Gillette testifies before Congress on federal tax exemption for municipal projects

Clayton Gillette, the Max E. Greenberg Professor of Contract Law, testified on September 18 before the House Domestic Policy Subcommittee about the appropriate scope of the federal tax exemption for municipal projects funded by payments in lieu of taxes (PILOTs). These payments are made to compensate a local government for some or all of the tax revenue it loses because of the nature of ownership or use of a particular property.

Gillette said that the availability of the exemption should be linked to the transparency of the local budgeting process. He pointed to the PILOTs designed for the Yankee Stadium deal as an example of PILOTs that do not meet that test.

"At least to the extent that PILOTs are treated differently from taxes, these payments permit evasion of the kinds of democratic scrutiny that ensure projects and financing structures that qualify for the federal tax exemption reflect constituent preferences  and serve the objectives of the local economy," Gillette said.

Read Professor Gillette's full Congressional testimony

Read Professor Gillette's faculty profile