Fonda, Johnstown & Gloversville Railroad v. State Tax Commission , 3 A.D.2d 178 ( 1957 )

Coon, J.

Petitioner is a New York corporation which operates a steam railroad wholly within this State between Fonda and Broadalbin, New York. During all of the time between July 1, 1951 and February 28, 1953 (the period involved in this controversy) and prior thereto, petitioner also operated omnibus lines wholly within this State, using 45 omnibuses, each having a seating capacity of more than 7 passengers.

Respondent (hereinafter called “ Tax Commission”) has imposed a 2% tax against petitioner for the above period upon the gross operating income of its intrastate omnibus operations under section 186-a of the Tax Law. The tax was paid under protest, and, upon application for a refund, a hearing was held and the Tax Commission made a determination denying the refund. This proceeding is to review that determination. The facts at the hearing were undisputed, and only a statutory construction question is presented.

Section 186-a of the Tax Law was enacted in 1937 (L. 1937, eh. 321) and imposed a tax on the utilities therein defined of 2% on the gross income ( if the utility is subject to the supervision of the State Dept. of Public Service) or on the gross operating income (if not subject to such supervision). Steam railroads were excluded from the definition of ‘ ‘ utility ’ ’ and were therefore not subject to the tax.

The Tax Commission concedes that petitioner was not subject to the tax imposed by section 186-a prior to July 1,1951 although its operations, including the omnibus lines, were substantially the same as thereafter, because of its status as an exempt steam railroad. The entire operation was treated as one unit, exempt from the tax, and petitioner contends that this same situation should prevail during the period involved here, despite some changes in the law.

Now two amendments to section 186-a enter the picture. An amendment in 1941 (L. 1941, ch. 137) imposed the tax upon activities defined as a utility “ regardless of whether such activities are the main business of such person or are only incidental thereto. ’ ’ Then in 1951, leaving the above amendment intact, the Legislature further amended section 186-a (L. 1951, ch. 601), by creating a new, separate and distinct utility consisting of the operation of ‘ ‘ one or more omnibuses having a seating capacity of more than seven passengers.” We then have subdivision 2 of section 186-a, effective July 1,1951, reading, insofar as pertinent, as follows: “2. As used in this section, (a) the word ‘ utility ’ includes every person subject to the supervision of the state department of public service, except persons engaged in the business of operating or leasing sleeping and parlor railroad cars or of operating railroads other than street surface, rapid transit, subway and elevated railroads, and also includes every person (whether or not such person is subject to such supervision) engaged in the business of operating one or more omnibuses having a seating capacity of more than seven passengers * * * regardless of whether such activities are the main business of such person or are only incidental thereto, or of whether use is made of the public streets ”.

The real question presented is whether under that statutory language- the intrastate omnibus operations of petitioner constitute a separate taxable “ utility ” irrespective of the exemption from the tax of its railroad operation.

The Tax Commission argues that as the statute read during the period in question, with the two amendments mentioned included, it was authorized to treat the omnibus operations of petitioner as an entirely separate utility and treat the two operations of petitioner as two separate and distinct activities, one taxable and one not. By the same theory of separation, the omnibus operation was regarded as falling within the category subject to taxation on “ gross operating income.”

Petitioner argues that, in the light of the historical background of the two amendments, they were enacted for á specific purpose and that the Legislature did not intend to change petitioner’s complete exemption. However, the legislative language so clearly and unambiguously covers petitioner’s situation and imposes the tax on one branch of its business, that we need not and may not resort to other means of interpretation. (Meltzer v. Koenigsberg, 302 N. Y. 523.)

It may well be that the 1941 amendment was prompted by a Court of Appeals decision that submetering of electricity by an apartment house owner was not subject to the tax because it was incidental to the main business of operating an apartment house. (See Matter of 339 Central Park West, Inc., v. Graves, 260 App. Div. 265, affd. 284 N. Y. 691, and Matter of Lacidem Realty Corp v. Graves, 288 N. Y. 354.) It may be that the 1951 amendment bore some relation to a holding that the State could tax the intrastate business of an interstate omnibus line. (See Greyhound Lines v. Mealey, 334 U. S. 653.) Nevertheless, that which prompts legislative action does not limit it. Once legislative attention is directed to a subject, the field subsequently included must be determined by the language of the act as it is finally enacted into law.

If we were to indulge in speculation as to the purposes of legislation, it is quite probable that the reason steam railroads were exempted from the tax in the first place was that they were already adequately taxed by other taxes upon their self-owned and maintained road beds, stations and other facilities. By the same token it is quite probable that the principal reason for expressly making omnibus lines subject to the tax was their use of publicly constructed and maintained highways for profit.

If petitioner’s argument were carried to its logical conclusion it would be theoretically possible, to use an extreme example, for a corporation to operate a vast system of omnibus lines covering every city in the State and escape the tax on omnibus lines because it also owned a small steam railroad.

We think the Tax Commission was correct in its interpretation of the law since 1951, and that it was not only authorized but was mandated to impose the tax in question. If the Legislature did not intend to include petitioner’s omnibus operations, it has had ample opportunity to change its broad language since this controversy arose. It still may do so, and petitioner’s remedy, if it is being wrongfully taxed, is by legislative action rather than by strained judicial interpretation.

There are many collateral ramifications to petitioner’s argument which we have carefully considered but deem unnecessary to discuss here.

The determination should be confirmed.