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Volume 9 - Opinions of Counsel SBEA No. 50

Opinions of Counsel index

Special franchise assessment (tax credit) (town highway charges) - Real Property Tax Law, § 626; Town Law, § 115:

A special franchise owner may credit a paid franchise fee against all town taxes levied for town highway purposes.

Section 626 of the RPTL provides special franchise owners with a credit against certain property taxes imposed upon their franchises. The credit consists of the amount of franchise fees paid “which payment was in the nature of a tax.”  Such franchise fees may be calculated as a percentage of gross earnings or other income, a license fee, or other sum of money on account of the special franchise. The tax credit is only available against taxes levied on the special franchise for purposes of the assessing unit, and it may not exceed the amount of the tax levied.

The State Comptroller has concluded that this credit is applicable to general town, city and village charges, but not to those charges “which are imposed for benefits received in a limited area of a town” (16 Op.St.Compt. 60-275). We agree with the analysis in that opinion insofar as it limits the application of the credit to general municipal charges. However, we believe further analysis is necessary to determine whether a charge imposed by a town and collected for a highway fund is a general town charge or one in the nature of a special district levy for a “limited area” of the town.

Revenues necessary to finance a special district are raised by means of either a “special ad valorem levy” or a “special assessment” (as defined in RPTL, §102(14), (15), respectively.) Charges imposed for a highway fund constitute neither. Rather, funds raised for highway purposes are part of the single tax levy authorized for the town (Town Law, §115). Highway Law, section 141, requires the town superintendent of highways to submit an annual estimate of expenditures which is divided into four categories of expenses:

1. Highway repair and maintenance
2. Bridge repair and maintenance
3. Purchases of equipment
4. Snow removal and miscellaneous.

This estimate is the same type as that required of each administrative unit in the town (Town Law, §104). While highway revenues may constitute a separate fund within the town (see, 24 Op.St. Compt. 68-766), this does not change the fact the revenues are part of the general tax levy process and are not imposed (with exceptions noted below) for the benefit of a limited area of the town on behalf of a distinct fiscal entity. The common source of the highway fund and the town general purpose fund is evident in section 113 of the Town Law, which authorizes transfers of surplus moneys from one to the other.

In general, then, a special franchise owner is entitled to credit the franchise fee payment against both the town general levy and any highway fund levy. We note, however, that the Highway Law (§277) authorizes a town to exempt property in a village within the town from charges for items 3 and 4 of a highway fund. The State Comptroller has stated that if a town does this, charges for items 3 and 4 of the highway fund should not be considered general town charges to which the section 626 credit may be applied (Op.St.Compt 60-275, supra). In that same opinion, the Comptroller indicated that a charge imposed for highway item number 1 is not a town purpose within the meaning of subdivision 2 of section 626, and that the credit is not allowable against charges for item 1.

We disagree with that part of the Opinion. We believe that charges imposed for the town highway fund, regardless of whether for items 1, 2, 3 or 4, are taxes for town purposes against which the special franchise owner may claim the credit for franchise fees paid in accordance with the provisions of section 626 of the Real Property Tax Law.

We assume that the rationale for both conclusions of the State Comptroller was that, if the village portion of a town is exempted from the payment of what otherwise is the general town charge, that charge is no longer collected for townwide purposes. Instead, it may be likened to a special ad valorem levy or special assessment and considered a special district charge. This assumption presumes that the exemption of property from any tax district-wide charge necessarily converts that charge into one which is not levied for tax district-wide purposes but only for the benefit of a limited area.

If that assumption were correct, the numerous exemption statutes would convert each charge levied upon real property from a general tax into one levied for the benefit of those who pay them. This would render meaningless the distinction between a tax, which is “imposed upon real property by or on behalf of a county, city, town, village or school district for municipal or school district purposes, but does not include a special ad valorem levy or special assessment” and these latter charges which are “imposed upon benefitted real property...to defray the cost, including operation and maintenance, of a special district improvement or service.” As stated above, charges imposed for the highway fund constitute neither special ad valorem levies nor special assessments. Such funds appropriated for highway purposes are a part of the single tax levy authorized for the town.

Accordingly, we believe that charges imposed for the town highway fund, regardless of whether for item 1, 2, 3 or 4, are taxes for town purposes against which the special franchise owner may claim the credit for franchise fees paid in accordance with the provisions of section 626 of the Real Property Tax Law. This conclusion applies regardless of whether there are any incorporated villages located within the town which have been exempted by the town board from the payment of items 3 and 4.

February 16, 1989

Updated: