Community Benefit

PILOTS/SILOTS

Please Take Note: The information provided does not constitute legal or tax advice. The material is provided for informational/educational purposes only. Please consult with counsel regarding your organization's particular circumstances.

Question: Should we include taxes we pay, such as PILOTS (payment in lieu of taxes) or SILOTS (services in lieu of taxes), sales tax (that nonprofits pay in some states) and unemployment taxes, as community benefit?

Recommendation: With the exception of Medicaid provider fees (sometimes referred to as taxes or assessments), taxes paid by non-profit organizations should not be accounted for as community benefit. While paying taxes relieves government burden, these payments do not explicitly help address a community health or public health need.

These payments may be counted if you can demonstrate that they are used by government for a program or service that otherwise the hospital might provide as part of its community benefit program — for example, if the organization pays the city to support or sponsor a clinic for the uninsured.

Many tax-exempt organizations agree that the dollar value of community benefits they provide should equal or exceed the value of their incremental "tax benefits," the taxes that would be paid if the organization no longer were exempt. Taxes currently paid by the organization can be factored into that analysis.