Tax Day is approaching, and we will soon hear a rising chorus of criticism of large corporations such as Verizon and General Electric that don’t pay taxes. Yet there is another group of big entities that also dodge taxes but receive a lot less scrutiny: major non-profit institutions such as universities and hospitals. Strictly speaking, giant non-profits are not dodging taxes, since they are largely tax-exempt. But that’s precisely the problem. These rich and powerful institutions increasingly behave like for-profit corporations yet are given privileged status under the tax laws. The latest battleground over non-profit tax exemption is Providence Rhode Island, where Mayor Angel Taveras has been trying to get local institutions such as Brown University to do more to help the struggling city. The Ivy League college has been making voluntary payments to the city, but Mayor Taveras wants Brown, which has an endowment of about $2.5 billion, to play a greater role. Brown’s facilities in Providence are reported to be worth more than $1 billion, which would mean $38 million in revenue for the city if university property were taxed at the commercial rate [left out is how much Brown would pay under land dues or a location-value tax]. The Ivy Leaguer is paying about one-tenth of that amount. The mayor’s effort has won support from students at Brown, who have recently held rallies calling on the university to pay more. It probably comes as a surprise to many that Brown is paying anything at all to the city. Providence’s arrangement with Brown is part of a limited but growing trend among local governments to persuade big non-profits to make voluntary payments in lieu of property taxes, or PILOTs. These are cousins of the PILOT agreements that for-profit companies often negotiate with localities when they are receiving large property tax breaks but want to be sure (often for public relations purposes) they are contributing something.
A 2010 report by the Lincoln Institute of Land Policy found that localities in at least 18 states have negotiated PILOT deals with non-profits. This often occurs quietly, but in Boston, where more than 50% of the land is tax-exempt, numerous universities and hospitals with deep pockets have gotten into high-profile tug-of-wars.
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