In its recent decision, the New Hampshire Supreme Court held that the City of Rochester may impose a real estate tax on Verizon New England, Inc. for licenses concerning the placement of, among other things, utility poles and related equipment along the public ways. The Verizon Court remanded the matter to the trial court for determinations whether: (1) the City’s tax is contrary to notions of equal protection under the rational basis test; and (2) Verizon can establish the burden of proving disproportionality.
In holding that Verizon’s licenses are subject to tax, the Supreme Court made several rulings and examined the language of RSA 72:23, I(b). It provides, in relevant part, the following:
All leases and other agreements, . . . which provide for the use or occupation by others of real or personal property owned by the state or a city . . . shall provide for the payment of properly assessed real and personal property taxes by the party using or occupying [the] property[.]
First, the Court concluded that it is immaterial whether Verizon’s use or occupation is public or private in nature for purposes of tax liability. In its decision, the Verizon Court stated: “[T]he legislature intended for leases and other agreements that permit the use or occupation of public property to include a provision requiring payment of properly assessed real estate taxes.”
Second, the Court determined that the City “owned” the public rights of way for purposes of RSA 72:23, I(b). Although the legislature did not define “own,” the Court looked to other laws regarding public ways for guidance. Interpreting RSA 72:23, I(b) in harmony with the overall statutory scheme, the Court concluded that it was not necessary for the City to hold title to the pubic ways in fee simple for the imposition of a tax. “[T]he legislature intended for [only a qualified property interest] to be sufficient to allow a city to impose real estate taxes on a user or occupier of the public ways.”
Third, the Court stated that, for purposes of tax liability, it was irrelevant whether Verizon only possessed an intangible right to use the public ways, as opposed to an interest in the occupation. The Court noted: “[W]hatever rights were conferred by the license agreement, the statute subjected those rights to properly assessed real estate taxes.”
Fourth, the Court rejected Verizon’s argument that “because the public ways have no fair market value, its use of the public ways cannot be properly assessed.” As the Court previously held in Public Service Co. v. New Hampton, 101 N.H. 142, 146 (1957): “[I]t is plain that to hold there is no market value in such instances would mean that valuable property would entirely escape its just share of the burden of taxation. Such a policy would make neither good law no ‘good sense.’”
Fifth, the Court stated that RSA 231:163 (1993) allowed the City to change the terms and conditions of any license in the interests of the public good. The test for whether an act is in the public good is whether: “[I]t is not forbidden by law and is to be reasonably permitted under all of the circumstances.”
Although the Court held that the City may assess a real estate tax on Verizon’s leases, it remanded the matter to the lower court for certain determinations. Verizon asserted that RSA 72:23 and the City’s tax treated Verizon differently from other utilities such as gas, cable, and electric companies, and, as such, the tax violated its right to equal protection. The Court instructed the lower court to “apply the rational basis test to determine whether the statute rationally relates to a legitimate government interest. In applying the rational basis test, the trial court may properly consider whether differences between the utilities justify varying treatment by the legislature.”
Finally, the Court concluded that the lower court improperly granted, in part, Verizon’s petitions for abatement. The lower court concluded that the City failed to follow a recognized methodology in determining the market value of Verizon’s use of the land for its pole licenses. However, the Verizon Court noted that “disproportionality, and not methodology, is the linchpin in establishing” entitlement to a petition for abatement—i.e., a taxpayer must establish that his or her property is assessed at a higher percentage of fair market value than the percentage at which property is generally assessed in the town.