Payments in lieu of taxes (known by its acronym, "PILOT") by human service non-profit corporations seems fair to many municipal officials. The movement, however, does not stand up to scrutiny. While proponents of the concept cast it as a moral imperative for non-profit organizations that occupy valuable land without paying taxes, a human service non-profit corporation's obligations to its clients may mandate a refusal to make voluntary payments in lieu of taxes.

The entire movement to exert pressure on human service non-profit corporations is misguided. Charitable corporations are exempt from taxes because the state legislature has concluded that the benefit to the Commonwealth of relieving such organizations from taxes, outweighs the benefits of taxing them. Rather than targeting human service non-profits, municipalities should be urging legislation that provides increased local aid to communities that host a significant number of tax-exempt organizations relative to available taxable land.

When considering PILOT initiatives, it is crucial to distinguish between human service non-profit corporations and large hospitals or universities. When key executives of the latter earn hundreds of thousands and even seven figure annual salaries, and the corporations have substantial endowments, payments in lieu of taxes to the municipalities that host them is appropriate. Most human service non-profits, however, have pay scales well below the private sector. Every dollar paid for non-programmatic purposes is a dollar less for client services.

There may be special circumstances when a human service non-profit Executive Director and Board of Directors legitimately concludes that a voluntary PILOT contribution is in the corporation's best interests. One example is the siting of a new program on a lot of land where the zoning is ambiguous and a zoning fight likely. If the promise of a payment in lieu of taxes gains the support of municipal officials and minimizes the likelihood of a lengthy and expensive court battle, the PILOT offer may be worthwhile. In other instances, the human service non-profit leadership may conclude that the voluntary payments purchase so much goodwill that they ultimately benefit clients.

In most circumstances, a human service non-profit Executive Director and Board of Directors are justified in standing firm behind the protection granted to their organization by the legislature. The charitable tax exemption has a well-established history and is based substantially in the recognition of the vital work for people in need, performed by non-profit corporations.