TAXATION OF PERSONAL PROPERTY IN THE STATE OF NEW YORK PUBLISHED BY THE DEPARTMENT OF TAXES AND ASSESSMENTS OF THE CITY OF NEW YORK Commissioners : LAWSON PURDY, President CHARLES J. McCORMACK JOHN J. HALLERAN CHARLES T. WHITE DANIEL S. McELROY EDWARD KAUFMANN JUDSON G. WALL TAXATION OF PERSONAL PROPERTY IN THE STATE OF NEW YORK. Compiled by Edward L. Heydecker, Assistant Tax Commissioner. CONTENTS. PAGE What is Personal Property 3 Exemptions of Personal Property ....... 4 Absolute Exemptions 4 Exemptions because of special taxes im- posed 5 Exemptions because of nature of owner- ship . 6 Personal Property which is liable to taxa- tion under the general property tax. . 6 Offset of Debts 7 Just Debts 7 Persons and corporations 7 Partners 7 Taxable Personal Property 8 Location of Personal Property 9 Non-Residents 10 Trustees, Executors, Administrators &c. . 11 Assessed Values xi Method of Assessment 12 Amount of Revenues from Special Taxes on classified Personal Property 12 Corporation Application Blanks. 15 Secured Debts Law 18 2 TAXATION OF PERSONAL PROPERTY IN THE STATE OF NEW YORK. The State of New York, like most of the other States of the Union, has a provision in its tax law, declaring that all property, real or personal, is liable to taxation, unless exempt by law. WHAT IS PERSONAL PROPERTY. By common law, all property, which is not real property, is considered to be personal prop- erty. Hence it is somewhat difficult to state in law what is personal property, with the same exactness as in the case of real property. Under the definition of personal property in the Tax Law the term “personal property” is not as broad as the similar term in common law. For example, good-will is personal property in common lav/ but is not personal property in the tax law. It may be stated however that in common law under the head of personal property are included the following forms of property: 1. All tangible movable things, such as horses, cattle and all live stock, carriages, wagons, automobiles, furniture, books, pictures, jewelry, clothing and personal effects, merchandise and all stock in trade, machinery and tools, vessels, 2. All intangible rights not attached to real property which are expressed in written in- struments such as certificates or shares of capital stock, corporate bonds, mortgages on real or personal property, promissory notes, book credits, deposits in banks, patent rights, trade-marks and copyrights, rentes reserved. 3 3- All intangible rights, not connected with real property, and not expressed by written in- struments, such as Good-will. EXEMPTIONS OF PERSONAL PROP- ERTY. Exemptions of personal property are of three kinds : A. Absolute exemption. B. Exemption from the general property tax be- cause the particular class of personal prop- erty has been subjected to some special tax. C. Because of nature of ownership. A. ABSOLUTE EXEMPTIONS. These include 1. Tangible personal property: a. Furniture and personal effects to the value of $.1,000 for each person. b. Vessels registered in any port of this State and engaged in ocean commerce between any port in the United States and any foreign port, until December 31, 1922. c. Property exempt from execution, including furniture, library and professional instru- ments of any man who supports a family or of any woman, to the extent of $250. d. Imported goods in unbroken, unsold, original packages. 2. Intangible personal property, which is ex- pressed by written instruments: a. Certificates or shares of corporate stock, b. Deposits in savings banks, c. Patent rights, d. Trade-marks and copyrights, e. Bonds of the United States, of the State of New York and of any municipal sub- division of the state. 4 3. Intangible personal property, not expressed in written instruments : a. Good-will. b. Accumulations of a domestic life insurance corporation, held for the exclusive benefit of the insured. c. Moneys of co-operative or assessment in- surance companies. d. Unearned premiums of any fire, casualty or insurance company. e. Accumulations of any incorporated co- operative loan association. B. EXEMPTIONS BECAUSE OF SPECIAL TAXES IMPOSED. 1. Tangible personal property: a. Automobiles. 2. Intangible personal property, which is ex- pressed by written instruments: a. Corporate bonds, when registered under the “Secured Debts” law or “Recording Tax Act,” b. Mortgages on real property within the State when the mortgage recording tax has been paid and bonds secured by such mort- gage, c. Mortgages on real property outside the state when registered under the “Secured Debts” law. d. Capital, surplus and undivided profits of banks, national and state, because of special tax of i% measured thereby. e . Capital, surplus and undivided profits of trust companies, because of special tax of i°/o measured thereby. /. Surplus of savings banks, because of spec- ial tax of measured thereby. 5 C. BECAUSE OF NATURE OF OWNER- SHIP. a. Property of the United States, the State of New York, and the various municipalities within their own corporate limits. b . Property of certain charitable, religious, &c., corporations. PERSONAL PROPERTY WHICH IS LIA- BLE TO TAXATION UNDER GEN- ERAL PROPERTY TAX. 1. Tangible movable things: a. Horses, cattle and all live stock. b. Carriages and wagons. c. Furniture, books, pictures. 'j j n excess d . Jewelry, clothing and personal ^-of $1000 effects. J in value. e. Merchandise and all stock in trade (except imported goods in unbroken original pack- ages, unbroken and unsold). /. Machinery and tools, g. Vessels (except vessels in foreign trade). 2. Intangible rights, not attached to real prop- erty, which are expressed in written instru- ments : а. Corporate bonds, if not registered under “Secured Debts” law or “Recording Tax Act.” б. Mortgages on real property, if mortgage recording tax has not been paid or if not registered under “Secured Debts” law. c. Mortgages on personal property. d . Promissory notes. e. Book credits. /. Deposits in bank, except in savings banks. g. Rents reserved on leases of over 21 years, 6 OFFSET OF DEBTS. From the assessed value of personal property, liable to taxation, the person or corporation as- sessed is allowed to deduct the total of all “just debts owing- by him,” subject however to the limitation affecting unregistered “Secured Debts” hereinafter referred to. JUST DEBTS. These debts which may be deducted are: 1. Amount owing on bond and mortgage, on which the person claiming the offset is liable,, while he remains the owner. 2. Amount owing on promissory notes. 3. Amount owing on book debits or contracts. Just debts do not include contingent liabilities as guarantor or endorser, unless such liabilities have become fixed, or debts incurred for the pur- pose of evading taxation. PERSONS AND CORPORATIONS. The law makes no distinction as to liability for taxation. A corporation is liable for taxation on its personal property, in the same manner as if it were a natural person, subject to ex- ceptions in a few minor particulars (see cor- porations form, page 15). Shareholders in a corporation are not liable to taxation on their shares because the property represented thereby is taxed to the corporation. PARTNERS. The tax law does not recognize partnerships. Hence each partner is liable upon his undivided .share of the taxable assets of the firm, after de- ducting his share of its liabilities. 7 TAXABLE PERSONAL PROPERTY. T angibles. These appear in the following groups : 1. Horses, cattle, live stock, carriages and wagons. These, of course, are chiefly in the rural districts and are the property of farmers. There are many horses, carriages and wagons in the- cities but in most instances they are the property of firms or. corpora- tions rather than individuals. All these are taxable at their market value, subject only to the offset of the “just debts” of their respective owners. 2. Merchandise and stock in trade (except im- ported goods in original, unbroken, unsold packages). This covers all the stock of goods of merchants, both wholesale and re- tail, whether owned by individuals, firms or corporations. It also includes the product, finished or unfinished, of manufacturers. It is taxable at its market value, subject only to the offset of “just debts” of the owners. 3. Machinery and tools. This includes all machinery and tools for manufacturing, mining or any industrial enterprise, together with boilers, motors and all power-producing machinery, provided it is not so affixed to the building as to be part of the real estate. It is subject to the offset of “just debts” like other forms of personal property. 4. Vessels (except vessels in the foreign trade). This includes all floating property, engaged in domestic commerce, and all pleasure crafts. It is subject to offset of “just debts” as above. 5. Furniture, books, pictures, jewelry, clothing and personal effects. 8 An exemption of $1000 to each person is allowed against these and in addition an exemption of $250 to each householder or each woman. Intangibles. These appear in two groups. 1. a. Corporate bonds included in the defi- nition of “Secured Debts” which have not been registered under the “Secured Debts” law. (See definition page 18). b. Mortgages on real property outside of the State, which have not been registered under the “Secured Debts” law. c. Rents reserved on leases of over 21 years, &c. The offset of “just debts” Is not allowed against these items and they are to be assessed at market value and retained upon the roll, regardless of the “just debts” of their owners. 2. a. Mortgages on real property in the State of New York, on which the mortgage re- cording tax has not been paid. (This means old mortgages and the bonds thereby se- cured recorded prior to July 1, 1906, and which have been registered under the law.) b. Mortgages on personal property (chattel mortgages). c. Promissory notes. d. Book credits. e. Deposits in banks, except savings banks. The offset of “just debts” by their respective owners is allowed against these items. LOCATION OF TAXABLE PROPERTY. The assessing authorities of the various tax districts of the State have jurisdiction over the citizens of New York, resident in their respective districts, to assess them for taxable personal property owned by them. This jurisdiction is subject however to the following limitation: 9 Tangible personal property, which is located outside of the State, cannot be assessed to the owner, who is a resident of the State, but tangi- ble persona! property located in the State but in a tax district other than the tax district in which the owner resides, may, nevertheless, be assessed to the owner in the tax district in which he does reside. Thus a resident of the City of New York who owns tangible personal property, located in New Jersey, cannot be assessed for such property, because it is not under the juris- diction of the State of New York, but if he owns tangible personal property in Delaware County, he may be assessed for it in the City of New York and the tax district in Delaware County, where it is located, has no jurisdiction to assess it. On the other hand all intangible personal property, owned by a resident of a tax district in the State of New York, no matter where the written evidences of such property may be, or where the debtor may reside, are to be assessed xo such owner in the tax district where he re- sides. Thus a resident of the City of New York, who has taxable bonds in a safe deposit box in Jersey City, N. J., and has bank balances in Albany, N. Y., or Boston, Mass., or Hong Kong, or book credits due from Chicago, 111., is to be assessed upon all of them, subject to the offset of his “just debts.” NON-RESIDENTS. In addition to jurisdiction to assess citizens, who are resident within the tax district, the as- sessors have jurisdiction to assess certain prop- erty of non-residents within the tax district, as follows : 1. The capital of non-residents of the State in- vested in business within the tax district. 2. The tangible personal property of non-resi- dents, having an actual situs in the tax dis- trict, not forming part of the capital in- io vested in business. This does not include bonds or other evidences of debt. By “capital invested in business’’ is meant the balance of taxable assets over and above the “just debts” and exemptions allowed by law. TRUSTEES, EXECUTORS, ADMINISTRA- TORS & c . It is the duty of the assessors to assess the person who holds the legal title to personal property. Hence all who stand in a trust ca- pacity, holding the legal title for the benefit of others, are to be assessed as owners and the beneficiaries are not to be assessed. ‘ The offset of “just debts” applies to trust estates as well as to individuals. . ASSESSED VALUE. The tax law requires assessors to assess at full value. In various sections of the law and in the provisions of local charters, other phrases have been used but they have all been interpreted to mean “full value.” What then is the “full value” of personal property? It means the sum for which it can be converted into cash. It does not mean the amount which it cost to acquire it, or the amount of money needed to replace it, or the sum for which it is insured, but the amount of money for which it can be sold. Some of the items of personal property, such as book credits and stock of merchandise, are exceedingly difficult of appraisal and assessment for this reason. Book credits may be of doubtful value because the debtor may be on the verge of insolvency. Merchandise may be old or out of style or dam- aged and not worth what it has cost to obtain it. All these things must be considered by the assessors. He must hold the scales even as be- tween the municipality and the tax-payer. He must not penalize the tax-payer by an over-assess- ment or defraud the municipality by an under- assessment. it METHOD OF ASSESSMENT. The assessor is directed by law to “make due and diligent inquiry as to taxable persons” within his jurisdiction and in the oath which must be attached to the assessment roll is the declaration that it “contains a true statement of the aggre- gate amount of the taxable personal estate of each and every person named in such roll over and above the amount of debts due from such persons, respectively.” AMOUNT OF REVENUE FROM SPECIAL TAXES ON CLASSIFIED PER- SONAL PROPERTY. Nearly all the forms of personal property, which constitute what may be regarded as in- vestment securities have been classified and are subject to some special tax in place of the gen- eral property tax. These forms are shares of stock, bonds, mortgages and long-time notes, commonly called debentures. Of these 1. Shares of stock are not taxable to the holder because the corporation is taxed upon its as- sets over liabilities the same as an individual. 2. Bonds may be registered under the “Secured Debts” law and on paying the tax therein provided, become exempt from state and local taxation. 3. Mortgages are required to pay the mortgage recording tax when they are offered for record and on payment of such tax, they become exempt from state and local taxation. 4. Debentures may be registered under the “Se- cured Debts” law, the same as corporate bonds. In addition to the above, we have the Inheritance Tax Law, which operates largely as a deferred personal property tax. 12 Corporation Franchise Taxes, which likewise operate as a substitute for the general prop- erty tax on personal property, for state pur- poses. Tax on Bank Shares. Tax on Trust Companies. Tax on Insurance Premiums. Tax on Savings Bank Surplus. Tax on Stock Transfers. Tax on Automobiles. Tax on Liquor Licenses or Excise. Tax on all corporations for the privilege of doing business as a corporation with some modifications and additional taxes in case of some corporations. all of which operate as substitutes for the gen- eral property tax on personal property. From these classified taxes the annual receipts as last reported were: Excise $15,664,997.82 Corporation Franchise Taxes Insurance Premium Tax Savings Bank Surplus Trust Companies Stock Transfers Inheritance Tax Mortgage Recording Tax Automobile Tax Bank Share Tax Secured Debt Tax 10,119,009.83 3.499.8 1 i. 32 8,152,198.77 3.575.243-32 878,799.25 4,306,489.24 1,500,000.00 $47,696,551.55 The assessed value of personal property, as last reported, is State of New York, outside of City of New York $109,855,368.20 City of New York 342,963,540.00 $452,818,908.20 13 Domestic corporations are assessed pursuant to the provisions of Section 12 of the Tax Law. This was enacted in 1855 and has been inter- preted many times by the courts. It must be read in the light of these court decisions. The form of application for reduction, given below, is in fact, a digest of these Court decisions as applied to the original Section 12. *4 THIS STATEMENT SHOULD BE FILED BY NOVEMBER 10. IT MUST BE FILED BY DECEMBER I. THE CITY OT NEW YORK DEPARTMENT OF TAXES AND ASSESSMENTS MAIN OFFICE Hall of Records. Northwest Corner Chambers and Centre Streets Borough of Manhattan The , (Please state full name of the corporation.) a corporation organized under the laws of the State of New York, claiming to be aggrieved by the> assessed valuation of its property for the year 1912, makes ap- plication by the undersigned, one of the officers of the said corporation, to have the same revised and cor- rected. Dated October 2, 1911. STATE THE VALUE OF THE FOLLOWING ITEMS : ASSETS All assets must be scheduled, whether located in the State of New York, or elsewhere, in- cluding deposits in banks and debts due from non-residents. 1. Real estate $ 2. Machinery and plant other than real estate $ 3. Goods, wares and merchandise $ 4. All other tangible personal property. (This does not include mortgages or credits) $ 5. Cash on hand and on deposit $ 6. Debts due from solvent debtors. (This includes bonds and all credits, also '‘secured debts”) $ 7. Shares of stock of other corporations $ 8. Value at which patent rights, copyrights, trade-marks, goodwill and franchises were taken in payment for capital stock $ 9. The aggregate of the above assets $ DEDUCTIONS Except the items numbered 12, 15, 17 and 18, the value of every item to be deducted must be the sum at which it is included in the above statement of assets. 10. Property exempt by law, which includes : U. S. Bonds, N. Y. State and Municipal Bonds $ N. Y. Mortgages recorded on or after July 1, 1906, and mortgages on which a registration tax has been paid since May 13, 1907, also “secur- ed debts.” (This includes only mortgages and “secured debts” owned by the corporation) $ Goods imported by above corpora- tion from foreign countries on hand in unbroken original packages $ 15 n. Value at which patent rights, copyrights, trade-marks, good will and franchises were taken in payment for capital stock $ 12. So much of the surplus, if any, as shall not exceed ten per centum of the par value of the shares of stock issued $ 13. Shares of stocx of other corporations actually owned by the above corporation which are taxable upon their capital stock $ 14. Tangible personal property having a per- manent situs outside of this State, specifying its nature and location. (This does not include bonds, notes, evidences of debt of any kind, currency, deposits in banks, bills receivable, or any other intangible property) 15. The assessed value of the corporation’s real estate in this State, including its special franchises. Give Section or Ward and Lot Numbers if in The City of New York 16. Real estate outside of this State, specify- ing its location 17. Indebtedness secured by the corporation’s bond and mortgage on real property to which corporation now holds title $ 18. All other indebtedness of the corporation not contracted or incurred in the purchase of non-taxable property or securities, or for the purpose of evading taxation. (The amount owing for goods imported by above corporation from foreign countries on hand in unbroken original packages and the capital stock of the corporation must not be included.) I'emize as follows : Bonds not secured by mortgage of real estate Notes Open Accounts . . . 19. The aggregate of the items set down in answer to questions 10 to 18 inclusive $ Additional Information Required -a. Total par value of capital stock issued $ b. Rate of last dividend.... Date c. Amount of surplus, if any, as shown by the books $ d. Amount of indebtedness for above imported goods; this amount is not included in No. 18 but is in addition thereto $ Gross assets as shown by answer to question 9 $ Aggregate of deductions from gross assets as shown by answer to question 19 $ 16 - 6 * Subtract the deductions from the above assets . $ . Add “secured debts” upon which no registra- tion tax has been paid $. The result is the Capital Stock Liable to Taxation $. $- The principal office or thei place of transacting the Financial Business of the said corporation is situated in the Borough of Manhattan, in The City of New York, at No Street. The City of New York,) . County of New York,) I, the . of the said corpor- ation, being duly sworn, do hereby certify that the fore- going is in all respects a just and true statement of the property and debts of the corporation on the first day of October, 1911. (Sign here.) Sworn to before me this day of 191 . (Any person authorized to administer oaths.) H Z w S uu H < m 2