Wednesday, January 16, 2008

Indiana Bill Would Impose PILOTS on Nonprofit Organizations

PILOTS, or payments in lieu of taxes , are generally considered "semi-voluntary" payments made by nonoprofit organizations in hopes of forestalling legislative or judicial scrutiny of a nonprofit organization's property tax exemption.  When cities become strapped for cash and begin looking at large nonprofits the way Wyle E. Coyote used to look at the roadrunner (longlingly, as if he had stumbled upon a turkey dinner with all the fixin's), nonprofits would "voluntarily" offer some sort of payment to make the cash-strapped city administrators go away.  A bill in the Indiana House, though, would remove whatever semblance of voluntariness" from PILOTS.  According to today's Indianapolis Star:

Hospitals, museums, fraternal clubs and many other nonprofit organizations now exempt from property taxes could have to chip in under a bill in the Indiana House.  Nonprofit groups that want to avoid the "payment in lieu of tax," or PILOT, would have to show the state they truly serve a charitable purpose, defined as providing "relief from human want."

The sponsors of a bill (summarized in a sidebar to the article) to make PILOTS mandatory -- essentially repealing the property tax exemption in Indiana -- argue  that "senior citizens struggling to pay property taxes should not have to subsidize nonprofit hospitals that generate millions in annual revenues, or organizations that essentially operate as social clubs, such as Elks clubs or college fraternities."

This bill and the recent decision by the Minnesota Supreme Court suggests that state and local governments -- wary of raising property taxes on voters -- are beginning to look upon nonprofit organizations as politically easy sources of revenue.

dkj

http://lawprofessors.typepad.com/nonprofit/2008/01/indiana-bill-wo.html

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