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Volume 6 - Opinions of Counsel SBEA No. 121

Opinions of Counsel index

Real property, definition of (general) (equipment for the distribution of heat, light, power, gases and liquids) - Real Property Tax Law, § 102(12)(f):

Equipment used for the distribution of heat, light, power, gases, and liquids is real property, regardless of whether it is movable.

A corporation has challenged the assessment of its property, contending that the assessment includes “movable machinery or equipment” which is exempt under section 102(12)(f) of the Real Property Tax Law. The equipment in question is a compressor(s) used to pump gas in and out of storage wells.

The fact that particular equipment may be movable is not the only relevant factor to be considered in analyzing section 102(12)(f). That section is derived from former section 3 of the Tax Law and the Legislature specifically provided that the repeal of section 3 and its reenactment in section 102(12)(f) of the Real Property Tax Law was not intended to effectuate any change in the law. In subdivision 5 of section 2002 (formerly § 1602, as renumbered by chapter 39 of the Laws of 1973) it is stated that:

5. The repeal . . . of . . . the last two sentences of section three of [the Tax Law] and the re-enactment of the provisions thereof in [subdivision] twelve . . . of section [102] . . . are intended to effectuate a continuation and restatement without change in substance or effect, of the provisions of such laws and the classification of any property as real property or personal property, as the case may be, shall not be broadened, increased, discontinued, diminished, affected or impaired by reason of such re-enactment (emphasis added).

Therefore, the treatment of property for purposes of section 102(12)(f) of the Real Property Tax Law is wholly dependent upon the statute from which it was derived, that is, section 3 of the Tax Law. (The Court of Appeals emphasized this fact in City of Lackawanna v. State Board of Equalization and Assessment, 16 N.Y.2d 222, 212 N.E.2d 42, 254 N.Y.S.2d 528).

Section 3 of the Tax Law provided, in part as follows:

As used in this section, the term “personal property,” in its application to the property of corporations taxable under article nine-a of this chapter, shall include any movable machinery and equipment used for trade or manufacture and not essential for the support of the building, structure or superstructure, and removable without material injury thereto and shall not include boilers, ventilating apparatus, elevators, plumbing, heating, lighting and power generating apparatus, shafting other than counter-shafting, equipment for the distribution of heat, light, power, gases and liquids . . . (emphasis added).

Thus, section 3 of the Tax Law excluded from the definition of personal property any equipment used “for the distribution of heat, light, power, gases and liquids.” Such equipment is therefore to be classified as real property, regardless of whether it is movable. As the Court of Appeals noted in the City of Lackawanna case, “paragraph (f) of subdivision 12 may not be read as extending or affecting the scope of the exemption previously provided by section 3” (16 N.Y.2d at 229).

Therefore, if the compressors are used for the distribution of “heat, light, power, gases and liquids,” they are real property, even if they are movable.

July 16, 1979

NOTE: A recent opinion held that compressor station equipment belonging to an Article 9-A corporation whose functions consist of “receiving, storing, cleaning and returning natural gas” to an interstate pipeline is “exempt from real property taxation” (Honeoye Storage Corp. v. Board of Assessors, Index No. 59507, Sup.Ct., Ontario Co., March 14, 1980, appeal pending).

Updated: