New York Law Review

Tag: Taxable Real Property

  • Metromedia, Inc. v. Tax Commission of the City of New York, 60 N.Y.2d 85 (1983): Determining Taxable Real Property Status of Advertising Displays

    Metromedia, Inc. v. Tax Commission of the City of New York, 60 N.Y.2d 85 (1983)

    For real property tax purposes, advertising display signs affixed to real property can be considered taxable real property if they are annexed to the property, adapted to its use, and intended as a permanent accession.

    Summary

    Metromedia, Inc. challenged the real property tax assessment on advertising display signs attached to elevated railroad superstructures. The court determined whether these signs constituted taxable real property. The Court of Appeals reversed the lower court’s decision, finding that the signs met the common-law definition of a fixture, being annexed to the property, adapted to its use, and intended as a permanent accession. The court emphasized Metromedia’s dominion and control over the signs, including the right to install, maintain, and amortize them, solidifying their status as taxable real property. The case was remitted for a hearing on the issue of overvaluation.

    Facts

    Metromedia had a franchise agreement with the New York City Transit Authority to construct and lease outdoor advertising displays on elevated railroad stations. The company constructed over 100 advertising display signs, with 33 located in The Bronx being the subject of the dispute. These displays consisted of a plywood sign face attached to a steel frame, which was connected to the “El” superstructure via welded metal plates and bolts. Electrical connections ran through the superstructure to illuminate the signs. The agreement stipulated that Metromedia was responsible for the signs’ construction and maintenance and would pay the Authority a percentage of its advertising income. The Authority had the option to acquire the frames at the end of the franchise term.

    Procedural History

    The City of New York assessed the 33 displays as taxable real property. Metromedia initiated proceedings to review these assessments, arguing the signs were personal property. Special Term granted summary judgment to Metromedia, vacating the assessments. The Appellate Division reversed, reinstating the assessments. Metromedia appealed to the New York Court of Appeals.

    Issue(s)

    Whether advertising display sign frames affixed to an elevated railroad superstructure constitute taxable real property under Section 102(12)(b) of the Real Property Tax Law.

    Holding

    Yes, because the sign frames satisfy the common-law definition of a fixture, being annexed to the real property, adapted to its use, and intended as a permanent accession, and because Metromedia exercised sufficient dominion and control over the signs.

    Court’s Reasoning

    The court applied the common-law definition of a fixture to determine whether the sign frames were taxable real property. This definition requires that the personalty (1) be actually annexed to real property or something appurtenant thereto; (2) be applied to the use or purpose to which that part of the realty with which it is connected is appropriated; and (3) be intended by the parties as a permanent accession to the freehold. The court found that the signs were annexed to the superstructure via welded metal plates, served the common use of advertising, and were intended to be permanent during the franchise agreement. The court emphasized that Metromedia had the right to install, maintain, and amortize the signs, held an insurable interest in them, and bore the risk of their operation. Quoting from the opinion, “[A] finding of such an interest is justified where that party exercises dominion and control over the property.” These factors demonstrated sufficient dominion and control, distinguishing this case from situations where the attachment is temporary or easily removable. The court noted that the parties structured their interests so that Metromedia held a taxable interest in the frames, even though the Authority owned the underlying real property. This case illustrates the importance of examining the practical realities of property ownership and control when determining tax liability. It also reflects the principle that parties can structure their property interests separately for tax purposes, provided that the party deemed to have a taxable interest exercises sufficient dominion and control over the property in question.

  • City of Lackawanna v. State Bd. of Equalization, 16 N.Y.2d 222 (1965): Defining Taxable Real Property for Manufacturing Corporations

    City of Lackawanna v. State Bd. of Equalization, 16 N.Y.2d 222 (1965)

    Under New York’s Real Property Tax Law, large industrial structures like blast furnaces and coke ovens are generally considered taxable real property, not exempt movable machinery, even if machinery is essential to their operation, unless the legislature clearly intends an exemption.

    Summary

    The City of Lackawanna challenged the State Board of Equalization’s decision to include $119,536,300 worth of Bethlehem Steel plant property in the city’s taxable real property assessment. The property in question included blast furnaces, open hearth furnaces, coke ovens, soaking pit furnaces, a by-products plant, electrical and steam properties, and ore bridges. The key issue was whether these items qualified for a tax exemption as “movable machinery or equipment” under the Real Property Tax Law. The Court of Appeals held that the large furnace and oven structures were taxable real property, emphasizing that tax exemptions are narrowly construed and that the legislature did not intend to create a new exemption for such structures. The court modified the lower court’s order regarding piping and pumps, deeming them taxable as well.

    Facts

    Bethlehem Steel operated a large plant in Lackawanna, New York. The State Board of Equalization increased the city’s equalization rate by including property at the Bethlehem plant that the city had not considered taxable real property. The contested properties included seven blast furnaces (averaging 150 feet in height), 35 open hearth furnaces, 459 coke ovens, 95 soaking pit furnaces, a by-products plant, electrical and steam properties, and ore bridges. These structures were substantial masonry and steel constructions resting on heavy concrete foundations, generally considered immovable. The city argued these items should be considered exempt from real property tax.

    Procedural History

    The City of Lackawanna initiated an Article 78 proceeding challenging the State Board of Equalization’s determination. Special Term and the Appellate Division largely upheld the Board’s decision, although they disagreed on some smaller valuation items. The City appealed to the New York Court of Appeals, challenging the classification of the Bethlehem Steel plant property as taxable real property.

    Issue(s)

    1. Whether the blast furnaces, open hearth furnaces, coke ovens, and soaking pit furnaces constitute taxable real property or exempt “movable machinery or equipment” under Section 102(12)(f) of the Real Property Tax Law.
    2. Whether the by-products plant and electrical/steam properties constitute taxable real property under Section 102(12)(f) of the Real Property Tax Law.

    Holding

    1. Yes, the blast furnaces, open hearth furnaces, coke ovens, and soaking pit furnaces are taxable real property because they are substantial structures, permanently affixed to the land, and the legislative intent was not to create a new exemption for such items.
    2. Yes, the by-products plant’s tanks and towers, as well as the electrical and steam properties, constitute taxable real property because they fall under the category of “equipment for the distribution of heat, light, power, gases and liquids.”

    Court’s Reasoning

    The Court reasoned that the furnace and oven structures, due to their size and permanent annexation to the land, would traditionally be considered real property. The court then analyzed the Real Property Tax Law § 102(12)(f), which exempts “movable machinery or equipment” used for trade or manufacture. The Court emphasized that the legislature intended this provision to be a continuation of prior law without any substantive change. Citing Section 1602(5) of the Real Property Tax Law, the court noted the legislature’s explicit intent to maintain the existing classification of property. The court highlighted that prior law specifically excluded “equipment consisting of structures or erections to the operation of which machinery is not essential” from the personal property exemption, meaning such equipment remained taxable real property. The court stated that the transposition of language in the recodification was not intended to create a new exemption. The court also invoked the principle that tax exemptions are strictly construed against the party claiming the exemption. “Tax exemptions * * * are limitations of sovereignty and are strictly construed. If ambiguity or uncertainty occurs, all doubt must be resolved against the exemption.” Therefore, the court held that the large furnace structures did not fall within the “movable machinery” exemption. Regarding the by-products plant and electrical/steam properties, the court found they fell within the taxable category of “equipment for the distribution of heat, light, power, gases and liquids”.