Payments in Lieu of Taxes (PILT) Introduction

The Department of the Interior's (DOI's) Payments in Lieu of Taxes (PILT) program provides compensation for certain entitlement lands that are exempt from state and local taxes.¹ These include most federal lands administered by the Bureau of Land Management, the National Park Service, and the U.S. Fish and Wildlife Service, all in DOI, and by the U.S. Forest Service in the Department of Agriculture; federal water projects; dredge disposal areas; and some military installations.² Enacted in 1976,³ PILT is the broadest—in terms of federal land types covered—of several federal programs enacted to provide compensation to state or local governments for the presence of tax-exempt federal lands within their jurisdictions.⁴

PILT was enacted in response to a shift in federal policy from one that prioritized disposal of federal lands—in which federal ownership was considered to be temporary—to one that prioritized retention of federal lands, in perpetuity, for public benefit.⁵ This shift began in the late 19^th century and has continued. Along with this shift came the understanding that, because these lands were exempt from state and local taxation and were no longer likely to return to the tax base in the foreseeable future, some compensation should be provided to the impacted local governments. Following several decades of commissions, studies, and proposed legislation, PILT was enacted to ameliorate this hardship at least in part.⁶ PILT payments generally can be used for "any governmental purpose,"⁷ which may include assisting local governments with paying for local services, such as "firefighting and police protection, construction of public schools and roads, and search-and-rescue operations."⁸

The Office of the Secretary in DOI is responsible for the calculation and disbursement of payments under PILT.⁹ Payments under PILT are made annually to units of general local government—typically counties, though other types of governmental units also may be used (hereinafter, counties refers to units of general local government)—containing entitlement lands. PILT comprises three separate payment mechanisms: Section 6902, Section 6904, and Section 6905 payments, all named for the sections of law in which they are authorized.¹⁰ Section 6902 payments account for nearly all payments made through PILT. The Section 6902 amount for each county is calculated according to a statutory formula that is subject to a maximum payment based on the county's population (see "PILT Payments Under Section 6902").¹¹ The remaining payments are provided through Section 6904 and Section 6905 under selected circumstances and typically are limited in duration. Through FY2023, PILT payments have totaled approximately $11.4 billion.¹²

This report provides an overview of the PILT payment program and includes sections on

• PILT's authorization and appropriations, which discusses the history of how Congress has provided funding for PILT;
• Section 6902 payments, which includes a breakdown of how Section 6902 payments are calculated;
• Section 6904 and Section 6905 payments, which outlines what situations result in payments under these mechanisms; and
• issues for Congress, which discusses several topics that have been or may be of interest to Members of Congress when considering the PILT program.

PILT Authorizations and Appropriations

PILT has been funded through both discretionary and mandatory appropriations at various times. PILT was funded through discretionary appropriations from its enactment in 1976 through FY2007 and in FY2015 (in part) and FY2016-2017. In other years, PILT received mandatary appropriations, namely for FY2008-FY2014, FY2015 (in part), and FY2018-FY2023.

More specifically, beginning in FY1976, the authority for PILT to receive discretionary appropriations read as follows: "There are authorized to be appropriated for carrying out the provisions of this Act such sums as may be necessary: Provided, That, notwithstanding any other provision of this Act no funds may be made available except to the extent provided in advance in appropriation Acts."¹³ In 1982, PILT was amended to provide an "Authorization of Appropriations" heading, which stated that "necessary amounts may be appropriated to the Secretary of the Interior to carry out [PILT]" and specified that "amounts are available only as provided in appropriation laws."¹⁴

In 2008, legislation was enacted to provide mandatory appropriations for PILT for FY2008-FY2012. The legislation changed the heading of the program's funding from "Authorization of Appropriations" to "Funding" and amended the text to read

For each of fiscal years 2008 through 2012-

(1) each county or other eligible unit of local government shall be entitled to payment under this chapter; and

(2) sums shall be made available to the Secretary of the Interior for obligation or expenditure in accordance with this chapter.¹⁵

Subsequently, PILT's funding provision (31 U.S.C. §6906) was amended several times. For instance, for each of FY2018 through FY2023, appropriations laws provided funding for PILT by amending the authority provided in 31 U.S.C. §6906. This was treated as mandatory spending.

Table 1 shows PILT appropriations over the 10 years from FY2014 through FY2023. The total payments to counties often were slightly different from the appropriations shown, in part because relatively small amounts of the total appropriations were authorized for program administration. For instance, of the $579.2 million appropriation for FY2023, $0.4 million was authorized for program administration. DOI distributed $578.8 million to counties for FY2023.

Figure 1 shows the authorizations and appropriations for PILT from FY1993 to FY2023. For many of the earlier years during this period, PILT received discretionary appropriations that were not at the full authorized level (e.g., FY1995-FY2007). In contrast, for most years when PILT received mandatory appropriations, the appropriations essentially were at the full level calculated under the statute (e.g., FY2018-FY2023).¹⁶ In addition, since FY2008, PILT appropriations have been provided through both one-year and multiyear appropriations.

Figure 1. PILT Authorizations and Appropriations, FY1993-FY2023 (in current and inflation-adjusted estimated FY2023 dollars)

Source: CRS, with data from PILT National Summaries, FY1993 through FY2023. Notes: The authorized and appropriated figures shown in bars reflect current (nominal) dollars. The line reflects inflation-adjusted estimated FY2023 dollars using the Office of Management and Budget's GDP Chained Price Index. The FY2013 and part of the FY2015 appropriations were subject to sequestration pursuant to the Balanced Budget and Emergency Deficit Control Act (2 U.S.C. §§900 et seq.), as amended by the Budget Control Act of 2011 (P.L. 112-25).

In addition to appropriating funding for the program, through the annual appropriations process Congress typically provides other guidance to DOI on implementing PILT. Such guidance has included minimum payment thresholds, set-asides for program administration, and provisions for prorating payments.¹⁷ When appropriated funding is insufficient to cover the full amount of authorized payments under Sections 6902, 6904, and 6905, counties typically receive a proportional payment known as a prorated payment. (Figure 1 shows the disparity between the authorized amount and the appropriated amount in certain years.) Even in years in which appropriations are set equal to 100% of the full statutory calculation, payments to counties may be prorated if funding is set aside for purposes other than payments, such as administration.

Some stakeholders and policymakers have expressed concern about changes over time in the appropriations authority and processes for PILT, due to the uncertainty that may accompany such changes. Changes that have given rise to concerns include switching between discretionary and mandatory appropriations, partial and full funding, and one and multiyear appropriations. Such changes may have implications for counties that rely on PILT funding as part of their annual budgets.

PILT Payments Under Section 6902

Section 6902 payments are provided to counties across the United States to compensate for the presence of entitlement lands within their boundaries. Section 6902 payments are provided to states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands.¹⁸ Section 6902 payments account for nearly all of the payments made under PILT. In FY2023, 99.92% of all PILT payments were made through Section 6902.¹⁹ The payments generally can be used for any governmental purpose, as noted.²⁰ Further, more counties are eligible for Section 6902 payments than either Section 6904 or Section 6905 payments.

Entitlement Lands

There are nine categories of federal lands identified as entitlement lands in the PILT statute.²¹

• 1. Lands in the National Park System (administered by the National Park Service, in DOI)
• 2. Lands in the National Forest System (administered by the U.S. Forest Service, in the U.S. Department of Agriculture (USDA))
• 3. Lands administered by the Bureau of Land Management (BLM)
• 4. Lands in the National Wildlife Refuge System (NWRS) that are withdrawn from the public domain (administered by the U.S. Fish and Wildlife Service, in DOI)²²
• 5. Lands dedicated to the use of federal water resources development projects²³
• 6. Dredge disposal areas under the jurisdiction of the U.S. Army Corps of Engineers
• 7. Lands located in the vicinity of Purgatory River Canyon and Piñon Canyon, CO, that were acquired after December 31, 1981, to expand the Fort Carson military reservation
• 8. Lands on which are located semi-active or inactive Army installations used for mobilization and for reserve component training
• 9. Certain lands acquired by DOI or the USDA under the Southern Nevada Public Land Management Act (P.L. 105-263)

Some of these categories largely account for all of the lands managed by the relevant administering agencies (e.g., categories 1-3). The U.S. Fish and Wildlife entitlement acreage excludes lands that were purchased as additions to the NWRS and lands that are not included in the NWRS. Some of the other categories are lands tied to specific laws or actions (e.g., categories 7 and 9) or may not include all, or even the majority of, lands administered by particular agencies or departments (e.g., category 8).²⁴

Calculating Section 6902 Payments

Section 6902 payments are determined based on a multipart formula (see Figure 2). The DOI Office of the Secretary calculates PILT payments according to several factors, including

• the number of entitlement acres;
• a per-acre calculation determined by one of two alternatives (Alternative A, also called the standard rate, or Alternative B, also called the minimum provision);
• a population-based payment (ceiling);
• certain prior-year payments pursuant to other compensation programs; and
• the amount available to cover PILT payments.

To calculate a particular county's PILT payment, the DOI Office of the Secretary first must collect data from several federal agencies and the county's state to answer the following questions:

• How many acres of eligible lands are in the county?
• What is the population of the county?²⁵
• What was the increase in the Consumer Price Index for the 12 months ending the preceding June 30?
• What were the prior year's payments, if any, to the county under the other payment programs of federal agencies?²⁶
• Do any state laws require payments under other federal land compensation laws to be passed through to other local government entities, such as school districts, rather than stay with the county government?

Figure 2. Steps in Calculating PILT Section 6902 Payments (FY2023 Rates)

Sources: CRS, based on PILT statute (31 U.S.C. §§6901-6907). Payment rates for FY2023 can be found in Department of the Interior, Fiscal Year 2023 Payments In Lieu of Taxes, National Summary, June 2023, pp. 9-11, available at https://www.doi.gov/pilt. Note: For more information on Box B (ceiling payments), see Figure 3.

The first step in calculating a county's Section 6902 payment is to determine the number of entitlement acres within the county (Figure 2, Box A). The acreage figures are reported to DOI by the various federal agencies that administer the entitlement lands.

The next step is to calculate the population-based ceiling by multiplying the county's population by the population payment rate (Figure 2, Box B). County population data are provided by the U.S. Census Bureau. The population number for this calculation differs based on the county's population level (Figure 3):

• For counties with populations fewer than 5,000, the county's actual population is used in the calculation.
• For counties with populations equal to or greater than 5,000, the county's population is rounded to the nearest 1,000, and this rounded population is used in the calculation.
• All counties with populations greater than 50,000, regardless of their actual populations, are considered to have a population equal to 50,000 for the purposes of calculating the ceiling.

The population payment rate is adjusted annually for inflation based on the change in the Consumer Price Index for the 12 months ending on the preceding June 30.²⁷ The population payment rate generally declines as population increases in 1,000-person increments. (Figure 4).²⁸ However, this is not always the case. For example, in FY2023, payment rates for several populations were the same despite increasing populations, such as the rates for populations of 26,000; 27,000; and 28,000, which are all $107.94 per person. For FY2023, the population payment rates ranged from $212.03 per person for counties with populations of less than 5,000 to $84.81 per person for counties with populations of 50,000 or greater.²⁹

Some payment ceilings do not increase with increasing populations. For example, counties with populations of 50,000 have a lower ceiling than those with populations of 49,000 (49,000 × FY2023 payment rate of $86.75 = $4,250,750; and 50,000 × FY2023 payment rate of $84.81 = $4,240,500, or $10,250 less for the more populous county).

Figure 3. PILT Population-Based Ceiling Calculation

Source: CRS, with information from 16 U.S.C. §6903.

Figure 4. FY2023 PILT Population-Based Ceilings

Source: CRS, with data from Department of the Interior, Fiscal Year 2023 Payments In Lieu of Taxes, National Summary, p. 15, available at https://www.doi.gov/pilt. Notes: Ceiling calculations for counties with populations greater than 5,000 are based on the county's population rounded to the nearest 1,000 (e.g., a county with a population of 8,499 would be credited with a population of 8,000, whereas a county with a population of 8,500 would be credited with a population of 9,000). Counties cannot be credited with a population above 50,000 (i.e., all counties with populations greater than 50,000 are, for the purposes of the ceiling calculation, treated as if they have a population of 50,000). The National Summary FY2023 contains the per capita payment rates for the FY2023 payments.

The next step is to calculate the payment level under Alternatives A and B (Figure 2, Box C). Alternative A has a higher per-acre payment rate than Alternative B, but Alternative A is subject to a deduction for prior-year payments. For FY2023, the per-acre payment rates were $3.15 per acre of entitlement land for Alternative A and $0.45 per acre of entitlement land for Alternative B.

For calculations under Alternative A, DOI deducts certain prior-year payments. Qualifying prior-year payments are those payments from the federal payment programs listed in statute:³⁰

• the Act of June 20, 1910 (ch. 310, 36 Stat. 557);
• Section 33 of the Bankhead-Jones Farm Tenant Act (7 U.S.C. §1012);
• the Act of May 23, 1908 (16 U.S.C. §500), or the Secure Rural Schools and Community Self-Determination Act of 2000 (16 U.S.C. §§7101 et seq.);³¹
• Section 5 of the Act of June 22, 1948 (16 U.S.C. §§577g–577g-1);
• Section 401(c)(2) of the Act of June 15, 1935 (16 U.S.C. §715s(c)(2));
• Section 17 of the Federal Power Act (16 U.S.C. §810);
• Section 35 of the Act of February 25, 1920 (30 U.S.C. §191);
• Section 6 of the Mineral Leasing Act for Acquired Lands (30 U.S.C. §355);
• Section 3 of the Act of July 31, 1947 (30 U.S.C. §603); and
• Section 10 of the Act of June 28, 1934 (known as the Taylor Grazing Act) (43 U.S.C. §315i).

However, if a state has a pass-through law that requires some or all of these prior-year payments to be paid directly to a sub-county recipient (e.g., a school district), the amount passed through from these payments is not deducted from subsequent PILT payments in the following year.³²

As noted, Alternative B is calculated without deducting prior-year payments, but it uses a lower per-acre payment rate.

Once each alternative is calculated, the greater of the two is the Section 6902 authorized payment for the county (Figure 2, Box D). However, if the per-acre calculated Section 6902 authorized payment is greater than the population-based ceiling, then the population-based ceiling replaces the per-acre calculated amount.³³

The Section 6902 authorized payments are calculated for every county, and this amount is added to the Section 6904 and Section 6905 authorized payments (for more information on Sections 6904 and 6905, see "PILT Payments Under Sections 6904 and 6905"). This summed amount is the full statutory calculation for a given fiscal year (Figure 2, Box E). DOI compares the full statutory calculation with the amount appropriated and available for PILT payments to determine whether Congress has provided funding to cover the full statutory calculation (Figure 2, Box F).³⁴ If sufficient funding is available, each county receives its authorized amount;³⁵ if funding is insufficient, each county receives a prorated payment that is proportional to its authorized payment (Figure 2, Box G).³⁶

The full statutory calculation and the amount available for PILT payments determine proration. Although there are additional adjustments made in the PILT proration calculation resulting from small idiosyncrasies related to the requirements for PILT payments—namely, the requirement of a minimum threshold of $100 for PILT payments³⁷—the proration is fundamentally the ratio of the appropriated funding available for PILT payments to the full statutory calculation:

As a result, counties may receive less than their authorized PILT payment in years when appropriated funding is insufficient to cover the full statutory calculation. This scenario can occur even when total PILT appropriations match the full statutory calculation; this has been the case in years with mandatory appropriations, when part of the appropriated amount is set aside for a use other than county payments. For example, laws providing appropriations for PILT routinely have allowed DOI to retain a small portion of PILT appropriations for administrative expenses.³⁸

PILT Payments Under Sections 6904 and 6905

Section 6904 and Section 6905 payments account for a small fraction of total PILT payments.³⁹ In FY2023, these payments accounted for 0.08% of PILT payments ($481,628 of $578.8 million in total payments made).⁴⁰ When a county receives Section 6904 and/or Section 6905 payments, it is to disburse the funds to governmental units and school districts within the county in proportion to the amount of property taxes lost because of the federal ownership of the entitled lands, as enumerated under these sections.⁴¹ The funds generally may be used for any governmental purpose, as noted.⁴²

Section 6904 Payments

Section 6904 authorizes the Secretary of the Interior to make payments to counties that contain certain lands, or interests in lands, that are part of the National Park System and National Forest Wilderness Areas.⁴³ However, Section 6904 specifies that these lands, or interests, are eligible only if (1) they have been acquired by the U.S. government for addition to these systems and (2) they were subject to local property taxes in the five-year period prior to this acquisition.⁴⁴ Payment under Section 6904 is calculated as 1% of the fair market value of the land at the time it was acquired, not to exceed the amount of property taxes levied on the property during the fiscal year prior to its acquisition.⁴⁵ Further, Section 6904 payments are made annually only for the five fiscal years after the land, or interest, is acquired by the U.S. government, unless otherwise mandated by law.

Section 6905 Payments

Section 6905 authorizes the Secretary of the Interior to make payments to counties that contain lands, or interests in lands, that are part of the Redwood National Park and are owned by the U.S. government or that are acquired by the U.S. government in the Lake Tahoe Basin under the Act of December 23, 1980.⁴⁶ Section 6905 payments are paid at a rate of (1) 1% of the fair market value of the acquired land or interests or (2) the amount of taxes levied on the land in the year prior to acquisition, whichever is less. Payments on these lands continue for five years or until payments have totaled 5% of the fair market value of the land, whichever is later.⁴⁷

Issues for Congress

PILT is of perennial interest to many Members of Congress and to stakeholders throughout the country. In particular, county governments are interested in the degree of certainty of PILT payments and how payments are calculated, because many consider PILT payments to be an integral part of their annual budgets. Congressional and stakeholder interests include questions of how PILT should be funded, what lands should be included as entitlement lands, and how authorized payment levels are calculated under PILT, among others.

Congress annually addresses questions of how funding should be provided to PILT. Congress has funded PILT through both discretionary and mandatory appropriations (see "PILT Authorizations and Appropriations"). PILT funding typically has been provided through the discretionary appropriations process for one fiscal year at a time, even when the funding has been considered mandatory spending. Although PILT has received funding each year since its enactment, the appropriations process has created uncertainty among some stakeholders about the level of annual funding. Stakeholders have expressed a desire for more certainty in terms of both the guarantee of funding and the amount of funding (i.e., the full statutory calculation).⁴⁸

Members of Congress typically contemplate the implications and tradeoffs of discretionary versus mandatory spending and may have different views than the counties that receive PILT payments. Congress, for example, may weigh the flexibility of having discretion to review and fund PILT on an annual basis through the appropriations process against the certainty of funding for specific activities that accompany mandatory appropriations.⁴⁹ In recent Congresses, bills have been introduced to amend how PILT is funded. For example, legislation was introduced in the 116^th Congress that would have required mandatory funding for PILT, either for a set period of time (e.g., 10 additional years) or indefinitely.⁵⁰

The question of which lands should be eligible for PILT payments is also of interest to many Members and stakeholders. In law, entitlement lands are restricted to the listed federal land types (see "Entitlement Lands"). However, this definition does not fully encompass the types of lands that are held by the federal government, nor does it account for the full suite of lands that are exempt from state and local taxes. Although counties may receive compensation for some of these other lands through other federal programs, not all federal lands exempt from taxation are covered by a federal compensation program. This might contribute to financial hardships for counties that otherwise might receive revenue from that land through taxation. To address this concern, some Members of Congress have proposed amending the definition of entitlement lands under PILT. Among other proposals, in past Congresses, Members have introduced legislation that would have amended PILT by expanding the definition of entitlement land to include

• land "that is held in trust by the United States for the benefit of a federally recognized Indian tribe or an individual Indian";⁵¹
• lands under the jurisdiction of the Department of the Defense, other than those already included in PILT;⁵²
• lands acquired by the federal government for addition to the National Wildlife Refuge System;⁵³ and
• lands administered by the Department of Homeland Security,⁵⁴ among others.

Amending the definition of entitlement lands could have several implications. Adding acres of entitlement lands could increase the authorized amount of payments under PILT for the counties in which those lands are located. Depending how the definition was amended, these additional entitlement lands may be eligible for compensation under other federal compensation programs. In turn, this could further affect PILT payment calculations through the adjustment for prior-year payments deducted from Alternative A.

The authorized payment level under Section 6902, which accounts for nearly all payments under PILT, is calculated pursuant to the statutory requirements. This section has remained largely unchanged since the requirement to adjust for inflation was added in 1994, among other changes.⁵⁵ The inflation adjustment clause has resulted in increasing payment and ceiling rates since that time. Congress at times has considered whether the current formula is the best means of calculating payments under PILT or whether the formula should be amended. For example, in the 116^th Congress, bills were introduced that would have adjusted the payment structure for counties with a population of less than 5,000.⁵⁶ This adjustment would have had implications for how population would be incorporated into calculating PILT payments. In the 117^th Congress, bills were introduced that would have directed the Secretary of the Interior to develop, study, and report on a modeling tool to calculate tax equivalency payments.⁵⁷

In addition to the above issues, Congress may consider other issues related to PILT and how the program fits into the landscape of federal programs that compensate for the presence of tax-exempt federal lands.⁵⁸