Top court backs Rochester in Verizon ruling

With a state budget deficit that some project to be $300 million over the next biennium looming in the near future, tax revenues are likely to be a big issue in this fall’s election and during the 2005 legislative session — and telecom taxes will probably be a central part of that debate.

Similar debates have taken place at the federal level, where the House and Senate have passed separate extensions on the moratorium on taxing Internet access, but in the absence of agreement on how long to extend the federal moratorium, the ban has expired.

Some analysts contend that telecom is the most taxed and regulated service in the United States, with taxes and regulatory charges often approaching 18 percent of subscriber fees. As the lines between telephone service and other forms of communication become even further blurred, public-policy makers are facing complicated and difficult decisions.

In a recent ruling concerning the city of Rochester’s ability to tax Verizon for its use of public ways, the state Supreme Court recently upheld the city’s authority to impose the tax, but sent the case back to Superior Court for the second time to resolve two remaining issues.

Holding that the city has clear statutory authority to tax Verizon for the placement of its poles, wires, cables and other equipment on city-maintained highways, the court rejected a number of Verizon’s arguments as to why the city could not impose such a tax. Nonetheless, the Supreme Court found that the Superior Court still must address Verizon’s claim that its equal protection rights are being violated because gas, cable and electric utilities are not being similarly taxed.

The other issue that the Superior Court must look at is Verizon’s claim that it is entitled to an abatement on the taxes. The Supreme Court said that Verizon could only succeed in this argument if it could show that the taxation is disproportionate, by establishing that its property is assessed at a higher percentage of fair market value than the percentage at which property is generally assessed in the city.

Given the remand to the Superior Court, this dispute — which originated in 1996 when the city first tried to amend the pole licenses to require Verizon to pay real estate taxes — is likely to continue for another few years.

The Rochester ruling comes as a legislative committee proceeds once again to study the issue of taxing telephone poles and conduits — a different tax than the one addressed by the Supreme Court. That tax is on the license to use city-maintained highways for placement of the poles, wires, cables and other equipment.

The Committee to Study Issues Related to the Property Tax Exemption for Wooden Poles and Conduits has its first two meetings in August and must report its findings by November of this year. The panel has as members Reps. Kurt Roessner of Exeter, Russell Ingram of Salem and Susan Almy of Lebanon, and Sens. Bob Odell of Lempster, Robert Boyce of Alton Bay and Lou D’Allesandro of Manchester,

During the 2004 legislative session, a contentious battle resulted in legislation that continues the exemption from taxation on the poles and conduits themselves for telephone companies for another two years. This legislation followed a study done in 2003 on the same issue that is the subject of this year’s study. nhbr

Doug Patch, former chairman of the New Hampshire Public Utilities Commission, is with the Concord law firm of Orr and Reno.