Boston Requests PILOT Payments From Area's Largest Nonprofits

Boston's largest tax-exempt institutions — including its premier hospitals, universities, and cultural institutions — are being asked to make regular voluntary payments to the city to help offset the rising cost of services, the Boston Globe reports.

Although many of the largest nonprofits in the city have been making so-called Payments in Lieu of Taxes (PILOTs) for decades, the official request sent to leaders at forty organizations is believed to be the first revenue-raising effort of its kind in the country. Based on the estimated cost of providing basic city services such as police and fire protection, snow removal, and emergency medical treatment, the city is asking for up to 25 percent of what these nonprofits would owe if their properties were not tax-exempt. The plan is designed to gradually more than triple nonprofits' annual payments to the city, from the $15 million this year to $48 million in five years.

Only those nonprofits with properties valued at $15 million or more are being asked to contribute, and each is allowed a credit of up to 50 percent of their expected payment in exchange for sustaining existing services or providing new ones to taxpayers. According to Daphne A. Kenyon, a visiting fellow at the Lincoln Institute of Land Policy, while 117 municipalities have PILOT programs, Boston's is the first to establish a uniform system for calculating payments from tax-exempt institutions.

Support for the plan, which has been in the works for several years, appears mixed among the organizations being asked to contribute. While some nonprofit leaders said the payments reflect the enormous budget pressures faced by many municipalities, others expressed reservations — in part because of concern that their participation could eventually compromise the tax-exempt status of their institutions. The plan also includes a wrinkle that some nonprofit officials singled out for praise: the pledge to publicize what nonprofits are being asked to pay and what they contribute.

"We're looking for fairness for Boston taxpayers and the nonprofits," said Boston mayor Thomas M. Menino. "This isn't something we drew up on the back of an envelope. It's something we put a lot of thought into."

Michael Rezendes. "City Sends 'Tax' Bills to Major Nonprofits." Boston Globe 04/24/2011.