After two years of meetings and study, Boston Mayor Tom Menino’s PILOT Task Force has released its final report recommending more consistent monetary contributions from the city’s tax-exempt non-profit institutions.
Boston’s existing Payment in Lieu of Taxes, or PILOT, Program is one of the longest standing and most revenue productive in the country, reflecting Boston’s heavy reliance on the property tax (more than 60% of its annual budget) and the extent of its tax-exempt real estate. The program has generated revenue through voluntary agreements between tax-exempt institutions and the City, often entered into in connection with major facilities development projects. As a result of this ad hoc system, PILOT contributions from similar tax-exempt institutions vary widely. The Task Force’s proposed changes would make the PILOT Program more consistent, more transparent, and more revenue-producing for the City.
Contributions would be expected not only from major hospitals and universities, but also from museum, cultural, social service and other tax-exempt institutions, based on the value of real estate owned. Each organization would be asked to contribute 25% of the amount that it would pay if its real estate holdings were taxable. To protect small tax-exempt organizations, the first $15 million of assessed property value would be considered exempt. Institutions could receive credit for up to half of the amount due for providing services that directly benefit the city residents and for real estate taxes voluntarily paid on properties that would ordinarily qualify for a tax exemption based on use.
Most tax-exempts would be expected to substantially increase financial contributions to the City. The report recommends that the Program remain voluntary—no new legislation to require payments is proposed---and that the program be phased in over a period of at least five years. The report is expected to be accepted by the Mayor, but the method of implementing its recommendations is as yet unclear.
For questions about the information contained in this advisory, please contact your usual Goulston & Storrs attorney or either of the following attorneys:
Darren M. Baird
Matthew J. Kiefer
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