PILOT (finance)

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A PILOT is a payment in lieu of taxes (also sometimes abbreviated "PILT"), made to compensate a local government for some or all of the tax revenue that it loses because of the nature of the ownership or use of a particular piece of real property. Usually it relates to the foregone property tax revenue.

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[edit] United States

In the United States, the occasion for such a payment can arise in several different ways:

  • Land owned by the federal government is generally not subject to taxation by state or local governments. Under Public Law 94-565, enacted in 1976, the federal government began a program of making payments in lieu of taxation to local governments affected by this reduction in their tax bases.
  • In some states where land owned by colleges and universities is not subject to local property taxes, the state government reimburses the local governments for part of the tax revenue that the local government would otherwise have collected.
  • PILOTs may be negotiated in specific circumstances, as when an arrangement is made for a corporation or institution to build a facility on public land without assuming ownership of the land. For example, there is such a program in New York state. In conjunction with the proposal to build a West Side Stadium in New York City for use by the New York Jets, there has been controversy over the proposal by the Mayor, Michael Bloomberg, to use PILOT money from the Jets to help finance the project rather than applying it to other municipal expenses. [1] The Port Authority of New York and New Jersey, a bi-state public authority, makes payments in lieu of taxes to New York City under an agreement relating to its ownership of the World Trade Center site. [2]

[edit] Canada

The federal government of Canada also has a program for federal payments in lieu of taxes to local governmental entities (including First Nations) in areas where the federal government owns property.

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