are done case by case, such as New Haven, Conn., and Yale University. Boston has a systematic PILOT program that creates more equity among the nonprofits.
The report notes that Duke University Medical Center in Durham pays a $300,000 fire service fee paid to the City of Durham.
In an era marked by teacher layoffs, library closings and cuts to important public health and educational services, is it time for Mecklenburg County to start talks with some of its larger and big-property-owning nonprofits?
Hyong Yi, the county's budget director, tells me Mecklenburg County isn't getting any payments of this sort from any nonprofits in the county and he didn't know of its being discussed locally. Nor is Charlotte budget director Ruffin Hall aware of any to the City of Charlotte.
Obviously, there are many sides to consider beyond simple tax revenue: How financially stable is the nonprofit? What services does it provide to the community that might make up for its lack of property tax payments? What services does it require from the community? Should a PILOT program apply to churches? What about nonprofit hospitals, such as Carolinas HealthCare System, which owns a ton of real estate, or Presbyterian Hospital? Several other states ended up in lengthy court battles over nonprofit hospital properties and whether they should be taxed.
The report's authors offer several cautions. A news release about the study says:
“PILOTs can provide crucial revenue for certain municipalities, and are one way to make nonprofits pay for the public services they consume,” said the report’s authors, Daphne A. Kenyon and Adam H. Langley. “However, PILOTs are often haphazard, secretive, and calculated in an ad hoc manner that results in widely varying payments among similar nonprofits. In addition, a municipality’s attempt to collect PILOTs can prompt a battle with nonprofits and lead to years of contentious, costly, and unproductive litigation.”
Monday, December 13, 2010
New property tax source for Mecklenburg?
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17 comments:
This could be a dangerous slippery slope. For example, if you wanted to tax the hospitals, the taxes will simply get passed on to the citizens in the form of even higher healthcare costs. Insurance companies will refuse to pay them, and the difference in what the hospital bills and what the insurance company pays will get sent to the patient. Either that or the insurance companies will pay the new rates for services and stick us with higher premiums. I don't see how any good can come of this.
Conservatives and liberals should be able to agree that the taxation of wealth (property) and income is unsustainable, and if we taxed consumption instead we'd be able to get out of this mess.
Thank goodness we discovered a new tax source! I was afraid the Democrats might have missed one.
Since the PILOT payment is voluntary (presumably used in the literal sense of the word, i.e., "discretionary," rather than the IRS' use of "voluntary" when used to describe how we pay income taxes), what happens when the volunteering organization chooses, for whatever reason(s), not to pay that year? Will budgets be based on an assumption of a receipt of a certain amount or percentage of PILOT payments? What happens when those assumptions are wrong and there is a shortfall? Conversely, where would excess (assuming there is any) revenue go? Would it be earmarked for a certain use(s), such as parks and schools, or would it just go straight to the general fund for use as the City or County deem fit?
As presented, this sounds like an idea that has no possible good outcome.
Property taxes are so low here. You could probably make up any difference a non-profit property tax would make by negligibly raising everyone else's. I would like to know how much potential revenue would actually come out of a program like this anyway.
If conservatives are for taxing consumption, why won't they raise the gas tax?
I would give non-profits a higher priority than County govt. and let them reinvest all their dollars in their missions.
How much does the CHA own?
I nominate Lee Institute, Foundation for the Carolinas, etc. to be first PILOT projects...
@ Anon 08:55 - the problem with the gas tax is that not everyone pays for it because not everyone drives a vehicle. So it is a tax born by a part of the population while roads benefit everyone (whether you drive or not, most of the food at your grocery store got to the store by trucks driven on roads). Not everyone owns property, but property taxes pay for things such as garbage collectors and police officers that benefit everyone. Most of the taxes in widespread use are like that - paid by some for services that benefit all or most.
A much better plan would be to eliminate the specialized taxes and have 1 tax on any good or service, such as the FairTax. That would eliminate the inequality of paying taxes, as well as the need for the IRS to exist. Imagine how much more businesses could invest in hiring people once the enormous cost of tax compliance is eliminated. Getting back to your food, that $2 loaf of bread has about 45 cents of taxes built into that price - income tax of farmers, gas taxes of distributors. Take away these hidden costs and the price of goods and services goes down.
Relating this back to the subject of Mary's post, I just don't see how the PILOT, another specialized tax on a few businesses, changes the economic pressures all levels of government are facing.
Tax the Y. All of them.
Tax the churches. Please sweet Jesus tax the freaking churches.
Tax Jane McIntyre's office, wherever it is.
Now maybe we can afford a tax cut.
I agree with "J", A fair tax on everyone only if the other taxes were taken out of the loaf of bread, gasoline and everything we purchase. Even though I'm retired and living off my savings I would rather pay a fair tax than get "done over" by the city/county governments along with the State and Federal. I look at my receipts and often I see two tax items, one at 8.25% and another at 2%. Perhaps the 2% would do for everything if everyone paid that on each item they purchase.
I intercepted this morning a set of PILOT program messages between a popular evangelist and that deity who throws up universes in 7 days. I’ll summarize them below.
(BG)
God, I like where I’ve moved my mission. My son’s large program for world-wide gift giving is hitting on all cylinders. Our neighbor down the street is a glorious network that broadcasts about the Word. This is the founding home of a huge Afro-American church. How in sweet Jesus can the government want us to pay taxes?
(God)
Reverend, I sort of opened the door a few thousand years ago when my kid said, “Render unto Caesar the things which are Caesar’s, and unto God the things that are God’s”. He let the cat out of the bag. Between me and Caesar we pretty much want all your money.
(BG)
No?
(God)
Yes! See, there’s not much difference between the Roman leaders and me. We’re both into expensive construction big-time. We feed the poor. Somebody is always coming-up and asking for a handout. It all takes money and all the masses ever offer to us are prayer or praise. Like my father said, “Two can live as cheaply as one if one doesn’t eat and the other doesn’t wear any clothes.”
(BG)
You had a father?
(God)
Sure, and he had a father and so on and so on.
(God)
Rev., next to Faith good financial planning has been the key to the last 2100 years success. You of all people should know that. That’s why this PILOT program sounds good. Let’s throw Caesar a bone.
((Epilog)) Rev. B didn’t say anything else because God always has the last word.
Bolyn McClung
Pineville
I am continually reading about the deficits of municipalities, states and the US govt. What about establishing a waiver or amnesty for 6 months on the penalties and interest that have been added to back taxes during those years. get the money in hand, get it off the books and move on. Same thing for student loans. after all, a bird in the hand is worth more than 2 in the bush. thanks
I agree, lets tax the hell out of everyone even more and we can start with the hypocrites at the southern poverty center, a liberal" non profit" center. And on top of that, we need a choo choo tax for 1% that actually use that colossal waste of money. Let's make the riders pay at least 1/2 the cost of their daily ride which would be about $13 per rider per trip. But we couldn't do that now could we?
And another nice thing about taxing churches, it would mean they have less to give to charities and homeless shelters. You see liberals are such great thinkers about the consquences of their careless and inept actions. This is perfect.
Gas is already taxed at over .40 cents a gallon and the road fund money was siphoned off by the corrupt Sleasley to pay for other liberal pet projects. And further costs on energy such as gas would be yet another economic set back for the struggling middle and lower class, but it appears you are OK with that?
I think LifeSpan should be #1 on the list! As crooked as they are let THEM see how it feels to be robbed "legally"!
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