October 22, 2008

Vander Molen: Treasury Gets Tough on PILOTs

Three days before a House panel was scheduled to hold a hearing questioning the use of PILOTs to finance the new New York Yankees stadium, the Treasury Department issued more restrictive regulations for bonds backed by payments in lieu of taxes. The Bond Buyer consulted Dorsey Partner Tom Vander Molen on the issue.

PILOT deals typically involve payments from private entities, used to pay debt service on tax-exempt bonds. To meet the tax code, PILOTs must be "less than, and commensurate with, the taxes that would have otherwise been collected on the property."

"While the final regulations generally are an improvement on the proposed regulations, and clarify certain ambiguous provisions, I am disappointed that the government chose to prohibit fixed payments arrangements in situations where the payment is less than the tax would have been," Vander Molen told The Bond Buyer.

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