Request By:
The Honorable William McBee
Seat 97, House of Representatives
Capitol Building
Frankfort, Kentucky 40601
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Rickie L. Pearson, Assistant Attorney General
Re: Occupational Tax for Transit Authorities
Herein is an opinion of the Attorney General's Office concerning two legal issues as they apply to the above-mentioned subject matter.
The first question presented is whether a Fiscal Court has the power to levy a payroll tax for a transit authority?
A Fiscal Court can levy an "occupational tax" for a transit authority based on the analysis below.
Pursuant to KRS 96A.320(3), Submission of proposal to establish program - Voters - Financing of program, expressly provides that:
Public bodies which have been parties to the creation and establishment of transit authorities, or who constitute the membership of such transit authorities, may, acting either individually or jointly, submit to either (i) the electorates of such public bodies, or (ii) the electorate of the transit area encompassed by any such transit authority, but only in the manner and pursuant to the procedures set forth in KRS 96A.310 to 96A.370, one or more proposals for the approval of a mass transportation program to be financed by voted levies of occupational license fees. Such voted levies of occupational license fees shall not exceed one per cent (1%) of (a) salaries, wages, commissions and other compensation earned by persons for work done and services performed or rendered and (b) the net profits of businesses, trades, professions or occupations from activities conducted in the public body, or the transit area, except public service companies, banks, trust companies, combined banks and trust companies, combined trust, banking and title companies, any savings and loan association whether state or federally chartered, and in all other cases where a public body is prohibited by law from imposing a license fee. (Emphasis added.)
Thus, the county or fiscal court can enact by ordinance or resolution an occupational tax, subject to other statutory provisions, which will be discussed in the question on referendums.
In City of Louisville v. Sebree, Ky., 214 S.W.2d 248, (1948), the Court of Appeals of Kentucky (now the Supreme Court of Kentucky) held that an ordinance imposing an annual license fee for the privilege of engaging in any business, occupation, calling, profession or labor within the cityw as valid. In upholding the ordinance the Court used the following reasoning:
(a) The city had the power to impose the occupational tax because the authority had been delegated to it via the State Constitution and other statutes.
(b) The occupational tax was not invalid as income tax, although it was measured by gross receipts, wages, commissions and all salaries or compensation. The Court specifically reasoned that the tax was on the privilege of those engaged in specified businesses and not an income tax on the above items.
(c) The tax was not a "property tax," being rather a tax on the right or privilege of carrying on a business, vocation, trade, or calling.
(d) The tax was not violative of the Fourteenth Amendment to the United States Constitution as a denial of equal protection or due process since there was a rational basis for it and all persons similarly situated were treated alike as determined from the practical operation of the taxing statute.
The second question presented is whether a referendum must be had before effectuating the occupational tax?
Pursuant to KRS 96A. 330 etseq., Resolution or ordinance to submit proposal to electorate - Simultaneous elections in transit are - Notice, and KRS 96A.340 et seq., Publication of resolution or ordinance - Framing of proposal - Majority required - Status of voted levies, there must be a referendum to effectuate the occupational tax.
If the transit authority is countywide, a referendum must be called for all individuals or the electorate in the county. If, on the other hand, the transit authority includes more than one county, a referendum must be called to submit the proposal to the electorate of each county or to submit the proposal jointly to the electorate of the entire transit area encompassed by the transit authority.
Note also, that under the above KRS provisions the transit authority board must adopt a resolution and a detailed study or incorporate such a detailed study by reference, with the proposed source or sources of funding.
Finally, the procedures for publication of the resolution or ordinance in a newspaper(s) under KRS 96A.340 et seq., must be adhered to in the effectuating the occupational tax. See also, KRS 424.120 etseq., Qualifications of Newspapers.