The federal principles underlying nonprofits’ tax-exempt status reflect sound public policy. This is evident given the significant public benefits Boston’s colleges and hospitals provide to our citizens, financed largely by private dollars. These principles recognize that the government should not be, and in fact cannot afford to be, the sole provider of health care, higher education and cultural services.

Unfortunately all the public good provided by the nonprofit community in Boston may be at risk. 

Today, payments in lieu of taxes (PILOTs) are being touted by some as a means of filling a gap in the city’s coffers. It’s worth noting that Boston’s PILOT program is already often cited as the nation’s most successful. While the city is home to many nonprofits, it’s important to recognize just how little land they occupy.

Educational and medical institutions own less than 5 percent of the city’s land area, according to the Boston Municipal Research Bureau. Some 53 percent of Boston’s land area may be tax-exempt, but the largest landowners are the state and the city itself. It’s also worth noting that tax-exempt does not mean tax-free. Boston’s hospitals and colleges pay full real estate taxes on property not related to their charitable missions and in addition contribute some of the largest PILOTs in the country. Last year, Boston University and Harvard paid the city $16.9 million in property taxes and PILOTs. Combined, these payments place them among the top 10 taxpayers in all of Boston. Northeastern University, Boston College and the city’s teaching hospitals paid an additional $6 million in direct taxes. These tax payments are above and beyond the more than $14 million in PILOTs that Boston’s colleges and hospitals contributed to the city last year.

A Boston city councilor suggested that nonprofits receiving federal appropriations for specific programs or equipment purchases should, in turn, pay the city a PILOT from these funds. This would ignore the purpose for which Congress appropriated that money - namely to meet specific larger societal needs, such as improving teaching in public schools or providing better health care and medical research for the needy.

These public benefits are the very reasons that government has granted tax-exempt status to colleges, hospitals and museums in every state.Massachusetts’ independent colleges and universities educate the majority of our citizens largely with private dollars. This saves the average state taxpayer significantly every year. An expanded program of partnership that leverages civic engagement with the entire nonprofit sector is a better approach, not PILOTs. These partnerships would build upon the tens of millions of dollars our nonprofits now contribute to Boston, and provide significant new fiscal relief to the city while still preserving and honoring the charitable tax-exempt status of our nonprofit community. 

Richard Doherty is the president of the Association of Independent Colleges and Universities in Massachusetts.