What Is PILT? How Federal Payments in Lieu of Taxes Work

Payments in Lieu of Taxes, known as PILT, is a federal program that sends money to local governments containing tax-exempt federal land. Because Washington pays no property taxes on land it owns, counties with large federal holdings would otherwise lose a significant chunk of their tax base while still having to fund roads, schools, and emergency services around that land. PILT fills the gap. In fiscal year 2025, the program distributed $644.8 million to more than 1,900 local governments across 49 states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.¹

The Problem PILT Solves

Counties fund most local services through property taxes. In parts of the West, federal land makes up more than half of a county’s total acreage, and none of it generates property tax revenue. Residents and visitors still need firefighting, law enforcement, road maintenance, and search and rescue, and those costs fall on a shrunken private tax base. PILT payments recognize that basic fairness problem and route federal dollars back to the affected local governments.²

What Federal Land Counts

The statute defines specific categories of “entitlement land.” Not every acre the federal government owns qualifies. The main categories are:

National Park System and National Forest System lands, including parks, monuments, forests, and grasslands
Bureau of Land Management lands, the largest category by acreage
Water resource development projects, meaning land tied to federal dams, reservoirs, and flood control
National Wildlife Refuge System lands
Semi-active or inactive Army installations kept for mobilization and reserve training, excluding industrial facilities
Army Corps of Engineers dredge disposal areas

A few narrower categories qualify as well, including specific acquired land near Fort Carson in Colorado and certain parcels under the Southern Nevada Public Land Management Act of 1998.³ The common feature is federal ownership tied to a public purpose that keeps the land off the local tax rolls.

Who Gets Paid

Payments go to “units of general local government,” which usually means counties, parishes, and boroughs with taxing authority and responsibility for general public services. Townships or cities can qualify where they meet the same criteria. The qualifying land must sit within that local government’s boundaries.²

Alaska is handled differently. Because of how local government is organized there, PILT payments for certain areas go to the State of Alaska, which then distributes the money to home rule cities and general law cities within those boundaries.⁴

How the Payment Is Calculated

The Department of the Interior runs two calculations for each eligible local government and pays whichever produces the higher number.

Alternative A multiplies a higher per-acre rate by the qualifying federal acreage, then subtracts what the local government received in the prior year from a specific list of federal land revenue-sharing programs (such as Secure Rural Schools payments, mineral leasing revenue, National Forest Fund timber receipts, and Refuge Revenue Sharing). For fiscal year 2025, the Alternative A rate was $3.46 per acre.⁵ The deduction can drive Alternative A all the way to zero but never below it.

Alternative B multiplies a lower per-acre rate by the same acreage and makes no deduction for prior-year revenue. The FY2025 rate was $0.50 per acre. Alternative B ends up being the higher number for counties that already receive substantial payments from those other programs, which is why it functions as a floor: every county with qualifying land gets something.⁶

Both alternatives are capped by a population ceiling so that a lightly populated county sitting on millions of federal acres doesn’t collect a wildly outsized payment. The ceiling multiplies population by a per-person dollar amount that decreases as population rises. For FY2025, those per-person amounts ranged from $232.73 for counties of 5,000 or fewer down to $93.09 at the 50,000 population cap. Counties larger than 50,000 residents are treated as though their population is exactly 50,000. Counties between 5,000 and 50,000 have their population rounded to the nearest thousand.⁶

The base per-acre rates and the per-person ceiling amounts are adjusted each year for inflation using the Consumer Price Index for the 12-month period ending June 30.

How Local Governments Can Spend the Money

Federal law places no restrictions on the use of PILT funds. The statute states that a recipient “may use the payment for any governmental purpose.”⁷ In practice, most communities put the money toward the same services property taxes would fund: road maintenance, emergency response, school support, and law enforcement. In rural counties dominated by federal land, PILT can account for a meaningful share of the annual operating budget.

When and How Payments Arrive

p>The Department of the Interior distributes payments once a year, typically in June. Before distribution, states receive a data request, generally due in early March, to verify acreage and other calculation inputs.²

Most payments transfer electronically. The Department encourages local governments to register in the System for Award Management at sam.gov, which feeds banking information into the payment system. SAM registration is not required. A local government that doesn’t register can submit a PILT Vendor Request form to set up direct deposit, or request a paper check by also filing an Electronic Funds Transfer waiver. Existing SAM registrations must be renewed at least once a year to stay active.⁸

In states whose legislatures have passed laws requiring PILT to be redistributed from larger local governments to smaller ones, the Department sends a single lump payment to the state. The state must pass the funds along within 30 days and cannot keep any portion for administrative costs.⁹

Funding Is Not Guaranteed Year to Year

PILT’s funding status is worth understanding. Between 2008 and 2014, Congress made the program mandatory, meaning local governments were entitled to their full calculated payments without going through the annual budget process. When that mandatory authority expired, PILT reverted to discretionary funding, so Congress has to approve the money each year through appropriations.

For fiscal year 2026, Congress appropriated full funding through the Interior and Environment appropriations package signed into law on January 23, 2026.² That covers a single year. Without legislation restoring permanent mandatory funding, every future payment depends on Congress including PILT in its annual budget.

Where the Money Goes

PILT payments concentrate in western states where federal land ownership is heaviest. In FY2025, the five largest state totals were California ($66.2 million), New Mexico ($51.6 million), Utah ($51.4 million), Colorado ($51.3 million), and Arizona ($48.3 million).¹⁰ Payments reached 53 states and territories, but most of the dollars flow west.

1
U.S. Department of the Interior. Interior Department Announces $644.8 Million in Payments to Support Vital Services in Communities
2
U.S. Department of the Interior. Payments in Lieu of Taxes
3
Office of the Law Revision Counsel. 31 U.S.C. Chapter 69 – Payment for Entitlement Land
4
Office of the Law Revision Counsel. 31 U.S.C. 6902 – Authority and Eligibility
5
U.S. Department of the Interior. PILT Frequently Asked Questions
6
Office of the Law Revision Counsel. 31 U.S.C. 6903 – Payments
7
U.S. Department of the Interior. 31 U.S.C. Chapter 69
8
U.S. Department of the Interior. System of Award Management (SAM) Bulletin
9
Office of the Law Revision Counsel. 31 U.S.C. 6907 – State Legislation Requiring Reallocation or Redistribution of Payments to Smaller Units of General Purpose Government
10
U.S. Department of the Interior. Fiscal Year 2025 Payments in Lieu of Taxes National Summary