Taxation and Finance, Department of

During the Dutch colonial period, government revenue was derived primarily from customs duties and excise taxes. When these sources proved insufficient, the colony fell back on voluntary contributions, but as early as 1654 the home government also granted the colony permission to tax land and livestock directly. There was little change in the tax structure during the British colonial period.

Responsibility for tax collection and maintenance of public funds was vested in the office of receiver general under the Dutch, and in the office of collector and later receiver general during the first fifty years of British rule. In 1706 a treasurer was appointed and this office continued until the Revolution. The First Provincial Congress established an office of treasurer in 1775, and the office was continued in the first State constitution, which provided for appointment of a treasurer by the legislature with the nomination originating in the assembly. The treasurer was appointed annually by joint legislative ballot under the 1821 constitution and was chosen for a two-year term at a general election after adoption of the 1846 constitution.

After ratification of the United States Constitution and assumption by the federal government of the powers to levy and collect excises and customs duties, New York State sought additional sources of revenue. During the late eighteenth century and first half of the nineteenth century, the State obtained revenue primarily from land sales, lotteries, canal tolls, auction fees, taxes on salt works, and investment of State funds. Collecting revenue was largely the responsibility of the comptroller, while the treasurer had custody of the funds and disbursed them upon the warrant of the comptroller.

The State also resorted to general property taxation, first from 1799 to 1802 and again from 1815 to 1826. By 1845, general property taxation became a necessary, permanent part of the revenue system, providing 98 percent of State tax revenue by 1879. Town and county officials assessed property and collected taxes for the State. This system of local assessment caused inequities in the level of taxation between communities. In 1859 (Chapter 312) a State Board of Equalization was created to equalize the assessments among counties and to fix the total assessment of real and personal property on which the state tax was levied. The board consisted of the commissioners of the land office and three State assessors appointed by the governor. The office of State assessor was abolished in 1896 (Chapter 908) and was succeeded by a Board of Tax Commissioners, consisting of three gubernatorial appointees empowered to furnish technical and advisory services to local officials and to collect information and make reports on local assessment practices. The three tax commissioners and the land office commissioners continued to serve as the State Board of Equalization.

State government reliance on direct property tax revenue declined after 1880 and was discontinued entirely in 1928. Meanwhile a variety of other revenue-producing programs were established including corporation franchise taxes; estate taxes and stock transfer taxes; fees on racing admissions, sale of alcoholic beverages, and motor vehicle registrations; and, beginning in 1919, a personal income tax. Assessment and tax-collection responsibilities were shared by the Board of Tax Commissioners, Board of Equalization, comptroller, secretary of state, and treasurer. Consolidation of these diverse functions began in 1915 (Chapter 317), when the State Tax Department was created. This department, headed by a three-member State Tax Commission (which succeeded the Board of Tax Commissioners), assumed the comptroller's duties relating to corporation taxes, and continued the previous board's functions regarding the property tax, mortgage tax, and the problems of local property assessment. The State tax commissioners along with the land office continued to constitute the State Board of Equalization.

In 1921 (Chapter 90), most of the remaining tax-collection duties were transferred to the department, including responsibility for the property and stock transfer and personal income taxes from the comptroller and for the registration and licensing of motor vehicles and drivers from the secretary of state.

During the general reorganization of State government in 1925-26, the Tax Department was renamed the Department of Taxation and Finance (Laws of 1926, Chapter 553), headed by a commissioner appointed by the governor. The commissioner served as president of the State Tax Commission, which also included two other members appointed by the governor. The department assumed all functions of the comptroller under the judiciary, tax, military, or any other law relating to the assessment, levy, and collection of direct State taxes, took over the duties of the state treasurer and the commissioner of the canal fund, which were abolished, and took over custody of the State Teachers' Retirement Fund and other State employees' retirement and pension funds. The State Tax Commission constituted the State Board of Equalization, which was concerned with local government property assessment after the State property tax was discontinued in 1928.

The State Board of Equalization was removed from the department in 1949 (Chapter 346) and made an independent temporary state commission known as the State Board of Equalization and Assessment. In 1960 (Chapter 464) the department's semiautonomous Bureau of Motor Vehicles became the newly created Department of Motor Vehicles responsible for the registration and licensing of motor vehicles and their operators.

Several additional State taxes have been added since the 1920s, including a sales tax in 1965 (Chapter 93) that now is second only to the personal tax as a source of revenue. A 1966 constitutional amendment allowed the operation of a State lottery. Enabling legislation in 1967 (Chapter 278) gave the department responsibility for administering the lottery and created within the department a State Lottery Commission (appointed by the governor) to serve in an advisory capacity. In 1973 (Chapter 346) all responsibility for administering the lottery was transferred to the newly created Racing and Wagering Board. Three years later (Chapter 92) the lottery was transferred back to the jurisdiction of the Department of Taxation and Finance to be administered by a "separate and independent" Division of the Lottery, whose director was appointed by the commissioner of taxation and finance.

In 1986 (Chapter 282) the State Tax Commission was abolished and replaced by a three-member Tax Appeals Tribunal appointed by the governor. The president of the tribunal serves as executive of the newly created Division of Tax Appeals, an independent division within the Department of Taxation and Finance. The Division of Tax Appeals holds hearings conducted by administrative law judges to resolve tax disputes between taxpayers and the department. Chapter 56 of the Laws of 2010 merged the Executive Department's Office of Real Property Services (ORPS) and the State Board of Real Property Services with the Department of Taxation and Finance. ORPS, renamed the Office of Real Property Tax Services (ORPTS), is responsible for overseeing local assessment administration. The State Board of Real Property Services became the State Board of Real Property Tax Services and is in charge of handling complaints made in regards to equalization rates, special franchise values and railroad ceilings.