Payments in Lieu of Taxes: Congress's Flawed Solution to the Burden of Federal Land Ownership

34 Pages Posted: 6 Jan 2013 Last revised: 15 Mar 2013

See all articles by Dayton Hall

Dayton Hall

Washburn University - School of Law

Date Written: January 4, 2013


The federal government makes Payments in Lieu of Taxes (“PILT”) to local governments to help ease the tax burden of federal ownership of land. Because federally owned land is nontaxable, PILT payments are intended to compensate local governments for losses in property taxes due to federal ownership of land within local governments’ boundaries. This Article explains the history and application of the PILT program, analyzes the equity and efficiency of the legislation, concludes that certain aspects of the PILT Act are both inequitable and inefficient, and proposes appropriate revisions. Specifically, this Article concludes and proposes the following: (1) shifting to a tax equivalency payment system based on states’ property valuation laws would be too complicated and inefficient, despite the benefit that such a program would provide more consistent, foreseeable payments to local governments; (2) PILT payments unjustifiably discriminate against less populated counties that contain substantial federal acreage, so the PILT calculation method should be revised to remedy this discrimination; (3) PILT distribution methods creates an inefficient incentive for states to form alternative political subdivisions to maximize payments, so this incentive should be eliminated; and (4) Congress must find a long-term funding solution so that local governments can rely on PILT payments in their long-term planning endeavors.

Keywords: PILT, Payments in Lieu of Taxes, Counties, County, Federalism, federal payments

JEL Classification: R5, R50, R51, R52, R53, H1, H2, H5, H7, H82, R58, R59

Suggested Citation

Hall, Dayton, Payments in Lieu of Taxes: Congress's Flawed Solution to the Burden of Federal Land Ownership (January 4, 2013). Available at SSRN: or

Dayton Hall (Contact Author)

Washburn University - School of Law ( email )

1700 College Avenue
Topeka, KS 66621
United States

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