Tax-Exempt Properties Hurt County Revenues

The Department of Legislative Services (DLS) briefed the House Ways and Means Committee on January 23, 2014 on property tax exemptions and Payments in Lieu of Taxes (PILOT) in Maryland.  According to DLS, local jurisdictions lose an estimated $669 million in revenue each year from properties that have been deemed as property tax-exempt under State law.  These tax exempt properties fall into several categories:  religious, charitable, fraternal/sororal, educational, blind persons, disabled veterans and surviving spouses, and other special exemptions.

DLS also stated that “tax-exempt properties account for 11% of the total assessable property tax base in Maryland.” Baltimore City, which loses an estimated total of $248 million annually, has the highest per capita revenue loss at $339, followed by Allegany and St. Mary’s Counties.

Approaches to offset some of this revenue loss includes Payments in Lieu of Taxes (PILOT).

A PILOT is an agreement between a jurisdiction and a developer, business, or landowner that substitutes a negotiated payment for annual real estate taxes that are traditionally due on a property.

As the presentation indicates, there are approximately 692 PILOTS in Maryland that fall into one of two general categories – tax-exempt properties and nonexempt properties. Tax exempt properties are exempt from paying all real property taxes, but voluntarily  agree to pay a sum of money  calculated as a percentage of the property tax or to cover a share of the services provided.

Nonexempt properties are taxable, but an agreement is negotiated to pay a reduced fee over time as an incentive to develop in an area.

Data was not provided on the revenue generated through these arrangements.

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