:The Giving Review: A conversation with the National Taxpayers Union Foundation’s Matthew Putnam Part 2

National Taxpayers Union Foundation (NTUF) policy manager Matthew Putnam’s research and writing focus on state and local tax and fiscal policies, practices, and proposed reforms. His February 2026 paper “Payments in Lieu of Taxation (PILOT) Programs: An Opportunity for Municipalities or a Threat to Non-Profits?” examines the growing use of PILOT agreements—under which tax-exempt nonprofits, usually hospitals and universities, pay local municipalities to help offset the costs of police, fire, road, and other services they receive.

The paper uses Boston as a case study. Last month, Boston University agreed to pay a total of $104.3 million to the city under a five-year PILOT agreement—the largest such commitment in the city’s history.

Rather than treating PILOTs as a threat to nonprofit status, Putnam presents them as a pragmatic response to the fiscal pressures created when large portions of valuable real estate are removed from cities’ tax rolls. He favors voluntary, negotiated PILOT deals over mandatory taxes or attempts to revoke nonprofits’ property-tax exemptions, arguing that well-designed programs can balance municipal fiscal needs with the public missions of charitable institutions.

Putnam was nice enough to join me for a recorded conversation last month. In the first part of our discussion, which is here, we talk about PILOTs and what they say, if anything, about what many consider to be, and want to protect as, the inviolability of charitable tax-exemption.

The 12-minute video below is the second part, during which we discuss the appropriate level and nature of PILOT payments and agreements, and whether they’ll become a benchmark for imposing actual outright taxes on nonprofits or perhaps even evolve into a broader-based challenge to exemption.

Asked how a nonprofit should determine an appropriate PILOT-payment level, Putnam describes two common approaches: estimating the value of municipal services actually consumed or negotiating a percentage of what the organization would otherwise owe in property taxes. He emphasizes, however, that cash payments are only part of the equation. Hospitals, universities, and other nonprofits often receive credit for community benefits—such as educational programs, internships, blood drives, or other public services—that are assigned a monetary value and offset what would otherwise be paid directly to the municipality. His advice to nonprofits negotiating a PILOT is to understand what comparable institutions have offered and accepted, and to make a good case for the monetary value of their own charity.

Putnam also recommends that PILOT agreements should be long-term and predictable, rather than renegotiated annually. “You don’t want to have to go back every single year speaking with municipal authorities, debating what’s worth what. You want to have longer-term plans,” according to Putnam. You don’t want to have cities that “increase their spending substantially come back to you and say, You know what? We had to increase our fire services so much in the past year, you’re going to have to pay more. These agreements have that staying power.”

Have there been any decreases in PILOT payments over the years? “So I think we haven’t seen decreases, but typically, they do stay pretty level,” Putnam answers. “When cities are looking at this, we have to remember that most of the time, these officials are not particularly responsible with our finances …. You don’t want to keep ratcheting this up. You want to make sure that they’re being responsible with our money as well when they keep approaching us for more.”

While acknowledging that a future government could theoretically use existing PILOT levels as a benchmark for imposing actual outright taxes on nonprofits, he believes that outcome is unlikely given the strong legal precedents protecting charitable tax-exemption and the political influence of the nonprofit sector. He is more concerned about challenges to universities and hospitals arising from their dependence on government funding than from PILOT programs themselves.

Putnam further thinks that municipalities have relatively little incentive to wage expensive legal battles over exemption itself for what are, in budgetary terms, comparatively modest sums.

Finally, he stresses that PILOTs are fundamentally a policy for large, land-intensive nonprofit institutions—again, principally hospitals and universities—rather than the sector as a whole. Nonprofit credit unions, he points out, “are also very big, but they are more well-liked. Frankly, they are seen as providing more of a good for the community, for lower-income individuals.”

Smaller charities simply do not own enough taxable real estate to even make meaningful contributions to municipal finances, Putnam says, so PILOT expectations with them would generate little revenue anyway. In his view, the narrow focus of existing PILOTs is enough of a limiting principle to prevent them from evolving into a broader-based challenge to exemption.