The system for taxing public utilities in New York may again be called upon to furnish the best illustration of an attempt to tax the special franchise of a corporation. This is found in what is known as the Special Franchise Tax law. The law was adopted in 1899 largely through the influence of Governor Roosevelt, and with but little agitation from the public. The law at once received extended favorable comment, and was heralded by many as the last word in public utility taxation. Contrary to expectations, however, the principle has not been adopted by other states, and has proved one of the most troublesome features in New York's tax laws.

The provisions of the law are somewhat as follows: Under the term "real estate" is included the value of all franchises, rights, or permissions to construct, maintain, or operate in, under, through, or above the streets, highways, or public places. Each of these franchises is to be assessed annually by the board of state tax commissioners, and the value sent back to the clerk of the assessment district where the franchise is located, as the tax is to be collected for local purposes. All assessments by the commission are subject to court review. Assessment difficulties led to the modification of the original law, so that all uses of public property outside of incorporated villages, of less than two hundred feet in length, are not considered special franchises.

Problem of Valuation. - The problem of finding a satisfactory method of valuing these franchises has proved almost insurmountable. The companies have not been satisfied, and have filled the courts with litigation. In New York City, where most of these franchises appear, nearly one fourth of the taxes assessed against them from the beginning still await final adjustment. Many rules have been submitted for the proper mode of reaching the special franchise values, but none has proved satisfactory. The task of placing an annual value by a centralized board upon some fourteen thousand special franchises scattered over the state, presents a problem of some magnitude. In reality, moreover, if the regulation by the public service commissions be a success, there is no place for these special franchise values to appear. Their retention simply means that higher rates must be allowed for services in order that the companies get what is considered a fair return.