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Volume 6 - Opinions of Counsel SBEA No. 51

Opinions of Counsel index

Special franchise assessment (refund) (appropriate protest) - Real Property Tax Law, §§ 612, 740:

Authority for administrative review of a special franchise assessment is vested exclusively in the State Board. Attachment of a notice of protest and demand for refund to a copy of a complaint served on the local assessing unit may be intended to protect the owner’s right to any refund of taxes which might accrue from an administrative reduction of the assessment by the State Board or a judicially mandated decrease.

A special franchise owner has filed a complaint with the State Board with respect to the tentative assessment of its property. In accordance with the requirements of section 610 of the Real Property Tax Law, a copy of the complaint was served on the assessing unit in which the real property is located. In addition, however, the owner included a “Notice of Protest and Demand for Refund” with respect to taxes levied or to be levied on the assessment. Local taxing jurisdictions have asked what their responsibilities are upon receipt of the complaint and demand for refund.

Neither a local assessing unit (e.g., a town or city) nor a local taxing jurisdiction (e.g., a school district) has any rights or duties in terms of reviewing the assessment of special franchise property. Upon the filing of a complaint by a special franchise owner, it is solely the responsibility of the State Board to conduct the administrative review (Real Property Tax Law, § 612) and to determine the final assessment (§ 614). Judicial review is then available as provided in Title 2 of Article 7 of the Real Property Tax Law (§§ 740-744). The final assessment of special franchise property is entered on the local assessment roll and has the same force and effect as if made by the local assessor (§ 616(2)).

With respect to the notice of protest and demand for refund, the special franchise owner may have included it as part of his complaint as protection against the possible application of the recent decision of the New York Court of Appeals in Matter of Bethlehem Steel Corp. v. Board of Education of the City School District of Lackawanna, 44 N.Y.2d 831, 378 N.E.2d 115, 406 N.Y.S.2d 752. In that case, the Court held that in jurisdictions which had exceeded their constitutional tax limits, taxpayers were entitled to a refund of excess taxes “if such taxes were paid under appropriate protest.” The prerequisite of payment under protect cited in the case has caused some confusion. Case law prior to the date of the Bethlehem Steel decision was vague in regard to what type of “protest” was required relative to tax payments. In construing that language, we concluded that mere payment of taxes did not in and of itself constitute protest and that a formal statement of objection to payment had to be included given the Court of Appeals rationale (see, 6 Op.Counsel SBEA No. 9).

Therefore, it may be that the purpose of the protest and demand for refund was to protect any right to a refund of taxes, should the special franchise assessment be reduced, and should a court conclude that the “appropriate protest” required in Bethlehem Steel was equally applicable here. (However, it is not at all clear whether payment under “protest” would be required under any circumstances other than those in Bethlehem Steel).

April 12, 1979