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Volume 4 - Opinions of Counsel SBEA No. 110

Opinions of Counsel index

Assessment, special franchise (tax credit) (annual fees) - General City Law, § 20-b; Real Property Tax Law, § 626:

An annual fee of three percent of gross earnings paid by a cable television company to a city pursuant to a city ordinance requiring such payment must be credited against special franchise taxes levied on the company’s property by the city, pursuant to section 626 of the Real Property Tax Law.

We have received an inquiry concerning the effect of an ordinance of a city on the provisions of section 626 of the Real Property Tax Law which allows the deduction of certain payments made to a municipality against special franchise taxes levied by that municipality. The ordinance in question granted a cable television franchise to a company in return for which the latter party agreed to pay three percent of the gross receipts it derived from the operation of that franchise. Section 6 of the ordinance, as amended, reads in pertinent part as follows:

Such annual fee [i.e., the three percent of gross receipts to be paid by the company] shall be in addition to any other fee, tax or assessment payable to the City under any other applicable provision of law.

In view of the language of this ordinance, the question is asked whether the company may still deduct its payment to the City of three percent of its gross receipts from its special franchise tax pursuant to section 626.

Section 626 of the Real Property Tax Law provides that when a tax levied on a special franchise is due, and the owner thereof has paid the assessing unit “ . . . for its exclusive use during the past year under any agreement or statute requiring the same, a sum based upon the percentage of gross earnings . . . which payment was in the nature of a tax,” such amounts (except money paid for paving or repairing pavements or streets) shall be deducted from the tax based on the special franchise assessment made by the State Board of Equalization and Assessment.

It is clear that a municipality may not act by ordinance (or otherwise) to contravene a general law of the State. As was stated in People v. Kearse, 56 Misc.2d 586, 289 N.Y.S.2d 346, 352:

In short, ordinances must not be inconsistent with the laws of the state. Bareham v. Rochester, 128 Misc. 642, 220 N.Y.S. 66, mod. 221 App. Div. 36, 222 N.Y.S. 141. A local ordinance attempting to impose any additional regulation in a field where the state has already acted will be regarded as conflicting with the state law and will be held invalid.

Paragraph (5) of section 2 of the Municipal Home Rule Law defines a “general law” as “[a] state statute which in terms and in effect applies to all counties, all counties other than those wholly included within a city, all cities, all towns or all villages.”

Section 626 of the Real Property Tax Law appears to be just such a “general law.” Therefore, unless there is a specific exception to that section, it would appear that all localities are bound by its mandate.

One such exception was recognized in the case of Standard Gas and Light Company of the City of New York v. Taylor, 161 Misc. 192, 292 N.Y.S. 371, aff’d, 248 App. Div. 583, 288 N.Y.S. 1111, aff’d, 272 N.Y. 611, 5 N.E.2d 357. There the court was asked to determine whether taxes, imposed pursuant to an enabling act authorizing the City of New York to impose any taxes the Legislature might impose, should be credited against special franchise taxes pursuant to the provisions of section 48 of the Tax Law (from which the present provisions in section 626 of the Real Property Tax Law were derived). In that case the enabling act in question provided that any tax imposed should “be in addition to any and all other taxes.”

The court stated as follows (at pp. 372-373):

The question is one of statutory construction. It must be remembered that the enabling acts were general in nature, conferring upon cities the broad power to impose any form of taxes which the Legislature had the power to impose. Therefore, a specific exception in the enabling acts with respect to section 48 of the Tax Law would have assumed that the locality would impose an additional tax on corporations already paying taxes on special franchises. No specific provision suspending a statute such as section 48 would be expected to be found in the enabling acts, under the circumstances. On the contrary, it would be expected that only general language would be used to denote the legislative intent. It seems to me that the phrase above quoted clearly shows that it was the intention of the Legislature that such credits as those provided under section 48 of the Tax Law were not to be allowed as against the new taxes provided. This is sufficiently revealed by the language used. Though such language is general in nature, it is most comprehensive in its terms. In effect, the Legislature said to the city that it might tax any source it saw fit, including a source already taxed, and that the new taxes would be in addition to the old. There is thus an expressed intention to add to former taxes which necessarily requires that any statute which would prevent such addition would be suspended.

Similar statutory authority for the imposition of taxes on utilities by any city in the State is today found in section 20-b of the General City Law. The first unnumbered paragraph of that section provides in pertinent part as follows:

Notwithstanding any other provisions of law to the contrary, any city of this state, acting through its local legislative body, is hereby authorized and empowered to adopt and amend local laws imposing in any such city a tax such as was imposed by section one-hundred eighty-six-a of the tax law, in effect on January first, nineteen hundred fifty-nine, except that the rate thereof shall not exceed one per centum of gross income or of gross operating income, as the case may be . . . A tax imposed pursuant to this section . . . shall be in addition to any and all other taxes. (emphasis supplied)

Assuming that the same legislative intent was behind the enactment of section 20-b of the General City Law as was the case with the enabling acts dealt with in the Taylor case, supra, it may be inferred that a tax imposed on a utility by a city which acted by local law, and which limited the tax to one percent of gross income, would not be deductible from the special franchise tax as otherwise permitted by section 626 of the Real Property Tax Law. This inference is, of course, in line with the rationale of the Taylor case.

However, whether this inference is correct or not is not determinative in the instant case since the City’s acts do not bring it within the purview of section 20-b. This is so for two reasons:

1. The statute requires a city to act by local law, and here the city acted by ordinance; (a “local law” as defined in Municipal Home Rule Law, § 2(9) does not mean or include an ordinance, resolution or other similar act of the legislative body or of any other board or body); and

2. The statute requires the tax to be limited to one percent of gross income, and in the instant case the city is imposing a charge of three percent of the gross income of the cable television company.

Therefore it is our opinion that payments made by the company based on a percentage of gross earnings, must be credited against special franchise taxes levied on its property by the city pursuant to section 626.

March 24, 1975