Proposed Changes to the Payment in Lieu of Taxes Program Can Save Millions

Pursuant to a congressional request, GAO analyzed the budgeting impact of four proposals amending the Payment in Lieu of Taxes Program (PILT). The four proposals would: (1) set a maximum payment to each county of $500,000; (2) deduct from a State's PILT payment all Federal payments made under acts listed in the PILT law; (3) amend the section governing deductions to include payments generated from Federal lands under the acts and have all other Federal payments deducted from PILT payments; and (4) substitute a $.10 per acre payment, as an alternative payment method for PILT payments.

GAO analysis of the proposals disclosed that each, if implemented, would result in substantial Government-wide savings. However, GAO analysis also indicated that the proposals do not provide payments based on true tax equivalency, as the law intended. GAO advocated that a decision be made as to whether the programs should be tax equivalency programs or amended to delete the tax equivalency implications. As long as the basic purpose of the land payment programs is expressed in terms of tax equivalency, GAO continues to believe that the recommendations included in its September 1979 report are valid and should be implemented.