Nonprofit Taxation

Nonprofit institutions are exempt from paying property taxes, but many New Hampshire cities and towns are now asking nonprofits to pay for municipal services through so-called PILOT agreements.

Under PILOT (Payment In Lieu of Taxes) agreements, nonprofits such as colleges, hospitals, and human service agencies - all of which are exempt from property taxes - are asked to voluntarily contribute to their city or town's budget. 

According to a recent study by the Lincoln Institute of Land Policy, while some PILOT programs can be flawed, they can have positive effects both for nonprofits and the communities they serve.

The study also notes that the great majority of nonprofits which take part in PILOT agreements are universities and hospitals; smaller nonprofits such as human service agencies tend to rent space and thus do not benefit from the property tax exemption. However, since part of that rent goes towards the landlord's property tax bill, they are effectively contributing their full share of taxes to municipal budgets.