Monday, March 17, 2014
One of these days I am going to finish my way too early draft on the theoretical implications arising from a nonprofit's "voluntary" agreement to make "payments in lieu of taxes." In short, I think the making of a PILOT, voluntary in name only, is the tax exempt analog to "statements against pecuniary interests" in evidentiary proceedings. PILOTS impliedly admit that property tax exemptions are unjustifiable in the first place and are usually only paid because the taxing authority is threatening to challenge property tax exemption. Why not accept the challenge? Probably because there is such a good chance that the property owner will lose, that's why.
I am moving at a snail's pace in my research but I wanted to pass along this interesting "PILOT Agreement" between the University of Iowa and its local city municipality. The news article from which I obtained the agreement raises some interesting issues, the most remarkable of which is that the University agreed to pay the PILOT in consideration for the land on which it would build a clinic. According to the article, the city would not sell the land unless the University agreed to what the parties are calling a PILOT. Is this even a PILOT or would first year contract [or tax] students think of this as more a part of the purchase price? Since the PILOT agreement has no ending date, the purchase price -- assuming the PILOT is actually part of the city's amount realized -- would be indefinite and perhaps even unknowable. Does it even matter? I guess it is a way to easier call something that looks like . . . well, a payment in the place of a tax not a tax (and therefore no admission that property tax exemption is unjustifiable in the first place!). Regardless, this circumstance demonstrates the problems with PILOTS, not only for the nonprofit making the admission, I mean "payment," but for the local governments extracting the PILOT. Its basically an ad hoc exercise of taxing power that seems violative of the equal protection clause. But that argument will have to await a later date, at least if it is to come from me. After all, the payment that takes the place of taxes is entirely voluntary so it can't be a disguised tax. Can it?