Under the PILOT program, a property’s current property taxes are frozen for a number of years. In some cases, certain items of personal property are included as well.
However, the owner and project still pay all other taxes. Including the mainstay of the Tennessee economy, sales taxes.
In Knoxville and Knox County, the Payment-In-Lieu-Of-Taxes (PILOT) program is targeted at development of property for either jobs creating economic development projects or economic-catalyst projects. In both cases, the goal is to appropriately incentivize business owners and developers to create economic activity where there was none before.
How do PILOTS work?
PILOTs are administered through the County and City IDBs. The IDB owns the property and leases it back to the owner/developer through a leasehold agreement during the term of the PILOT. If the leaseholder defaults on any of the terms of the lease, then the project is returned to the tax roles at its improved, fully appraised value.
Under a County IDB PILOT, a potential project must provide particular economic development information, including number of jobs created, average wages, amount of investment and air quality information, in order for the County IDB to determine the term length of the PILOT (up to a maximum of 15 years). Typically, the amount of taxes paid in the current year becomes the future amount to be paid as the PILOT payment. A City IDB PILOT is more commonly oriented towards catalyst-type developments, aimed at redevelopment districts and significantly underutilized properties. The City IDB works with the City staff to determine the amount and length of the PILOT (up to a maximum of 20 years).