CHAPTER XVII.

TEMPORARY PROVISIONS FOR CREDITING CORPORATIONS WITH PERSONAL TAXES PAID IN 1917 AND 1918.-SCHOOL TAXES.

Temporary provisions.-The intent to relieve corporations paying the income tax from assessment of personal property and on their capital stock as it was expressed in the Act of 1917, presented obscurity in its application because of difference between the various taxing districts as to the beginning and the end of the fiscal year. The income tax is payable in advance each year on a report made as of November 1, as to the income of the previous year. Under the General Tax Law, assessment rolls outside of New York City are made up before August, closed in September, then equalized by the County Board of Supervisors, and the collector's warrant is by Section 59, to be attached on or be fore December 15th, or some other date not later than April 15th, if the latter date be adopted by a special resolution of the Board of Supervisors. Speaking generally, there are tax districts in which the tax year runs not only from July to July, but from every month between January and December. By Section 27, corporations must report as to their capital stock paid in on June 1st, or within 30 days afterward. The new law took effect at once on its approval by the Governor on June 4th, 1917, and in making up assessment rolls between then and August 1st, 1917, assessors outside of New York City had before them corporation reports which prematurely claimed immunity from personal payment to be made January 1st, 1918, in advance for the year beginning November 1st, 1917. The claim was of immunity from a personal property tax for 1917 not then completely assessed or due and was based on an income tax for the year beginning November 1st, 1917, not payable until January 1st, 1918. Amendatory legisla

tion added to Section 219-j of the law by Chapter 271 of the Laws of 1918, sought to cure the confusion so created. There was a serious question as to the constitutionality of the 1917 Act in denying to corporations taxed for the same year the equal protection of the law.

The amendment excepted from the immunity from the personal tax, levies for the fiscal year ending December 31st, 1917, in taxing districts in which the calendar year and the tax year are the same, i. e., "coterminous." In districts in which local taxes are levied for a twelve-month beginning in 1917 and ending in 1918, corporations taxable under Article 9-a are not to be assessed on any personal property or capital stock except the levy for the year 1917-1918. It was also provided by the amendment that corporations omitted from the assessment rolls in 1917, through prematurely crediting them with an income tax which they expected to pay for the year 1918, should be restored to the rolls and be taxed on the valuation of their omitted property at the rate per cent., levied on property generally listed on the roll.

Provision is made for five days' notice as to valuation of omitted property, and for an opportunity to be heard. The taxes thus put back on property omitted prematurely from the assessment rolls made up in the summer of 1917, "shall be deducted from the aggregate of taxation, otherwise to be levied on such taxing, for the current year, before such tax is levied." In other words, the town, village and city authorities are to deduct from the 1918 levy the amount of taxes corporations would have been assessed if they had not been omitted prematurely from the rolls.

The amending act not only confers authority on the assessors to place on the assessment rolls personal property of corporations omitted, but specific authority to make a retroactive tax levy on the omitted property is given and to make assurance thoroughly certain it is declared that the amended law shall be read and interpreted as though the amendment were in the act when it was passed in 1917. There is thus a difference from the general authority given assessors to place omitted property on the assessment roll in the following year at the valuation made or to be

made for the preceding year under Tax Law Section 34. That section applied to corporations (People ex rel. Brooklyn City Railroad v. Assessors of Brooklyn, 92 N. Y. 430); but it did not authorize assessment of omitted property without notice or after completion of the roll of the current year. Overing v. Foote, 65 N. Y.

263.

The case where corporations begin paying income taxes on January 1st, 1918, but are still assessed on personal property and capital for a tax covering some portion of the year 1918, is provided for by the amending legislation of 1918.

The Act of 1917 provided that the obligation to pay taxes on personal property or capital stock assessed in 1916, and in 1917, before the act took effect, whether payable in that year or not, should not be impaired, and the omission to mention specifically assessments after June 4th, 1917, no doubt led to omission from the assessment rolls.

The amended act drops the phrases "after this act takes effect, manufacturing and mercantile corporations shall not be assessed on any personal property," etc., and "after this act takes effect manufacturing and mercantile corporations shall not be assessed or taxed on their capital stock as provided for in Section 12 of this chapter."

In their place, is substituted a clearer expression of intent. The phrasing is now: "After this article takes effect, corporations taxable thereunder shall not be assessed on any personal property or capital stock, except for taxes levied for the fiscal year ending December thirty-first, nineteen hundred and seventeen, in taxing districts in which the fiscal year is coterminous with the calendar year, and where taxes are required by law to be levied for local purposes for a fiscal year beginning in nineteen hundred and seventeen and ending in nineteen hundred and eighteen."

The amending act substitutes the phrase "as specifically provided for in this section whether such taxes have been or may hereafter be assessed" for the confusing expression of the act as passed in 1917. The only personal tax assessment now specifically provided for in Section 219-j refers to those made for a year ending

with 1917 or made in 1917, and covering a period lapping over into 1918.

As the law now stands, a corporation which shall submit to the Tax Commission, proof that it has paid a tax on its personal property to local assessors for a tax period covering any part of the year ending December 31st, 1918, will be entitled to credit to that extent on account of its income tax payment. The credit can be assigned to another corporation. Such credits are to be deducted from the apportionment made to the same locality for local purposes from the revenue derived from the income tax.

Comptroller may refund under 1919 law. Chapter 138 of the Laws of 1919 omitted the last paragraph of Section 219-j. This paragraph had reference to the administrative features for charging or crediting taxes against the various taxing districts of the State. There was added to this section in lieu of the omitted paragraph, the following:

Upon receipt of notice from the tax commission of any credit under this article the comptroller may refund to the corporation, out of the current revenues in his hands received under this article, the amount of such excess paid by the corporation, without interest, and shall charge the amount or amounts of such excess against the state treasury and the taxing district or districts in the proportions that such excess was originally credited or paid. In case the amount of current revenues credited to any taxing district under this article is not equal to the charge against any such taxing district on account of such refund, further revenues credited to such taxing district shall first be applied by the comptroller to the liquidation of such charge.

Payment of personal taxes for the year 1917-18 is not a contract with the State.-In the City of Buffalo, personal tax assessments were made for the fiscal year beginning July, 1917, and ending July, 1918. Under the reading of Section 219-j, as it existed in 1917, corporations thus assessed were entitled to a credit on their franchise tax payments by virtue of Section 219-j of Chapter 726 of the Act of 1917, in the full amount of the personal property tax paid.

After the amendment to Section 219-j in 1918, by which corporations were only entitled to a credit "for the amount of such

part of the taxes so paid locally as the portion of the year nineteen hundred and eighteen for which such taxes shall have been paid bears to the entire calendar year," a Buffalo corporation claimed that its payment of taxes in 1917 for 1918 was in the nature of a contract with the State of New York, and that the amendment of 1918 was invalid insofar as it attempted to interfere with or impair the obligation of this contract. Upon application by the Iroquois Door Company of Buffalo, for a credit for the franchise tax assessed and determined against it by the State Tax Commission under the provisions of Section 219-j, Article 9-a of the Tax Law, for the year beginning November 1st, 1917, on account of taxes paid locally on personal property, the Tax Commission having considered the facts on the application, determined that this corporation was entitled to a credit of only onehalf of the taxes paid by it for city purposes for the fiscal year of the City of Buffalo ending June 30th, 1918. Thereafter, the Iroquois Company appealed to the Appellate Division of the Supreme Court and by unanimous decision, the court sustained the Tax Commission. Judge Cochran, in writing the opinion in People ex rel. Iroquois Door Co. v. Knapp, 173 New York Supplement, 641, said:

"I can discover no element of a contract in the Act of 1917. Such legislation was not personal to the relator. It was part of the General Tax Law of the state. Its provisions were applicable to all corporations falling within its purview. The state, by that legislation was not entering into a contract with the relator or any other corporation. It was merely exercising its taxing power. Inadvertently, an unjust discrimination in the matter of taxation was made in favor of the relator and certain other corporations. When it was discovered that an unfair discrimination had been made in favor of the relator and other corporations, such unfairness was corrected by the Act of 1918. I do not see that it makes any difference whether or not the relator had in the meantime paid the franchise tax contemplated by the Act of 1917. Unless there was a contract with the relator, which very clearly there was not, the state, by virtue of its taxing power, could correct a manifest injustice and prevent the relator from escaping in part a single taxation, which was the effect of the Act of 1917 as applied to the relator. The relator has given up