Boston is Pushing PILOTs for Nonprofits: What Will be the Impact

Tim Delaney, President & CEO, National Council of Nonprofits, posted to Huffington Post about the recent issue of PILOTS in Boston.

As he relates: Leaders of nonprofit organizations across America were stunned by reports this week in the Boston Globe and NPR's Marketplace that the City of Boston would turn its back on the nonprofit cultural, educational, and health care institutions that have played such vital roles in making that city great.

What stunned nonprofit leaders nationwide is that Boston sent letters essentially mandating that various nonprofits make "Payments-In-Lieu-Of-Taxes" (PILOTs) to the city based on the value of their property, even though Massachusetts law -- like the law in all 50 states -- prohibits local governments from taxing nonprofit property. What in turn shocked nonprofit leaders is how Boston intends to enforce its supposedly "voluntary" PILOT program: with a Scarlet-letter campaign designed to coerce compliance with the city's demand for "voluntary" payments.

Boston has concocted an Orwellian program that uses euphemisms -- such as "PILOTs" instead of "property taxes" and "voluntary" instead of "coerced" -- apparently attempting to hide what is really happening to evade what the law prohibits. The city, knowing the courts would strike down as an illegal act any attempt to directly impose property taxes on charitable nonprofits, invented a program to coerce "voluntary" Payments-In-Lieu-Of-Taxes. But slapping on a misleading label to cover a bad act does not render it any more acceptable; a payment based on property value is still a tax.

To enforce its legally unenforceable program, Boston has threatened to paint a Scarlet letter of shame on every nonprofit that does not comply with the city's demands for payments. Such coercion to obtain what the Commonwealth's law prohibits is outrageous and threatens everyone; who's next, when Boston -- or any government -- wants something the law prohibits?

The city's program also disregards unique aspects of nonprofit law, thus putting coerced nonprofits at risk of running afoul of the Massachusetts Attorney General, who has jurisdiction to oversee that funds donated to nonprofits are used as donors intend. By demanding that nonprofits pay the city 25 percent of their property's tax value, the city is whipsawing nonprofits, putting them in a lose-lose dilemma: either undergo the city's shameful public branding, or cave in to the city's demands to pay, only to have the Massachusetts Attorney General come after the nonprofit if donors complain that they gave their money for purposes other than transfers to the city treasury.

In trying to balance its budget on the backs of people served by charities and those who donate to them, Boston has disregarded not only the law, but also fiscal reality. The recession already has stretched nonprofits too far financially as demands for their services have skyrocketed while their revenues have nosedived, with corporate contributions declining, foundation grants down, and governments delaying payments and not paying full costs on legally-binding contracts. According to the IRS, even individual giving has sagged by 20 percent. Read more here.