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applicable to the one as to the other, the return is sufficient for all practical purposes. People ex rel. N. Y. C. & H. R. R. R. Co. v. Sullivan (1912), 77 Misc. 535, 138 N. Y. Supp. 48.

Subd. 4. Matters of Practice.

(Fiero, Spec. Pro., 3rd Ed., pp. 1941-1943.)

On certiorari to review the assessment of a special franchise tax the court determines de novo the value of the franchise and may modify or refuse to accept a determination by the State Board of Equalization. People ex rel. Third Ave. R. R. Co. v. Tax Comrs. (1913), 157 App. Div. 731, 142 N. Y. Supp. 986, affd., 212 N. Y. 472. The court should reduce the assessment to the same percentage of valuation as has been followed generally with respect to the assessment of other real property on the same roll. But the inequality of the assessment can only be determined from the roll of that year and not by assessments made in prior years. People ex rel. Third Avenue R. R. Co. v. Tax Commissioners (1913), 157 App. Div. 731, 142 N. Y. Supp. 986.

There is a presumption that the assessment of a special franchise is correct, and it should not be overthrown without evidence that it is erroneous. People ex rel. N. Y. & R. B. R. Co. v. Tax Comrs., 157 App. Div. 496, 142 N. Y. Supp. 1139, affd., 209 N. Y. 599. The burden rests upon the relator to show satisfactorily that a wrong system of computing the value of the intangible part of a special franchise has been adopted, or that a proper system has been erroneously applied. People ex rel. N. Y. C. & H. R. R. R. Co. v. Priest (1912), 150 App. Div. 19, 133 N. Y. Supp. 1087, affd., 206 N. Y. 274.

By making a return to a writ of certiorari, submitting the questions involved to the court upon the merits, without objecting to the failure of the petition to allege the extent of overvaluation as required by section 290 of the Tax Law, the respondent waives the defect. People ex rel. N. Y. & R. B. R. Co. v. Tax Comrs. (1913), 157 App. Div. 496, 142 N. Y. Supp. 1139, affd., 209 N. Y. 599.

That the State Board of Tax Commissioners did not before filing returns, move to quash the writ of certiorari is a waiver of any defect in the petitions. People ex rel. L. I. R. R. Co. v. Bd. of Tax Comrs. (1918), 104 Misc. 234.

Upon certiorari to review the action of the State Tax Commission in assessing special franchises the relator is entitled to have considered evidence offered as to overvaluation and inequality. People ex rel. L. I. R. R. Co. v. Bd. of Tax Comrs. (1918), 104 Misc. 234.

Subd. 5. The Statute, How Construed and Applied.

(Fiero, Spec. Pro., 3rd Ed., pp. 1943-1949.)

A tax on special franchises is a tax on property and valid even where the corporation is engaged exclusively in interstate or foreign commerce. People ex rel. Commercial C. Co. v. Tax Comrs. (1917), 99 Misc. 532, 166 N. Y. Supp. 62.

So long as a railway company occupies the public streets with its tracks under color of right, it may not escape the payment of a special franchise tax therefor by alleging that it is a trespasser. People ex rel. East River T. R. v. Tax Comr. (1913), 79 Misc. 134, 140 N. Y. Supp. 722, affd., 146 N. Y. Supp. 112.

The Special Franchise Tax Act applies to railroads operated by steam, running across the State from one terminal point to another, and the crossings made by constructing such railroads across streets already in existence. People ex rel. N. Y. C. R. R. Co. v. Woodbury (1911), 203 N. Y. 167.

It is the duty of the court to reduce the assessment of a special franchise to correspond with the percentage of the assessment of real property in the tax district in which the special franchise is assessed to its actual value. People ex rel. N. Y. C. & H. R. R. Co. v. Priest (1912), 206 N. Y. 274.

The object of the Special Franchise Tax Act is to tax railroad corporations for privileges granted them in the streets which they occupy on their lines of railway, and if, after they have their rights of way secured over private land, a public highway is laid across the tracks, while there is a crossing, it is not a crossing made by the railroad, or through public favor so far as the railroad is concerned, and hence is not liable to taxation as a special franchise. People ex rel. N. Y. C. R. R. Co. v. Woodbury (1911), 203 N. Y. 167; People ex rel. N. Y. & R. B. R. Co. v. Tax Comrs. (1913), 157 App. Div. 496, 142 N. Y. Supp. 1139, affd., 209 N. Y. 599; People ex rel. New York Central, etc., R. R. Co. v. Tax Comrs. (1917), 179 App. Div. 489, 165 N. Y. Supp. 970,

afd., 222 N. Y. 542. Additional lands acquired by a railroad company across streets laid out subsequent and adjacent to its right of way, upon which no structures have been erected, are not assessable as for a special franchise. People ex rel. N. Y. C. & H. R. R. R. Co. v. Woodbury (1915), 167 App. Div. 428, 153 N. Y. Supp. 537. Where a railroad company has possessed for many years a franchise to maintain and operate its railroad through a street, but for the purpose of eliminating grade crossings a subway for a street to pass under the railroad and two overhead bridges for two other streets to pass over the railroad were constructed, toward the cost of which structures the railroad company was compelled to contribute, such subway and overhead bridges are not subject to assessment for a special franchise tax as part of the tangible property of the company. People ex rel. N. Y., O. & W. R. Co. v. Tax Comrs. (1915), 215 N. Y. 434.

The crossing of canal lands by the tracks of a railroad company is a special franchise. People ex rel. N. Y. C. & H. R. R. R. Co. v. Woodbury (1915), 167 App. Div. 535, 153 N. Y. Supp. 541, affd., 216 N. Y. 651.

Authority given to a railroad company to construct and maintain a bridge over navigable waters is a special franchise liable to assessment and taxation. People ex rel. H. R. & P. C. R. R. Co. v. Tax Comrs. (1915), 215 N. Y. 507.

The right of a railroad company, not in connection with its tangible property, but given solely by contract to operate cars over a bridge on tracks owned by a city, does not constitute a special franchise. Matter of New York Railways Co. (1916), 172 App. Div. 128, 158 N. Y. Supp. 237. Where a railroad company's right to use a portion of a street is not a public favor, but because of its ownership of an easement therein, acquired for a valuable consideration, pursuant to contract and legislative act, contemporaneously with the construction of the street itself, and as a part of a general scheme therefor, it is not taxable as a special franchise. People ex rel. Long Island R. R. Co. v. Tax Comrs. (1912), 148 App. Div. 751, 133 N. Y. Supp. 348, affd., 207 N. Y. 683.

Where a railroad crossed a canal and highway at an oblique angle, upon a continuous bridge, and not at the intersection of another street or highway, it was held, that under the Tax Law

as it stood in 1907 it was not lawful to assess as one special franchise the crossing of the canal and the contiguous crossing of the highway. People ex rel. N. Y. Central R. R. Co. v. Woodbury (1913), 208 N. Y. 421.

Tangible property included in a special franchise should be valued at the cost of reproduction less depreciation. People ex rel. N. Y. C. & H. R. R. R. Co. v. Woodbury (1915), 167 App. Div. 428, 153 N. Y. Supp. 537. Overhead bridges which are entirely unnecessary for the operation of a railroad, but which have been established and are maintained by it absolutely for the benefit of the traveling public, pursuant to statute, are not tangible property taxable as part of the special franchise. People ex rel. N. Y. C. & H. R. R. R. Co. v. Tax Comrs. (1917), 179 App. Div. 421, 166 N. Y. Supp. 25. A bridge owned by a railroad company over a river, the abutments of which are built upon lands owned by it in fee is not tangible property situated in, upon, under or above any street or highway, public place or public waters in connection with a special franchise and is not taxable as such. People ex rel. N. Y. C., etc., R. R. Co. v. Woodbury (1912), 206 N. Y. 304. The pavement which a street railroad corporation is obliged to construct and maintain between and near its tracks, under the Railroad Law, is not to be treated as tangible property of the corporation in assessing the value of its special franchise. People ex rel. B. & L. E. T. Co. v. Tax Comrs. (1913), 209 N. Y. 496.

A viaduct constructed by a railroad company pursuant to agreement with the town in which it is located, under which the cost was apportioned and the company undertook to pay for maintenance is part of the tangible property of the company, and taxable as part of the special franchise, although the public enjoy a joint right of user therein. People ex rel. B. & L. E. T. Co. v. Tax Comrs. (1913), 209 N. Y. 502.

Where a railroad company owns franchises necessary for the construction and operation of its railroad and for increased facilities, among which were franchises to construct and operate bridges carrying the tracks over certain highways, the mere fact that the work was not completed at the time of the assessment did not deprive the company of its franchises so as to prevent their assessment. People ex rel. N. Y. C. & H. R. R. R. Co. v. Tax Comrs. (1917), 179 App. Div. 489, 165 N. Y. Supp. 970, affd., 222

N. Y. 542. Where a railroad under construction under the Hudson river was uncompleted and it was uncertain whether it would be a profitable venture or otherwise, the structure is properly assessable under the Special Franchise Act at the cost of reproduction, but no assessment should be placed on the franchise. People ex rel. R. R. Co. v. Tax Comrs. (1911), 203 N. Y. 119.

Subd. 6. The Net Earnings Rule.

(Fiero, Spec. Pro., 3rd Ed., pp. 1949-1953.)

In ordinary cases, the net earnings rule is the best practical method that the taxing officers and the courts have as yet been able to evolve in order to arrive at the valuation of a special franchise. People ex rel. Third Ave. R. R. Co. v. Tax Comrs. (1914), 212 N. Y. 472; People ex rel. New York Cent., etc., R. R. Co. v. Priest (1912), 150 App. Div. 19, 133 N. Y. Supp. 1087, affd., 206 N. Y. 274. The term net earnings, means what is left of the gross earnings after the legitimate costs, expenses and deductions connected with and arising from the use of the property are paid. People ex rel. Third Ave. R. R. Co. v. Tax Comrs. (1914), 212 N. Y. 472.

The rule as to net earnings is to ascertain the gross earnings of the corporation and then deduct the operating expenses, together with the annual taxes paid. From the remainder there should also be deducted a fair and reasonable return on that portion of the capital which is invested in tangible property, the result becoming the net earnings contributable to the special franchise. People ex rel. Manhattan Ry. Co. v. Woodbury (1911), 203 N. Y. 231, modfg., 143 App. Div. 905, 127 N. Y. Supp. 1138.

It is proper, under the net earnings rule, to exclude from the earnings of a street railroad company the rental which it received from cars rented to subsidiary companies and to include in operating expenses payments by such a corporation for percentages of gross earnings and for car licenses, and also salary paid to a receiver, and the sum spent for the ordinary annual expenses for maintenance, renewals and repairs of equipment, machinery, appliances and structures, but the sum spent for replacements should not be so included, but should be deemed included in an allowance for depreciation. People ex rel. Third Ave. R. R. Co. v. Tax Comrs. (1914), 212 N. Y. 472.

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