When should payments in lieu of taxes be recognized as revenue?

Payments in lieu of taxes (PILOTs) should be recognized as revenue either as the service is provided or as soon as there is an enforceable legal claim, if available. This is because revenue recognition principles establish that revenue should be recorded when it is earned and realizable.

When recognizing PILOTs, if the entity is providing a service that generates the payment, it would be appropriate to recognize the revenue as that service is rendered. This aligns with the matching principle, whereby revenue is recognized in the period in which the related services are performed.

On the other hand, if there is an enforceable legal claim to the payment, this indicates that the money is owed to the entity, and recognizing it at that point also aligns with revenue recognition standards, reflecting the realization of income at the moment the claim can be legally enforced.

Both scenarios establish a basis for recognizing PILOTs, leading to the conclusion that either method is acceptable under proper accounting principles.