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Volume 7 - Opinions of Counsel SBEA No. 108

Opinions of Counsel index

Special franchise assessment (tax credit) (taxes payable in installments) - Real Property Tax Law, § 626; Suffolk County Tax Act, § 13:

A special franchise owner is entitled to a credit against town taxes, in an amount not to exceed the franchise fee paid to the town in the twelve months preceding lien date. The fact that taxes are payable in installments is irrelevant.

We are asked how the credit against special franchise taxes (RPTL, § 626) should be implemented where, as in Suffolk County, taxes are due in two installments. The annual franchise fee was paid to the Town of Brookhaven on April 1, 1982; the second installment of 1982 taxes was payable by May 31, 1982. Should the April first fee payment be credited against the first tax installment (paid January 10, 1982), against that second tax installment only, or against taxes levied in the succeeding year?

Subdivision 1 of section 626 of the RPTL provides that a special franchise owner is entitled to a credit “when a tax levied on a special franchise is due in any assessing unit” (emphasis added). However, I the right to a credit is contingent upon the owner having paid the assessing unit “for its exclusive use during the past year”, a sum based upon a percentage of gross earnings or some similar payment which is “in the nature of a tax” (emphasis added). Subdivision 2 prescribes the mechanics of granting the credit. A designated officer of the assessing unit must deliver a certificate to the collecting officer “showing the several amounts which have been paid during the year ending on the date set forth in the certificate”. The certificate must be delivered “not less than five nor more than twenty days before a tax on a special franchise is payable.”

The deceptively simple language of this statute causes some difficulty in its references to when taxes are “due”, when they are “payable”, and in its varied references to a “year” (“past year”; “the year ending on the date set forth in the certificate”). Assuming that a tax is “due”, in the context of subdivision 1 of section 626, at the time that it is “payable”, as the latter term is used in subdivision 2, we suggest that a reasonable interpretation of when a tax is payable would be the date on which that tax first becomes a lien (see, RPTL, § 902).

We find support for our conclusion in the language of the Suffolk County Tax Act (SCTA). Pursuant to section 13(c) of the SCTA, a town board may act by resolution to permit payment of taxes in two installments. In order to avoid late charges, the first half of taxes is due by January 10, the second by May 31. Lien date for the entire tax, however, is December 1 of the calendar year preceding the January in which the first installment is due. More specifically, section 13(c) empowers town boards to provide for installment payments although “all taxes . . . in the tax roll shall be due and payable and shall be and become liens . . . on December first of each year” (emphasis added). Thus, in the context of the SCTA, a tax is “due and payable” when it becomes a lien, notwithstanding provision for payment of that tax in installments.

Applying this interpretation to the language of section 626 of the RPTL, we must then consider the meaning of “past year” (§ 626(1)) and “the year ending on the date set forth in the certificate” (§ 626(2)). There is case law which suggests that the word “year” as used in section 626 means the 365 days preceding or succeeding the payment of the franchise fee, rather than “calendar year”, “fiscal year” or any similar terminology (People ex rel. New York, Westchester and Boston Ry. Co. v. Ebstein, 219 N.Y. 576, 114 N.E. 1078 (1916); see also, General Construction Law, § 58). Thus, for example, where a franchise fee was paid on April 1, 1982, a credit would be available to the special franchise owner in an amount not exceeding such fee, for any town taxes which become “due and payable” (i.e., which become a lien) in the succeeding 365 day period. In the case of the Town of Brookhaven, taxes so payable would be those which will become a lien on December 1, 1982.

An alternative interpretation has been suggested: since the franchise fee (based upon earnings in calendar year 1981) was paid after the first installment of 1982 taxes could be paid without penalty, the right to a credit would be limited to the amount of the second installment (of 1982 taxes). However, we find nothing in the statute that suggests that the right or extent of the credit should be contingent upon how the local government collects its taxes (i.e., in installments or in one payment). Nor does the statute provide authority or administrative procedures for a refund in this situation if the credit available were to exceed the amount of the second installment.

Finally, we believe that our interpretation is reasonable in light of the number of fiscal and assessment calendars employed by local governments in this State, and the competing accounting/reporting calendars of special franchise owners entitled to credits under section 626. If the franchise fee had to be received before the tax for the immediately succeeding calendar year became due, many special franchise owners would never receive their credits. As franchise fees are often based upon a percentage of annual gross earnings, it follows that there will be a certain lag between the end of the “year” for which the franchise fee is payable and the date actual payment is made.

Accordingly, it is our opinion that under the circumstances, the special franchise owner is entitled to a credit against town taxes which became a lien December 1, 1982, in an amount not to exceed the franchise fee paid to the town in the twelve months preceding lien date.

November 23, 1982