Volume 5 - Opinions of Counsel SBEA No. 10
Telephone equipment exemption (scope) (property owned by companies providing services not associated with telephone and telegraph companies) - Real Property Tax Law, § 470:
The exemption provided by section 470 of the Real Property Tax Law is applicable only to certain specified categories of equipment of the telephone and telegraph industries, and is not applicable to other businesses which have comparable property serving a similar function to the telephone and telegraph equipment.
Our opinion has been requested concerning the applicability of section 470 of the Real Property Tax Law (which grants a partial exemption to certain types of “telephone and telegraph” property) to property of companies which provide services or perform functions generally not associated with “telephone and telegraph companies,” but which apparently own equipment similar to central office equipment, station equipment, station apparatus, station connections and private branch exchanges of telephone and telegraph companies.
It is our opinion, based on the following discussion, that section 470 was not intended to apply to property of companies such as those in the fields of cable television, burglar and fire alarm service, and brokerage, banking and business data transmission companies using equipment such as computers, cathode ray tubes and certain document reproduction equipment. Rather, we believe section 470 exempts only certain specified categories of telephone and telegraph equipment as such categories are defined in the Uniform System of Accounts of the Federal Communications Commission (FCC) (§§ 31.221 - 31.234) and the Public Service Commission (PSC) (§§ 221 - 234).
All real property in New York State is subject to taxation, special ad valorem levies, and special assessments unless specifically exempted therefrom by statute (Real Property Tax Law, § 300). While the Legislature is free to determine what property shall be taxed and what property shall be exempt, subject only to the broad limitations of the due process and equal protection clauses of the Federal and State Constitutions (Association of the Bar of the City of New York v. Lewisohn, 34 N.Y.2d 143, 313 N.E.2d 30, 356 N.Y.S.2d 555), as a general rule of construction, statutes exempting real property from taxation must be strictly construed against the real property owner seeking such exemption (City of Lackawanna v. Slate Board of Equalization and Assessment, 16 N.Y.2d 222, 212 N.E.2d 42, 264 N.Y.S.2d 528). That is to say, if there is any doubt as to the intent of the Legislature it must be resolved in favor of the taxing power (People v. Brooklyn Garden Apartments, Inc., 283 N.Y. 373, 28 N.E.2d 877). With these standards of statutory construction in mind, we next consider the specific question, viz., the interpretation to be given section 470 of the Real Property Tax Law.
Pursuant to section 470, certain telephone and telegraph equipment is exempt from taxation, special ad valorem levies, and special assessments to the extent that the assessed valuation of such property exceeds the assessed valuation thereof appearing on the last assessment roll of a tax district completed prior to December 31, 1974 (unless there is a tax district-wide revaluation subsequent to said date in which case there is a provision for increased assessments without regard to this exemption provision). The equipment entitled to this partial exemption is described as follows: “telephone and telegraph central office equipment, station equipment, station apparatus, station connections and private branch exchanges.” Insofar as we can determine, these terms were taken directly from the Uniform System of Accounts prescribed for telephone and telegraph companies by the FCC and the PSC. As terms of art in the industry, we assume that any item of real property, listed in the Uniform System as accountable under each term, is meant to be entitled to the partial exemption. However, in addition, in view of the requirement that exemption statutes are to be strictly construed, and mindful of the general rule that “words of art” when used in a statute should be construed according to their technical sense in the absence of legislative intent to the contrary (see discussion below), we are of the opinion that real property, other than those items specifically enumerated in the Uniform System as accountable under each term set forth in section 470, is not entitled to this partial exemption (i.e., the mere fact that other real property “serves a comparable function” or is “appurtenant” to telephone or telegraph equipment exempt pursuant to this section does not entitle the other real property to the exemption).
As previously suggested, it seems clear that the terms used to describe the property entitled to an exemption under section 470 are “terms of art” in the telephone and telegraph industries. A term of art has been defined as “one which is used in a particular field with a precise technical meaning” (Suwannee Fruit and Steamship Co. v. Fleming, 160 F.2d 897, 899). It is generally accepted that “[w]hen words of art or peculiar phrases are used, it is supposed that the Legislature had in view the subject matter about which such terms or phrases are commonly employed” (McKinney’s Statutes, §233; see also, Chamberlain v. The Western Transportation Co., 45 Barb. 218, rev’d on other grounds, 44N.Y. 305). In Chamberlain, the court noted that the federal statute in question made use of commercial phrases which, by usage in the trade, had acquired a well-known significance prior to the enactment of the statute. Therefore, the court reasoned, “[t]he reasonable supposition would be that these terms or phrases were intended to be used as they were understood in the pursuits, and by the persons to which the statute was designed to be addressed.” Similarly it is our opinion that the phrases employed in section 470 of the Real Property Tax Law are “terms of art” commonly used in the telephone and telegraph industries and that the Legislature, being cognizant of the meaning these technical terms had acquired through such use, intended to limit the effect of the statute to those items of real property of telephone and telegraph companies specifically set forth in certain designated sections of their Uniform System of Accounts.
Apparently, however, other businesses which own and operate equipment “comparable to” this exempt telephone and telegraph property and which is taxable as “telephone appurtenances” under section 102(12)(d) of the Real Property Tax Law are of the opinion that their equipment should also be entitled to the exemption provided by section 470. Based on our previous discussion of “terms of art” and the requirement that exemption statutes be strictly construed, it is our opinion that the fact that other businesses (e.g., cable television companies, burglar and fire alarm agencies, and the like) may have “comparable” property or property which “serves a similar function” to the telephone and telegraph equipment exempt under section 470 does not make the property of such other businesses exempt. That is to say, that since the “terms of art” used in section 470 in their technical sense relate to certain equipment of the telephone and telegraph industry per se, rather than property of communications systems in general, the exemption is limited to the former property and is not available to make similar equipment in related fields partially exempt.
This conclusion is further buttressed by the fact that under section 102, subdivision 12(d) of the Real Property Tax Law, much of this related equipment of businesses in the field of communications systems (e.g., cable TV, and burglar and fire alarm companies) has been held to be taxable real property as “telephone and telegraph . . . appurtenances.” (emphasis added) Had the Legislature intended to make this related equipment exempt under section 470 it could have used language similar to that found in section 102, subdivision 12(d) since the latter section has taken on a well-known and generally accepted definition which applies generally to communications systems’ equipment “appurtenant to” telephone and telegraph equipment.
New York case law, prior to the enactment of section 470, had determined that “telephone and telegraph . . . appurtenances” included:
(a) central office equipment of a telephone company (see, Matter of New York Telephone Co. v. Ferris, 257 App.Div. 415, 13 N.Y.S.2d 359, aff’d w/o, 292 N.Y. 667, 26 N.E.2d 805);
(b) station apparatus (station equipment), station installations (station connections) and private branch exchanges of a telephone company (see, Matter of New York Telephone Co. (Canough) 264 App. Div. 937, 36 N.Y.S.2d 263, aff’d, 290 N.Y. 537, 49 N.E.2d 997);
(c) switchboards and associated wiring in the central office of a burglar and fire alarm company together with drop lines and burglar alarms located on subscribers’ property (see, People ex. re. Holmes Electric Protective Co. v. Chambers, 1 Misc.2d 990, 125 N.Y.S.2d 436, aff’d, 285 App. Div. 886, 139 N.Y.S.2d 245, aff’d, 1 N.Y.2d 760, 135 N.E.2d 56, 152 N.Y.S.2d 304).
In addition, equipment comprising cable television systems has been and is currently being assessed and taxed throughout the State under this provision; and finally it is our understanding that several assessing units have been assessing as “telephone and telegraph . . . appurtenances” computer communication systems belonging to such non-9-A (Tax Law, Article 9-A) corporations as brokerage firms, banks, insurance companies and data processing firms.
It is an accepted maxim that all new laws are enacted with knowledge on the part of the lawmakers of the existence and scope of old laws (Davis v. Supreme Lodge. Knights of Honor, 165 N.Y. 159, 58 N.E. 591; see also, Erikson v. Helfand, 1 App. Div.2d 59, 147 N.Y.S.2d 157, aff’d, 1 N.Y.2d 775, 135 N.E.2d 586, 153 N.Y.S.2d 48; McKinney’s Statutes, § 17). In addition, the Court of Appeals has stated that the Legislature is charged with knowledge of the practical construction of a statute and that “its failure to interfere indicates acquiescence” (Engle v. Talarico, 33 N.Y.2d 237, 242, 306 N.E.2d 796, 351 N.Y.S.2d 677, 681). Therefore, we may assume that the Legislature was cognizant of case law and administrative determinations relating to the taxability as “telephone and telegraph . . . appurtenances” of equipment of cable television companies, data processing firms, and like businesses, prior to its enactment of section 470. Thus, it is logical to conclude that the Legislature did not intend to make exempt under section 470 all property which had previously been held to be taxable real property as “telephone and telegraph . . . appurtenances” as that phrase has come to be understood in section 102, subdivision 12(d). Had they so intended, it is our opinion that they would have used the phrase under which such property has been held taxable. The reasoning by the lower court in Chamberlain v. The Western Transportation Co., 45 Barb., at 222, in contrasting related phrases in a federal statute, appears most apropos in our case:
The manner in which the different phrases are used, indicate the conviction . . . that there was a very clear distinction between them. If that had not been the case, and the same subject matter, only, had been intended to be described in all these sections, it is highly probable that the same term would have been repeated for that purpose. For in that way a greater degree of simplicity and uniformity would have been secured in the form as well as the substance of the law.
The intention plainly appears of distinguishing the subject expressed by one set of phrases, from those included within the others. (emphasis added)
It is likewise our conclusion that the Legislature, in not adopting the language of section 102, subdivision 12(d) in section 470, intended to limit the exemption granted thereby to telephone and telegraph equipment as described in the Uniform System of Accounts of the FCC (§§ 31.221 -31.234) and the PSC (§§ 221 - 234) prescribed for telephone and telegraph companies rather than extending it to similar equipment of companies in related fields of communications.
It is, of course, obligatory for any taxpayer who claims that section 470 applies to some of his property (whether such taxpayer is a telephone or telegraph company or a private individual) to satisfy the assessor that his property is telephone or telegraph equipment described in the aforementioned Uniform System of Accounts under one of the headings in those Accounts mentioned in section 470, viz., central office equipment, station equipment, station apparatus, station connections and private branch exchanges.
May 12, 1975