PILOT stands for Payment in Lieu of Tax and is a form of tax incentive used to support development in the state of Tennessee. As the name would suggest, a PILOT agreement allows for a business to rent from a government owned property and pay an alternative amount such as the costs of development or additional jobs in lieu of a typical property tax. Tennessee law requires businesses leasing property from certain public boards and authorities to annually report to the State Board of Equalization concerning the leased properties.
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The business using the property under lease from the Board should file the report. If there are both prime and sublessees, it is suggested that the business using the property take the lead in ensuring the report is filed.
The law requires merely a good faith estimate of value, not a formal appraisal. For relatively new property, a summary of costs may be a good measure of value. State assessment standards for tangible personal property require depreciated acquisition cost be used as the taxable value of personalty, using depreciable lives provided by statute (e.g., eight years for manufacturing equipment, to a maximum of 80% depreciation). Construction-in-process personalty values are limited to 15% of acquisition cost as long as it is still reported as CIP for federal income tax purposes.