Volume 9 - Opinions of Counsel SBEA No. 16
Real property, definition of (telecommunications equipment) (effect of L.1987, c.416) - Real Property Tax Law, § 102(12)(i):
Central office and telecommunications property which was in place in 1986 is to be phased out as taxable real property. Such property which was installed after 1986 is not included in the taxable base amount being phased out, its taxable assessed value already being zero.
We have been asked two related questions concerning the implementation of chapter 416 of the Laws of 1987, regarding the taxation of telecommunications equipment. The first is whether and to what extent telecommunications property installed between 1987 and 1991 is taxable. The second is whether and to what extent the total assessed value of telecommunications property assessed on 1986 assessment rolls may differ from the taxable assessed valuation of such property on assessment rolls filed between 1987 and 1991.
Chapter 71 of the Laws of 1985 added a new paragraph (i) to section 102(12) of the RPTL, establishing, “telecommunications equipment,” including switching and transmission equipment of long-distance telecommunication companies, as a new class of taxable real property. Chapter 71 also added a new section 471 to the RPTL which provided a 25% exemption for such property. Both provisions were to be effective only from January 1, 1985 until December 31,1986 (L.1985, c.71, §13).
Chapter 416 of the Laws of 1987 allowed these provisions to expire as scheduled. It further provided, however, that such equipment would continue to be taxable real property until 1991, subject to certain assessment restrictions. Specifically, section 14 of the legislation provided that until 1991:
Central office equipment...and telecommunications equipment...shall constitute real property subject to taxation pursuant to the real property tax law; provided, however, the taxable assessed valuation of such property on  assessment rolls...shall not exceed the taxable assessed valuation of such real property on  assessment rolls.
Similar language was used to provide that the 1988,1989,1990 and 1991 taxable assessed values of “such real property” shall not exceed 100%, 75%, 50% and 25%, respectively, of the 1986 taxable assessed value “of such real property.” These limitations are subject to adjustments where there is a change in level of assessment of 25% or more.
By the terms of this provision, central office equipment and telecommunications equipment, whenever installed, are taxable real property until this provision expires on December 31, 1991. It is thus necessary to determine the extent to which the prescribed assessment limitations apply to such property if installed after the 1986 taxable status date.
The assessment limitations prescribed by section 6 of chapter 416 could be construed as applying either: (1) to the aggregate taxable assessed value of the entire class of “such real property” (e.g., the total taxable assessed value of all such property in 1989 may not exceed 75% of the total taxable assessed value of all such property in 1986), or (2) to the taxable assessed value of each separately assessed parcel “of such real property” (e.g., the taxable assessed value of a separately assessed parcel of such property in 1989 may not exceed 75% of the taxable value of that parcel in 1986). We believe the limitations were intended to apply to individual assessments.
The ultimate purpose of chapter 416 was to eliminate the tax on central office equipment and telecommunications equipment on the assumption that such equipment does not satisfy the common law fixture test (see, e.g., 8 Op.Counsel SBEA No. 3). The phaseout of the 1986 assessment was intended to ameliorate the impact of this loss upon local tax bases. If “such real property” were intended to refer to the entire class of assessments, rather than to individual assessments, then the tax burden could shift within the class. For example, if one of the taxpayers were to remove some or all of its telecommunications equipment, an increase could result in the taxable assessed values of the remaining property in the class. Thus, if all of the pre-1987 property in the class were removed, the taxes would have to be borne by the post-1986 property in the class. However, we believe that in enacting chapter 416 the Legislature did not intend that the taxable assessed value of one parcel could increase simply because the taxable assessed value of a separate parcel decreased. This would not only be inequitable to the adversely affected taxpayer but would be indefensible from the standpoint of assessment administration.
Further, given the difficulties assessors had in obtaining inventories and valuing telecommunications equipment in 1985 and 1986, we also believe that the Legislature did not intend to require assessors to continue these efforts while the assessments were becoming increasingly less important. Further, since the class would consist of central office equipment as well as telecommunications equipment, the shifting could result in an increase in the assessment of central office equipment which had been subject to a ceiling (former RPTL, §470) prior to the enactment of chapter 416. We doubt that the Legislature intended such potential disruption in enacting chapter 416. It is far more reasonable to conclude that the Legislature simply intended to initially maintain existing assessments and then gradually eliminate them.
Therefore, in our opinion, chapter 416 should be read to mean that if telecommunications equipment was installed after the taxable status date for the 1986 roll but on or before the taxable status date for the 1991 roll, it is taxable real property, but since it was not assessed in 1986, its taxable assessed value must equal zero. For the reasons stated below, we believe the total assessed value must also equal zero.
The second question is whether and to what extent the total assessed value of central office equipment and telecommunications equipment on assessment rolls filed after 1986 and before 1992 may differ from the taxable assessed value of such property.
Chapter 416 repealed both section 470 of the RPTL, which had imposed assessment limitations upon central office equipment, and section 471, which had provided a partial exemption for telecommunications equipment. In their place, chapter 416 imposed restrictions on taxable assessed values on assessment rolls filed after 1986 and before 1992. However, chapter 416 was silent as to how the total assessed value of such property should be determined for these assessment rolls.
Although chapter 416 could be construed as limiting the taxable but not the total assessed value, to do so would imply that the assessor must obtain a current inventory and value the property, even though the assessment would not be taxable to the extent it exceeded the appropriate percentage of the 1986 taxable assessed value. As discussed above, we do not believe the Legislature intended to impose such a burden upon assessors in the administration of a component of the tax base of dwindling significance. Accordingly, we believe that the total assessed value of each parcel of central office equipment and telecommunications equipment must equal the taxable assessed value thereof on assessment rolls filed after 1986 and before 1992.