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Volume 4 - Opinions of Counsel SBEA No. 111

Opinions of Counsel index

Assessment, special franchise (tax credit) (car license fees and bridge tolls) - Real Property Tax Law, § 626:

In a city having a population of 175,000 or more, bridge tolls and car license fees paid by a special franchise owner to the city may not be credited against special franchise taxes.

Our opinion has been requested concerning deductions allowed against taxes on special franchises pursuant to subdivision 1 of section 626 of the Real Property Tax Law. Specifically, we have been requested to render our interpretation of the clause relating to a deduction of certain fees in cities of 175,000 population or more. Subdivision 1 of section 626 provides as follows:

When a tax levied on a special franchise is due in any assessing unit, if the special franchise owner has paid such assessing unit for its exclusive use during the past year under any agreement or statute requiring the same, a sum based upon a percentage of gross earnings or other income, a license fee or other sum of money on account of such special franchise possessed by such special franchise owner, which payment was in the nature of a tax, all amounts so paid for the exclusive use of such assessing unit, except money paid or expended for paving or repairing the pavement of a street, highway or public place, and except in a city having a population of one hundred seventy-five thousand or more according to the latest federal census, car license fees or tolls paid for the privilege of crossing a bridge owned by the city, shall be deducted from the tax based on the assessment made by the state board for purposes of the assessing unit, but not otherwise, and the remainder shall be the tax on such special franchise payable for such purposes.

Section 626 is derived from section 48 of the Tax Law. Section 48 was amended by chapter 581 of the Laws of 1916 to provide in part as follows:

§ 48. Deduction from special franchise tax for local purposes.

If, when the tax assessed on any special franchise is due and payable under the provisions of law applicable to the city, town or village in which the tangible property is located, it shall appear that the person, copartnership, association or corporation affected has paid to such city, town or village for its exclusive use within the next preceding year, under any agreement therefor, or under any statute requiring the same, any sum based upon a percentage of gross earnings, or any other income, or any license fee, or any sum of money on account of such special franchise, granted to or possessed by such person, copartnership, association or corporation, which payment was in the nature of a tax, all amounts so paid for the exclusive use of such city, town or village except money paid or expended for paving or repairing of pavement of any street, highway or public place, and except in a city of the first class car license fees or tolls paid for the privilege of crossing a bridge owned by the city, shall be deducted from any tax based on the assessment made by the state board of tax commissioners for city, town or village purposes, but not otherwise; and the remainder shall be the tax on such special franchise payable for city, town or village purposes. . . . [new material emphasized]

Except for a minor change in 1917 (not relevant here), this was the statute as it existed at the time of the recodification of the Real Property Tax Law (L.1958, c.959). The recodification did not intend any substantive revision (Real Property Tax Law, § 2008; see also, Cale-Rome, Inc. v. Board of Assessors of the City of Rome, 44 Misc.2d 675, 255 N.Y.S.2d 12).

While the language in subdivision 1 of section 626 quoted above may be somewhat unfortunately convoluted in regard to cities of more than 175,000 inhabitants, a study of relevant legal decisions and other available materials leads to a conclusion that car license fees or tolls paid by a special franchise owner for the privilege of crossing a city-owned bridge may not be deducted from taxes based on assessments made by the State Board of special franchise property in such cities.

In the case of People ex rel. Nassau Electric Railroad Company v. Grout, 119 App.Div. 130, 103 N.Y.S. 975, aff’d, 189 N.Y. 510, 81 N.E. 1173, it was held that the railroad company which ran its cars across the Brooklyn Bridge pursuant to an agreement with the city requiring the company to pay a toll of $.05 per car for each round trip was entitled to deduct such payments from the special franchise taxes it owed to the city. This case, however, was decided in 1907, long before section 48 of the Tax Law was amended.

New York Railways Company v. Prendergast, 172 App.Div. 128, 158 N.Y.S. 237, was also decided prior to the effective date of chapter 581 of the Laws of 1916. The railway company sought to compel the city to credit bridge tolls paid by it to the City of New York under a contract for the operation of cars over the Williamsburg Bridge against the special franchise taxes owed by it. The Court held that the applicant was not a special franchise and that, therefore, no deduction could be allowed for such tolls. However, in dicta, the Court indicated that the city had given credits for such fees to certain other corporations against their special franchise taxes.

The apparent purpose of chapter 581 of the Laws of 1916 was to establish a definite rule as to the deductibility of such license fees and tolls. In the case of Brooklyn, Queens County and Suburban Railroad Company v. City of New York, 224 App.Div. 659, 229 N.Y.S. 9, the Appellate Division reversed a lower court decision, awarded judgment to plaintiffs and stated:

. . . The conclusions to which we have come are (I) that the evidence, by its clearly preponderating weight, establishes that the right to operate across the Williamsburg Bridge was included in the assessment of the railroad company’s special franchise for the year 1912, and that the bridge tolls paid were the subject of reduction from that tax under the provisions of section 48 of the Tax Law as then in force (emphasis added).

By this statement, the Court seems to intimate that its decision would be otherwise if it were to interpret section 48 as it existed in 1928.

In interpreting section 626 of the Real Property Tax Law, it has been stated that:

A special franchise owner is entitled to a deduction from the tax based on the special franchise assessment made for an assessing unit, of the amount paid by the owner to such locality during the past year pursuant to agreement or statute on the basis of a percentage of gross earnings or other income, or a license fee, or other amount on account of the special franchise, which payment was in nature of a tax, but not moneys paid for paving or repairing the pavement of a highway or public place, and in a city having a population of 175,000 or more, nor car license fees or tolls for the purpose of crossing a bridge owned by the city. (58 N.Y.Jur., Taxation § 228)

Finally, in Bender’s Forms to the Real Property Tax Law, Form 3 concerning section 626 suggests the following paragraph to be included in the certificate of amounts paid on account of special franchise to be forwarded to the city receiver of taxes:

Said payments were paid for the exclusive use of said City pursuant to the provisions of a certain ordinance of the City of . . . . . . . . . . . . . . , dated . . . .  . . . , 19 . . . . , as amended by subsequent contracts with the said City of . . . . . . . . . . . . . . Such payments were not for paving or repairing of a pavement of any street, highway or public place and were not car license fees or tolls paid in a city of the first class for the privilege of crossing a bridge owned by such a city.

Accordingly, based on the foregoing, it is our opinion that the clause concerning bridge tolls and car license fees constitutes a second exception (the first being pavement repairs) from the general rule that amounts paid by a special franchise owner in the nature of a tax may be credited against special franchise taxes, said second exception being applicable only to cities having a population of 175,000 or more.

This clause of the statute and the cited cases refer to street railway companies and the deductibility of tolls and fees paid by them to the cities in connection with the operation of their franchise.

March 13, 1975

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