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Volume 4 - Opinions of Counsel SBEA No. 81

Opinions of Counsel index

Real property, definition of (hydroelectric plant machinery and equipment) - Real Property Tax Law, § 102(12)(e):

All machinery and equipment located in a hydroelectric plant used to generate electricity which is affixed to the land or building is taxable real property.

Our opinion has been requested concerning the taxable status of a hydroelectric plant which an electric company proposes to erect in a town.

The plant will consist primarily of turbines and generators installed in buildings or on land owned by the company. These generators will be activated by water which has been taken from a river, pumped to the top of a mountain through a tunnel and released to fall down through the tunnel at peak periods to generate electricity for distribution to its customers. The specific question is what equipment and machinery in the plant will be real property for taxation purposes.

It is our opinion that under New York case law all of the machinery and equipment located in the hydroelectric plant used to generate electricity which is affixed to the land or building will be taxable real property. It is our belief that two cases clearly establish this principle. The cases are Herkimer County Light and Power Co. v. Johnson, 37 App. Div. 257, 55 N.Y.S. 924 and People ex rel. New York Edison Co. v. Wells, 135 App. Div. 644, 119 N.Y.S. 1057, aff’d, 198 N.Y. 607, 92 N.E. 1097.

In the first cited case, the Herkimer case, the court held that machinery and equipment owned by a power company installed in leased buildings used to generate electricity or manufacture gas for distribution to customers throughout the city was taxable real property. The rationale of the court was “that the language in the third subdivision of section 2 of the Tax Law above quoted [now Real Property Tax Law, § 102(12)(e)] that ‘all mains, pipes and tanks laid or placed in, upon, above or under any public or private street or place for conducting . . . electricity or any property, substance or product capable of transmission or conveyance therein or that is protected thereby,’ must be deemed applicable to machinery used in connection with the mains for generating and sending forth electricity on the lines, or through the mains.”

The second cited case above, the New York Edison Co. case, sets forth in some detail the particular machinery and equipment held to be realty:

As to the propriety of assessing the machinery as real estate, the court found the following facts, which are amply supported by the evidence:

“That said building, with its appurtenances, was erected and planned for the purpose of producing electricity for distribution to relator’s customers; that all the electrical and mechanical machinery and apparatus in said building on said date was designed for said building and was necessary for the purposes for which said building was erected and the said machinery was installed, to wit, the production of electricity by relator for distribution to its customers; that all of said machinery and apparatus was installed in said building upon foundations specially built for that purpose and was installed for the avowed purpose of having the most efficient plant that could be produced; that all said machinery and apparatus on said date was actually attached to and had become part of said building and the freehold, and was being used for the aforesaid purposes of the relator on said date; that all of said machinery and apparatus in the building constituted a complete plant for the production of electricity; that the land and building was the property of the relator on said date; . . . that all of said machinery and apparatus was placed in the building with the intention that it should remain there until worn out or superseded by other machinery.”

The taxable quality as real estate of machinery thus circumstanced is now well settled. Tax Law (chapter 908, p. 796, Laws 1896) § 2, subd. 3., as amended by Laws 1899, p. 1589, c. 712; People ex rel. Manhattan Ry. Co. v. Wells, 122 App. Div. 921, 107 N.Y.Supp. 1141, affirmed 192 N.Y. 566, 85 N.E. 1114; Herkimer County Light & Power Co. v. Johnson, 37 App. Div. 257, 55 N.Y.Supp. 924; People ex rel. National Starch Co. v. Waldron, 26 App. Div. 527, 50 N.Y.Supp. 523; Detroit United Railway v. Board of State Tax Commissioners, 136 Mich. 96, 98 N.W. 997. There are very many other decisions which illustrate and determine the principles upon which the foregoing authorities rest. . . .

Secondly, we are asked to give our opinion as to whether any property installed in the town in connection with the plant will constitute special franchise property assessable by the State Board. We would assess any tangible property situated in, under, above, upon, or through any public street, highway, water or other public place together with the value of the franchise or permission to place it. For example, if electrical lines or cables are placed under the river, in all probability this property would be considered special franchise property. After the plant and ancillary facilities are erected, we should be able to tell more specifically which items, if any, constitute special franchise property.

April 12, 1974