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Volume 7 - Opinions of Counsel SBEA No. 53

Opinions of Counsel index

Real property, definition of (location of equipment) (traveling cranes) - Real Property Tax Law, § 102(12)(b)(f):

The location of movable machinery or equipment outside a building is not a basis for denying an exemption for which it otherwise qualifies pursuant to section 102(12)(f) of the Real Property Tax Law. Articles erected upon or affixed to the land, and owned by a non-9-A corporation are real property pursuant to section 102(12)(b).

We have been asked whether the taxable status of a traveling crane is affected by (1) location – whether it is located inside or outside a building; and (2) ownership – whether or not it is owned by a corporation taxable under Article 9-A of the Tax Law (a “9-A corporation”).

In the past, a traveling crane owned by a 9-A corporation located outside a building had been administratively considered taxable real property. If it was located inside a building, the same equipment was deemed to be exempt pursuant to section 102(12)(f) of the Real Property Tax Law.

This distinction was based upon a rather narrow reading of certain language in section 102(12)(f) and its predecessor statutes. In our opinion, that distinction is invalid. Case law, at least since 1958, has made it clear that location of equipment inside or outside a building or structure is not determinative of the taxable status of equipment of 9-A corporations for purposes of section 102(12)(f).

Under paragraph (f), property must meet the following requirements in order to be entitled to the exemption from taxation. The machinery or equipment must be:

(1) movable;

(2) used for trade or manufacture;

(3) not essential for the support of a building, structure or superstructure;

(4) removable without material injury to a building in which located; and,

(5) if it consists of structures or the like, machinery must be essential to their (referring to structures or the like) operation.

One of the difficulties in interpreting paragraph (f) is that the precise language of the statute, in items (3) and (4) above, is “the” building, rather than “a” building – suggesting that if the machinery or equipment is not located within a building, it cannot qualify for this exemption. However, case law is to the contrary.

In Tri-County Asphalt and Stone Co. v. Board of Assessors, 17 Misc.2d 437, 190 N.Y.S.2d 1021 (S.Ct., Washington Co., 1958), the court declared that “[t]he fact that the machinery and equipment in question is not housed in a building would not . . . prevent [§1 02(12)(f)] from being applicable” (190 N.Y.S.2d, at 1023).

Similarly, in Martin v. Gwynn, 18 A.D.2d 851, 236 N.Y.S.2d 755 (3rd Dept., 1963), the court impliedly affirmed the holding of the Tri-County case. In concluding that machinery and equipment of a gravel maker was entitled to the exemption provided by section 102(12)(f), the court said “[n]ot being located in any building, it is not ‘essential for the support’ of ‘the’ building, but stands fastened to the open ground in a movable condition” (236 N.Y.S.2d, at 757).

Finally, in West Mountain Corp. v. Miner, 85 Misc.2d 416, 381 N.Y.S.2d 606 (S.Ct., Warren Co., 1976), a court concluded that ski-lift machinery and equipment – all of which were located outside of any building or other structure – were entitled to the exemption provided in paragraph (f). The court stated, “clearly, the ski lift equipment, being free standing, was ‘not essential for the support of [a] building’ or other structure” (381 N.Y.S.2d, at 611).

Therefore, if machinery and equipment otherwise meet the requirements of section 102(12)(f), the owning 9-A corporation should not be denied an exemption on the ground that the property is located outside a building, structure or superstructure.

In reaching our conclusion, we would distinguish a seemingly contrary judicial opinion (In re Hazelwood Oil Co., 195 App.Div. 23, 185 N.Y.S. 809 (4th Dept., 1920)). In that case, the issue was whether oil wells could be assessed as taxable real property, or should be considered “personal property” under then section 3 of the Tax Law (the predecessor to § 102(12)(f)). The owner contended that it was entitled to an exemption for the well as movable machinery and equipment. The court held that another statute, section 39 of the General Construction Law, specifically made oil wells real property, and stated that it did not believe that the “9-A” exemption provisions superseded the language of section 39. The court went further, however, and stated that the 9-A exemption “refers to machinery used for trade or manufacture situate in a building, structure, or superstructure” (185 N.Y.S., at 812).

The quoted language appears to be dicta, however, since the issue raised could have been resolved according to general rules of statutory construction based solely on a comparison of the language of the General Construction Law and the then Tax Law. Therefore, we believe the cases beginning with Tri-County Asphalt are controlling on this question.

As to the second part of the question – ownership – a distinction must be made between equipment owned by a 9-A corporation or by some other entity. For example, if the machinery or equipment were “articles and structures, substructures and superstructures erected upon, under or above the land, or affixed thereto” within the meaning of section 102(12)(b), it would be real property and not entitled to exemption if owned by a non 9-A corporation. However, if under the common law standards, the machinery or equipment is not “affixed” to the land or there is evidence that the person installing it did not intend to make a permanent addition to the property, it should be considered personal property whether owned by a 9-A corporation or some other entity.

February 25, 1980