Request By:
Frederick G. Neikirk, Esq.
Pulaski County Attorney
104 W. Columbia Street
Somerset, Kentucky 42501
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Thomas R. Emerson, Assistant Attorney General
This is in reply to your letter raising a question concerning a county occupational license tax on fire and casualty insurance companies for the privilege of engaging in business within the county. You state that the county has formed a fire protection district and would like to impose a license tax on fire and casualty insurance companies to finance the operation of the fire district.
The county realizes that it can impose a general occupational license tax but your primary question is whether the county may impose an occupational license tax on fire and casualty insurance companies only without imposing a general occupational tax pursuant to KRS 68.197.
If a general occupational license tax on all businesses is required, you ask whether KRS 68.197 is the only method of imposing such a tax (Pulaski County has a population of over 30,000 persons). You refer to a statute permitting cities to tax insurance companies and ask whether there is a specific statute which permits counties to tax a particular industry for a particular purpose.
You refer to two earlier letters from this office to yourself and the county judge/executive concerning a county occupational license tax but you maintain that those letters and the accompanying opinions of this office are confusing. In addition, you state that this office recently advised you over the telephone that the county could not single out the insurance industry and specifically a branch of the insurance industry such as fire and casualty and impose a tax on those agencies without enacting a general occupational tax as provided in KRS 68.197.
Your letter mentions a "Fire Protection District" but we assume you are not referring to a Fire Protection District organized and existing pursuant to the provisions of KRS Chapter 75. A county-wide district (embracing corporate areas as well as unincorporated areas) would conflict with KRS 75.010. Furthermore, KRS 75.040(1) authorizes a Fire Protection District to levy a tax upon property in the district. Such a district is a special and separate taxing authority and may levy its own tax exclusive of the county levy. In addition, a Fire Protection District is organized by the petition method pursuant to KRS 75.010 and 75.025.
In OAG 78-624, copy enclosed, we said that a county under Section 181 of the Kentucky Constitution, and through the fiscal court, is authorized to levy only two kinds of taxes: (1) ad valorem taxes, and (2) occupational or license taxes. See
Driver v. Sawyer, Ky., 392 S.W.2d 52 (1965) and
Widemann Brewing Co. v. City of Newport, Ky., 321 S.W.2d 404 (1959).
The Supreme Court of Kentucky, in Fiscal Court, Etc. v. City of Louisville, Ky., 559 S.W.2d 478 (1977), in striking down most of the original home rule statute, generally for vagueness in the delegation of legislative authority to fiscal courts, did uphold what now appears as KRS 67.083(2), providing that, "The fiscal court of any county is hereby authorized to levy taxes not in conflict with the constitution and statutes of this state now or hereafter enacted." Section 181 of the Kentucky Constitution provides in part that the General Assembly may delegate to counties the power to impose and collect license fees on franchises, trades, occupations and professions. Thus, the county, through its fiscal court, has the authority to levy an occupational or license tax.
Section 171 of the Kentucky Constitution provides in part that "Taxes shall be levied and collected for public purposes only and shall be uniform upon all property of the same class subject to taxation within the territorial limits of the authority levying the tax." In this state the uniformity provision of the Constitution is held to be applicable to license taxes as well as property taxes. See
City of Louisville v. Aetna Fire Ins. Co., 284 Ky. 154, 143 S.W.2d 1074 (1940) and
City of Lexington v. Motel Developers, Inc., Ky., 465 S.W.2d 253 (1971).
In OAG 76-575, copy enclosed, at page two, we said that pursuant to Sections 171 and 181 of the Kentucky Constitution and the tax levying authority set forth in KRS 67.083 the fiscal court could pass an ordinance imposing an occupational or license tax upon those persons writing fire insurance policies in the county.
". . . However, such tax, to meet the constitutional test, must be based upon a reasonable classification, must not be discriminatory, and must not be confiscatory. The courts have declined to establish additional limitations.
Jellico Grocery Co. v. City of Whitesburg, 286 Ky. 470, 151 S.W.2d 35 (1941), 36. Such a license tax must be uniform on all such insurance businesses in the county regardless of coverage. Such a license tax must be fairly and equitably integrated with a general county occupational or license tax applying to occupations, trades and professions generally. The Court has held that a 'city legislative body could not, without some rational basis, select a certain type of business enterprise and levy upon it a substantially heavier tax than that imposed upon other businesses which fall within the same general classification. '
City of Lexington v. Motel Developers, Inc., Ky., 465 S.W.2d 253 (1971) 257; and
Jahr v. City of Radcliff, Ky., 503 S.W.2d 743 (1973)."
In
Baker v. City of Corbin, Ky. App., 556 S.W.2d 449 (1977), the Court said that where the taxation of occupations and professions is involved, the classification must be based on reasonable distinction, uniform as to the class, and not excessive, arbitrary or prohibitive. The ordinance cannot create a special class for the purpose of imposing an additional tax burden. Furthermore, in
Paducah Automotive Trades Ass'n v. City of Paducah, 307 Ky. 524, 211 S.W.2d 660 (1948), the Court said that where a license tax is imposed upon a class of persons engaged in a particular business, trade or occupation, then all persons engaged in such business, trade or occupation are subject to the tax and it must be uniform upon the class singled out for taxation. In
City of Lexington v. Motel Developers, Inc., Ky., 465 S.W.2d 253 (1971), the Court said that a legislative body may discriminate between classes in the imposition of license taxes but discrimination which does not have a reasonable basis is obviously arbitrary and violates the principle of equality and uniformity set forth in Section 171 of the Kentucky Constitution.
Finally, in City of Louisville v. Sebree, 308 Ky. 420, 214 S.W.2d 248, 256 (1948), the Court said in part:
"It is familiar law that the selection of subjects of classification for taxation founded upon a natural and reasonable basis, with a logical relation to the purposes and objectives of a statute or ordinance, does not offend the principle of equality or uniformity in the imposition of a tax of this character so long as it operates equally upon all of those within the class."
In connection with the levying of an occupational or license tax by the fiscal court, see KRS 68.197, applicable to counties having a population of 30,000 or more. As we said in OAG 78-664, copy enclosed, KRS 68.197 requires that a fiscal court imposing an occupational or license tax under subsection (1) thereof must submit the question of the tax to the voters of the county at the next general election. You may also wish to examine KRS 68.510 to 68.550, pertaining to public service programs, and providing for ad valorem taxes and license fees by fiscal court ordinance for "public service programs." This ordinance must also be approved by the electorate.
While KRS 92.285 authorizes cities to impose and collect license fees or taxes upon insurance companies for the privilege of engaging in the business of insurance, that particular statute is not applicable to counties and cannot be utilized by counties.
In conclusion, it is our opinion that the county cannot impose an occupational license tax only on fire and casualty insurance companies. Such a tax must be uniform on all such insurance businesses in the county and such a license tax must be fairly and equitably integrated with a general county occupational or license tax applying to occupations, trades and professions generally.