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March 30, 2017

Fiber Optic Cable is not Taxable Real Property in New York: Appellate Division, Fourth Department Follows First and Third Department Holdings

The Appellate Division, Fourth Department has followed the First and Third Departments finding fiber optic cable is not taxable real property. With three of the four Appellate Divisions so holding, this has pragmatically and definitively determined the issue for fiber optics located in private property in New York State. In Matter of Level 3 Communications, LLC v. Chautauqua County, et al, ___A.D.3d___, 2017 NY Slip Op 1199 (4th Dep't March 24, 2017), the Fourth Department reversed the lower court and agreed with Level 3 Communications that its fiber-optic installations are not taxable under Real Property Tax Law 102(12)(f) which defines real property as including apparatus and equipment ""¦used for the distribution of"¦light." Fiber optic cables transmit light to a receiver that decodes the light into electronic signals which are then sent to a television, computer or other device. The Court distinguished between "distribution" and "transmission" finding the definition of distribution to imply an apportioning of something more or less to an appropriate person or place. Fiber optic cable transmits light signals from one end of a network to the other resulting in the distribution not of light but, rather, data. The 4th Department's rationale followed that of the Third Department in matter of Level 3 Communications, LLC v. Clinton County, 144 A.D. 3rd 115 (3d Dep't 2016). The First Department in Matter of RCN N.Y. Communications, LLC v. Tax Commn. of the City of N.Y., 95 A.D.3d 456 (1st Dep't, 2012), lv. denied 20 NY3d 855 (2012), came to a similar conclusion applying RPTL 102 (12) (i) and distinguishing fiber optic installations from electrical conductors. These decisions from the First, Third and Fourth Departments conclusively resolve the status of fiber optic cable installations on private property as not constituting taxable real property in New York.

As all three of these cases involved fiber optic cable located on private property, the issue remains whether fiber optic cable located on public property should be treated as not taxable. RPTL 102 (17) defines special franchise property as conduit and wires used for "conducting" light and historically referenced street lighting systems. Despite the First Department in Matter of RCN N.Y. Communications observing that the Petitioner was not objecting to the assessment of its special franchise fiber optic cable on public property, the Level 3 Communications, LLC cases provide an added impetus to the argument such property should not be treated as taxable and whether in the public right-of-way or private property the transmission or conduction is not of light, but rather, data.

Finally, the Fourth Department denied Level 3's claim for refunds under RPTL 556 because it did not object to the taxes at the time of payment and affirmed the lower court judgment dismissing is petition. Absent the property owner having paid the tax bills under protest at the time of voluntarily remitting payment, it has no claim under RPTL 556 for a refund of the monies paid despite the municipality having unlawfully imposed the tax.

Should you have questions regarding the information presented in this alert, please contact Mark R. McNamara, Chair of the firm's Real Property Tax and Condemnation Practice Area, at (716)566-1536 or


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