The sun., 1907-08-28
CAN'THAX SUBWAY FRANCHISE
justice Fits DEGJDES ~ FAVOR
or gNTERBOR ROt ON.
Holds That Road snd Franchise. Taxed NJ
~2A. 100000 Ibelon9 10 the Ctiy; That
the Lease u w, n special Franchise
and. ~ o. II. The Lease Not Taxable.


the Lease u Not n special Franchise
and. 10 o. IL. the Lease Not Taxable.
ALBASY. Aug Eff decision handed
down to-day by Supreme Court Justice
Fits is sustained by the higher courts
New York city will lose annually thousands
of dollars in special franchise taxes. The
opinion is in the case Df the marlborough
Rapid Transit Company against the State
Board Of Tax Commissioners 10 review
10y oertiorari the action Of the State COM
mission in tn king the lines OF the company In
the subway tunnels OF Manhattan and The
Bronx az special franchises
Justice Fits holds that there is no special
franchise to be assessed in such tunnels
In 1905 the State Tax Commission assessed
the special franchises OF the Interborough
Rapid Transit Company. which ia in pos
session Of the tunnels in New York city. at
Sa,OOO.OO0. The company appealed to the
courts objectinR TO the assessment. or any
assessment. on the ground that IL did not
have or hold any special franchise in the tun-
nels which was assessable. The case was
tried and submitted to Justice Fits year
ago.
Notwithsta ndng that the acuon was
pending. the State commission in 1906
fixed the value Of the companys special
franchises in the tunnels at $4,000, ,0OO
on account OF the various improvements
made to the lines during 1905 The Tax
Commission in 1907 fixed the value of the
special franchises at S2t 600. .O0O. $50. DOC. 900
in the Borough Of Manhattan and 81 900. 900
in the Borough of The Bronx.
During the first year of Mayor McClel-
lan's administration the tunnels and SUD
ways we're leased TO the marlborough
company for a period OF thirty-fve years.
In the agreement made between the two
parties H. was made to appear that IL was
the intention Of the city 70 exempt the
corporation from taxation. By success
sive tinkering with the rapid transit act
the corporation was allowed to escape
taxation. except on special franchises.
The company contended II is not vested
with a special franchise. its interest 10 the
road being contractural only. the interest
of a lessee Of the owner of the special
franchise. Therefore IT, should be exempt
from taxation by an express provision Of
the rapid transit act
Justice Fits says in his opinion.
The underground road which ia now
operated by the relator in this proceeding
was not operated under a franchise pur-
chased from the city. according to the
provisions Of the original act passed in
1891, hut under the provisions of a scheme
Of municipal ownership. Accordingly this
special franchise for the construction.
maintenance and operation Of a railway
and lease Of the same TO the relator ia q
grant and transfer Of this franchise. No
authority or power was lodged in the State
Board OF Tax Commissioners to assess the
same as a franchise. as the property of
the relator in this proceeding. The city of
New York is vested with the special fran
chise and owns the railroads. The relation
in the case is that Of the right OF possession
for a term of years under q contract or
lease. Ownership of the property to be
taxed is a condition precedent to the juris-
diction to tax. The determination OF the
State Board of Tax Commissioners ia
clearly erroneous.
In conclusion Justice Fits says:
II have reached the conclusion. first.
that the constitutional consents and fran
chises under which the underground rail-
way now operated by the relator was con-
structed and ia now being maintained and
operated are vested i'm and belong TO the
city OF New York; second. that the contract
and lease providing for the equipment.
maintenance and operation OF the railway
by the railroad Is not q special franchise
within the meaning of subdivision
third OF Section OF the tax law third
that even though it may be held that the
right exercised by the relator to operate the
railroad in question was a special franchise
the same Ia not taxable, as the interests Of
tion under Section 30 of the rapid transit
act as amended"
In order to get final determination on
the question Attorney General Jackson
will appeal