Are Pilots Property Taxes for Nonprofits?

45 Pages Posted: 13 Apr 2015 Last revised: 21 Apr 2015

See all articles by Fan Fei

Fan Fei

University of Michigan at Ann Arbor - Department of Economics

James R. Hines Jr.

University of Michigan; NBER

Jill R. Horwitz

UCLA School of Law; National Bureau of Economic Research (NBER)

Date Written: April 2015

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.

Suggested Citation

Fei, Fan and Hines, James Rodger and Horwitz, Jill R., Are Pilots Property Taxes for Nonprofits? (April 2015). NBER Working Paper No. w21088. Available at SSRN: https://ssrn.com/abstract=2593667

Fan Fei (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

James Rodger Hines

University of Michigan ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jill R. Horwitz

UCLA School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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