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Millions In Assessed Value, Large Revenue At Stake Over Legal Battle

A legal fight over whether fiber optic cable is taxable has nearly $160,000 in annual revenue at stake for local government and school districts in Chautauqua County.

The battle initiated in 2014 when Level 3 Communications, a Colorado-based telecommunications and Internet provider, filed corrected tax rolls and refunds for taxes they paid to the county Real Property Tax Office. Applications were filed for refunds in 2010-12 for fiber optic cable installed along the Lake Erie shore.

The county denied requests in 2014 and 2015 as they said it’s taxable and meets the definition of real property. Level 3 Communications followed by seeking a declaration that its fiber optic installations weren’t taxable real property.

The matter went to Chautauqua County Supreme Court where the Hon. Paul B. Wojtaszek ruled in favor of the county in October 2015. The telecommunications company appealed to the state Supreme Court Appellate Division’s Fourth Department, which ruled in favor of the county on March 24. In the ruling, the court said the company began paying taxes without establishing legal protest.

“Without express protest, moneys remitted as taxes or fees are applied to authorized public expenditures and financial provision is not made for refunds,” the court said.

While the court ruled in favor of the county, they agreed with Level 3 Communications in that its fiber optic installations are not taxable under real property tax law.

Despite the victories, the battle is far from over. Level 3 Communications is currently issuing payment to the county under protest, or a payment made subject to a dispute, for 2013-17.

Jim Caflisch, county real property tax director, told county legislators last week the company made some payments last year. Around $9 million of assessed valuation and $81,000 in tax revenue to the county are at stake, he said.

In addition, there’s a similar amount of revenue in jeopardy for municipalities and school districts in the north county. They include the city of Dunkirk and its school district; village of Brocton and its school district, village of Westfield and its school district; Fredonia Central School District; and Ripley Central School District.

“It is substantial,” said Caflisch, adding litigation could go on for another two to three years. “It’s very complex and very arcane. I didn’t tally exactly how much, but this year they paid everything that I am aware of under protest.”

Last week, the County Legislature’s Administrative Services and Audit and Control committees approved a resolution denying Level 3 Communications’ applications for corrected tax rolls and refunds for 2013-17. The resolution will go before the full County Legislature on Wednesday.

Chautauqua County is one a few counties involved in the legal matter. Caflisch said Erie County has the most at stake in the legal battle. Caflisch criticized the state for failing to address the issue at a legislative level.

“The state Legislature has had three years to look at this and has walked away from it three years in a row,” he said.

Caflisch said he’ll be asking the County Legislature to set up a reserve account in event they need to refund Level 3 Communications for 2016 and 2017.

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