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The New York Court of Appeals handed a victory to the state's municipalities in a decision Thursday that found certain equipment owned by telecommunications companies is taxable under the state's real property tax law, rejecting arguments from T-Mobile.

The court, in an opinion from Chief Judge Janet DiFiore, unanimously affirmed a decision by the Appellate Division, Second Department that will compel T-Mobile to pay property taxes on a series of large cellular data transmission installations in the city of Mount Vernon, though the decision has wide-ranging implications for similar arrangements in municipalities statewide.

John Nicolich, a partner at Ingram Yuzek Gainen Carroll & Bertolotti in Manhattan, represented T-Mobile in the matter. He declined to comment when reached by phone Thursday. An inquiry sent to T-Mobile on the decision was not immediately returned.

The litigation is one case of several brought by T-Mobile and Level 3 Communications, another telecommunications company, against municipalities statewide over the same issue. T-Mobile has other cases against New York City, Nassau County and the village of Scarsdale in Westchester County. Level 3 has cases against Erie County, Chautauqua County, Albany County and school districts in those regions over the same complaint.

Michael Risman, a partner at Hodgson Russ in Buffalo who represented the city of Mount Vernon, said Thursday's decision will presumably set a precedent for the other cases currently being litigated over the issue.

“I think it has wide-ranging implications,” Risman said. “I'm very pleased with the decision and I think it's a victory for municipalities, towns, and cities throughout New York state, reaffirming that fiber optic telecommunication installations and cables are taxable real property in New York.”

Thomas Scapoli, an associate at Ingerman Smith in Westchester County, argued before the Court of Appeals for the Mount Vernon City School District, which was also sued by T-Mobile in the matter. He said beyond the other active litigation on the issue, the decision could empower uninvolved municipalities to collect property tax revenue on equipment that they previously had not considered.

“We're very pleased with the decision and I think it is going to have a really big impact on municipalities because it generates some taxable property that I think has really been untapped,” Scapoli said. “It hasn't been taxed by many assessors, so I think this is going to help develop some additional ratables by municipalities that haven't been accessed so far.”

Scapoli specializes in representing public, private and charter schools in legal matters, which he's done now for more than two decades. He's been at Ingerman Smith for eight years.

Risman focuses on municipal law at Hodgson Russ, which he joined after serving as corporation counsel for the city of Buffalo for a decade. He said his experience working for the city has helped him navigate what can sometimes be a complicated practice area like municipal law.

The decision from the Court of Appeals on Thursday, for example, referred to a series of changes to the state's real property tax law enacted by the state Legislature over the last half-century, as well as other court precedent.

The issue was over what can best be described as a series of large cabinets with antennas that house wiring and different kinds of cables, which run throughout the installation's components. They are blocked from public view by so-called 'stealth walls,' which largely shield them from being seen.

Those installations are attached to the exterior of buildings, whose owners T-Mobile signs multi-year leases with to occupy the space and maintain the installations.

The city and school district of Mount Vernon had decided to separately assess real property taxes on the equipment, which T-Mobile then disputed through a refund application. The company's request for a refund was rejected, which spurred the litigation.

T-Mobile argued that a section of the state's real property tax law should have made its installations tax exempt. That part of the statute was intended to phase out “equipment used to provide transmission or switching of electromagnetic voice, video and data signals” from those taxes, T-Mobile argued. The company also claimed that since they lease out the space for the installations, which are removable, leasehold property, they shouldn't be subject to property taxes.

DiFiore wrote in the court's opinion that T-Mobile's interpretation of the most recent law on the taxation of telecommunications equipment—passed in 1987—did not match the Legislature's intent. The law followed recommendations by the State Board of Equalization and Assessment from years earlier to change what type of equipment should be considered taxable.

According to DiFiore, all of the equipment included in T-Mobile's installations fit into the definition of what the Legislature said was taxable in the 1987 law.

“Indeed, it appears that T-Mobile's equipment is precisely the type of property the Legislature intended to cover when it substantially revised the [real property tax law] in 1987,” DiFiore wrote. “Instead of basing taxation on the characteristics of the owner (utility versus non-utility), the Legislature focused on the nature and function of the property.”

The installations consist of three major parts: base transceiver stations, antennas and different cables. DiFiore wrote that each part matched an item that the Legislature identified as taxable based on its function.

The base transceiver stations, which are basically cabinets that house wires and electrical components, fit the definition of “inclosures for electrical conductors,” which are taxable, DiFiore wrote. The antennas also fit that definition since they are part of the base transceiver stations, she said, and the cables can be considered 'lines' or 'wires,' which are also taxable under the statute.

DiFiore wrote that the plain language of the statute, section 102 (12) (i) of the real property tax law, supports the court's interpretation of T-Mobile's taxable equipment.

“Thus, although ambiguities in tax statutes are generally resolved in favor of the taxpayer, that doctrine is not implicated here because the plain text of [the law] unambiguously indicates that T-Mobile's equipment installations are taxable real property,” DiFiore wrote.

One catch in the law concerns the definition of a telephone company, which is considered to provide noncellular local exchange services. If the equipment was owned by a telephone company, under that definition, it may have been tax exempt, DiFiore wrote. But the parties—including T-Mobile—agreed that T-Mobile did not meet that definition.

Mount Vernon Mayor Richard Thomas called the decision a “huge victory” in a statement Thursday afternoon.

“The state Court of Appeals decision is a huge victory for taxpayers in Mount Vernon and around the state,” Thomas said. “By successfully arguing for common sense – that cell towers and other equipment can be taxed – Mount Vernon has established a long-term source of revenue that's beneficial to its residents and all municipalities across the state. Taxpayers deserve to share in the innovations of technology and this decision protects that dynamic.”

The litigation also grabbed the attention of the New York Conference of Mayors, which filed an amicus brief in the case with the Court of Appeals. Peter Baynes, executive director of NYCOM, celebrated the decision in a statement Thursday.

“NYCOM filed an amicus brief on this case because protecting the equitable distribution of real property taxes is essential to keeping our local governments running. Exempting property from the tax rolls does not make the costs for providing essential local services just disappear. Rather, it unfairly shifts the burden to a smaller pool of taxpayers,” Baynes said. “This decision sends a strong message that the telecommunications industry must pay its fair share to help fund these services, which will improve the quality of life in cities and villages throughout the state.”

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