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Volume 4 - Opinions of Counsel SBEA No. 18

Opinions of Counsel index

Special franchise assessment (tax credit) (exclusive franchise) - Real Property Tax Law § 626:

Section 626 provides a credit against the special franchise tax based upon the payment of certain franchise fees. The availability of the credit is not limited to exclusive franchises. This deduction may be applied only to city, town, or village taxes for the current year, and not to county or school taxes.

We have been requested to provide an interpretation of the provisions of section 626 of the Real Property Tax Law pertaining to the availability of a credit against the special franchise tax based upon the payment of certain franchise fees.

Subdivision 1 of section 626 provides as follows:

§ 626. Deductions allowed against taxes on special franchises
1. 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.

This language has been construed to include payments made pursuant to an agreement between the special franchise owner and an assessing unit, in spite of the fact that, strictly speaking, these payments might not be “in the nature of a tax” (see, 4 Op.Counsel SBEA No. 33).

Subdivision 1 of section 626 provides that the deduction is available “when a special franchise owner has paid such assessing unit for its exclusive use during the past year under any agreement . . . a sum . . .” (emphasis supplied). It is our opinion that the words “exclusive use” should not be interpreted to limit the availability of the deduction to exclusive franchises. The word “its” in the phrase “its exclusive use” refers to the assessing unit, not the franchise owner. Any other interpretation would render certain other provisions of section 626 a nullity. The Attorney General has held in an unpublished informal opinion that in the absence of specific legislative authority, a town board may not grant an exclusive franchise for the use of its streets, highways and public places. The courts will not interpret the language of a statute (in the absence of unconstitutionality) so as to render the statute ineffective to fulfill its legislative purpose. Thus, it is not necessary that a special franchise be exclusive to fall within the provisions of section 626(1).

Section 626 of the Real Property Tax Law provides a deduction against the special franchise tax based on the payment of certain franchise fees. This deduction may be applied only to city, town, or village taxes for the current year and not to county or school district taxes, if any.

November 21, 1973
Revised June 13, 1975

Updated: