Nonprofits make ‘tax’ payments

February 3, 2012
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Details still unclear

Big nonprofit institutions recently paid $9.4 million in tax-like contributions under the City of Boston’s reformed “payment in lieu of taxes” or PILOT system. That is a 24 percent boost to income from the old system, according to a press release from Mayor Thomas Menino’s office.

But it remains unclear what the City means by allowing up to half of PILOT to be made in “community services” rather than cash—despite a March 1 deadline for filing such requests. Unclear community services deals were a main reason for reforming PILOT in the first place.

And some nonprofits have yet to pay at all. Nineteen of 45 institutions receiving a PILOT bill last fall have made a payment, according to the Mayor’s Office press release.

The Mayor’s Office has not provided the Gazette with details of how the new PILOT system is working, despite various requests made over the past nine months.

“I think it’s too soon to tell,” said Ron Provost, president of Jamaica Plain’s Showa Boston Institute for Language and Culture, about the community services details. “We don’t have a good feeling yet for what [city officials] will accept and what they won’t accept.”

Showa Boston was one of the first nonprofits to make a payment under the new PILOT system, and is the only JP institution that falls under the PILOT threshold of owning property worth at least $15 million.

Nonprofits are tax-exempt. But many large colleges, hospitals and museums have long made voluntary PILOT payments to the City to make up for basic city services they receive. PILOT is important because Boston is unusually reliant on property taxes for revenue, and over half of its land is owned by nonprofits or the government.

The original PILOT system was informal and controversial. Some payments were criticized for being shockingly low. A Gazette investigation found that they were negotiated in secret meetings by unknown formulas with few records.

Some institutions paid large amounts, while others paid little or nothing. Some got credit for community services, while others—including Showa Boston—never even heard of that option.

In 2009, Menino responded to the criticism by creating a task force to reform PILOT deal-making. Under the new system, all the large nonprofits are being “billed” at 25 percent of what would be a normal commercial property tax on their property. Reportedly, up to half of that can be paid in community services—which are still undefined. Various institutions have expressed confusion about the new system to the Gazette since April 2011.

Showa Boston has made a pure cash PILOT for decades. Under the old system, it paid 12.5 percent of the commercial property tax rate—roughly $126,000 today, Provost said. That amount is now doubled under the new PILOT. Showa Boston has paid the cash part as usual, but is still waiting to see what community services it can use to cover the other half, Provost said.

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