A pilot, in shipping, is someone who intimately knows the geography of a harbor and its entrances and climbs aboard incoming and outgoing ships to guide them away from rocks, wrecks, and other dangers. A PILOT, on the other hand, spells dangers ahead for faith-based and other nonprofit organizations.

A PILOT is a Payment in Lieu of Taxes–a payment collected by a government from a nonprofit organization that is legally exempt from taxes. PILOTs are voluntary, at least in theory–the organizations are tax-exempt. But some municipalities have become very insistent on extracting–I mean, negotiating–them, apparently sometimes threatening resistant nonprofits with denial of a needed license or zoning decision or other governmental action.

Why the pressure from cities and other governments? The need for more revenue is a big reason. Especially cities with a substantial number of hospitals and universities look longingly at all of the acres of land that could be generating property taxes–and officials consider, too, that the tax-exempt facilities and their employees and customers do use government services, such as fire fighters and storm sewers.

A much more troubling reason is an apparent weakening appreciation of the intrinsic good provided by nonprofit organizations of all sorts–religious and secular, cultural and poverty-fighting, musical and educational, and all the rest. The growing demand for PILOTs reflects, instead, “a rising quid-pro-quo rationale, under which charities are expected to show that they provide something to the community in exchange for their exemption.” But such a “show me” requirement is very troubling, if only because different officials, and different parts of the public, have very different views of what is valuable. Consider just the reality that while many in our society regard faith-based services to be of great value, a growing number of critics of religion are sure society would be better off if such services disappeared.

For details, discussion, and different views on the contemporary phenomenon of PILOTs, see the very informative paper, “The Charitable Property-Tax Exemption and PILOTs,” by Evelyn Brody, Mayra Marquez, and Katherine Torn, published by the Urban Institute Center on Nonprofits and Philanthropy and the Urban-Brookings Tax Policy Center.

H.T. to the Alliance for Charitable Reform.