Payment In Lieu Of Tax Agreements

A PILOT, or "Payment in Lieu of Tax" is an important financial incentive available to companies investing in facilities in Jefferson County, that can significantly reduce the company's local property tax liability. Essentially, through a series of legal transactions, certain assets of a company are rendered "tax exempt" (click here to download application) and the company agrees to make non-tax payments to the effected municipalities. In its simplest terms a PILOT has three components:

• Assessed Value (AV): The dollar value of the proposed investment.

• Tax Rate (TR): The rate per thousand dollars of assessed value that is the basis of the tax payment.

• Exemption Rate (ER): The level of the exemption, stated in terms of a percentage.

The PILOT Payment is simply derived from the equation: PILOT Payment = AV x TR x ER

From the standpoint of the company the key factor is the Exemption rate - that portion of full value taxation that the company does not pay under the terms of the PILOT Agreement.

In Jefferson County, depending on the type of project, a process of negotiation with the effected local taxing jurisdictions takes place prior to implementation. The focus of this negotiation is the company's proposal to make a business investment in the community, and the attendant economic impact of that investment. These discussions usually concern the number of jobs to be created or retained, the economic impact of those jobs, the economic impact of the company's increased business activity, and the size and nature of the capital investment itself. The terms of the PILOT agreement are also negotiated. Issues such as the assessed value of the investment, the length of the agreement and its exemption terms are also negotiated at this time.

The first step in implementing the PILOT is for the JCIDA to take title to some or all of the fixed assets of a business. Typically the amount of those assets are equivalent to the value that the company is investing. Since IDA's are tax exempt by law in New York State, this step renders the subject assets also exempt from taxation.

Download the new Uniform Tax Exempt Policy (PDF)

Next, the company and the IDA will enter into a lease arrangement that requires the company to make payments equal to the annual PILOT payments.

The company, the IDA, and the taxing jurisdictions enter into an agreement that establishes all the terms of the PILOT: the assessed value of the project, the term of the agreement, and the exemption schedule. At present the JCIDA administers four standard PILOT schedules; the schedule selected depends on the individual project and the negotiations process.

Sales Tax Abatement

JCJDC takes title to the property for period of construction and passes tax exempt status to contractors so expanding or new facilities may do so without paying sales tax on purchases. Property reverts back to company after construction. (click here to download application)

Mortgage Recording Tax Abatement

JCIDA passes its tax exempt status to any business with facility expansion construction projects. The exemption is .75% (click here to download application)

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