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Volume 7 - Opinions of Counsel SBEA No. 124

Opinions of Counsel index

Special franchise assessment (tax credit) (waived) - Real Property Tax Law, § 626:

While there is no authority to implement the statutory credit against special franchise taxes by reducing the franchise fee by the amount of the tax, the municipality and the special franchise owner may contractually so provide.

Does section 626 of the RPTL authorize the reduction of a franchise fee by the amount of a real property tax on a special franchise? Subdivision 2 of section 626 requires the chief fiscal officer of a city, town or village, to whom any sum is paid for which a special franchise owner is entitled to credit as provided in subdivision 1 of that section, to deliver to the collecting officer, not less than 5 nor more than 20 days before the special franchise tax is payable, a certificate showing the several amounts paid during the year ending on the date set forth in the certificate. Upon receipt of the certificate, the collecting officer must credit the special franchise owner for that amount on the tax roll. No credit may be given on account of such payment or certificate in any other year.

Because of clerical, and perhaps, cash-flow problems with the implementation of section 626 as written, some municipalities have suggested that the special franchise owner deduct from the franchise fee the amount of the tax, rather than crediting the amount of the fee paid against the tax due. We are asked whether this alternative procedure is authorized and, if not, whether the owners and the municipalities may provide otherwise by mutual agreement.

While administrative difficulties may have arisen in the administration of section 626, “local government units are creations of, and exercise only those powers delegated to them by, the State” (Seaman v, Fedourich, 16 N.Y.2d 94, at 101, 209 N.E.2d 778, 262 N.Y.S.2d 444, at 449 (1965)). We are not aware of any authority for a municipality to implement section 626 by directing the property owners to reduce their contractual franchise fees by an amount equal to special franchise taxes paid. Section 626 authorizes an offset of the special franchise fee against the special franchise tax, not the reverse.

However, it is now clear that a special franchise owner may waive its rights to a section 626 credit against its special franchise taxes (6 Op. Counsel SBEA No. 14; Teleprompter Corporation v. City of New York, 82 A.D.2d 145, 441 N.Y.S.2d 239 (1st Dept., 1981); see also, Brooklyn Union Gas Co. v. City of New York, 104 Misc.2d 441, 428 N.Y.S.2d 564 (S.Ct., New York Co., 1980), aff’d, 78 A.D.2d 966, 443 N.Y.S.2d 691 (1st Dept., 1981), aff’d, 56 N.Y.2d 881, 438 N.E.2d 1113, 453 N.Y.S.2d 398 (1982)). Since the matter of the franchise fee is contractual in nature, we see no problem in the special franchise owner and the municipality modifying or amending an existing contract, which would include a waiver of the section 626 credit and a municipal consent to permit the special franchise owner to offset against the franchise fee the amount of special franchise taxes paid.

March 17, 1983