Verizon’s facility at 183 Broad Street.

Citing a 1940 law, phone services giant Verizon is telling New Jersey municipalities it is not liable for taxes on utility lines and other equipment because of its shrinking share of the telecom market, the Bergen Record reports today.

The company has a significant presence on Broad Street in Red Bank, where it maintains a large switching station. While the specific impact on Red Bank is unclear, towns with switching stations are among those that “could lose the most,” the Record says.

The Record says the move by Verizon could force cash-strapped towns to shift millions of dollars in tax liability to other property owners.

From the article:

The company is using a provision of a 1940 state law to argue that utility poles, wires and other landline equipment should no longer be on tax rolls. They claim traditional usage has slipped significantly as more people turn to cable and the Internet for telephone service.

So far, five towns, including Dover and Victory Gardens in Morris County, have been informed that they will not receive their 2009 equipment taxes.

Verizon officials say that 150 towns will lose the tax by 2011, and the company predicts this number will continue to increase.

Towns across the state stand to lose anywhere from a few hundred dollars to more than $1 million in fees, which are known as “personal property taxes.”

Those with equipment like underground transfer stations and switching stations could lose the most. Hackensack could lose almost $500,000, and Wayne more than $300,000. Newark, which is a hub for telecommunications equipment, could see $1.9 million evaporate.

Verizon officials say the law requires the company to pay taxes on landline equipment only when it is the dominant provider in town. The company claims it is losing more than 35,000 residential telephone customers a month due to competition from other traditional providers, cable companies and Internet phone services such as Vonage.

“According to state law, once we fall below 51 percent, we are no longer required to pay taxes on personal property,” said Verizon spokesman Rich Young. “Clearly the trend is that we’re falling below threshold in more and more communities as time goes on.”

But lawmakers and local government advocates say that Verizon does not have the legal right to take its property off tax rolls. The League of Municipalities issued a formal opinion saying that if Verizon was paying taxes on its property in 1997 when the 1940 law was amended, it should still be subject to those taxes.

The 51 percent reference was only used to define a “telecommunications carrier,” not to decide what taxes should be, they say.

“Verizon is interpreting the law to their advantage, and nowhere does it say that they’re allowed to stop,” said Assemblyman Upendra J. Chivukula, head of the Telecommunications and Utilities committee. “The law does not say that. The law was only using that to define what a carrier is, and who should pay.”

The state attorney general is looking into whether Verizon is following the statute, according to a spokesman at the Division of Taxation.

The Red Bank facility is assessed at $4.69 million. The building was the subject of a tax appeal by Verizon earlier this year.

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