Request By:
Mr. Bennie Garland
Public Administration Specialist
Lake Cumberland Area
Development District, Inc.
P.O. Box 377
Jamestown, Kentucky 42629
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
In 1974 the Kentucky County Coal Coalition, consisting of some 40 county judges from coal producing counties, drafted a model ordinance levying a tax on coal severed and processed within the boundaries of the various counties. However, in C.C.C. Coal Co., Inc. v. Pike County, Ky., 536 S.W.2d 467 (1976), the Supreme Court of Kentucky struck the ordinance down as being unconstitutional.
The counties of Kentucky, you say, in view of H.B. 44 [1979 Ex. Sess.], the questionable status of Revenue Sharing, and the depletion of their natural resources, are seriously facing the question of additional revenue to fund vital and demanded local governmental services.
You ask under what circumstances may a fiscal court enact an occupational or license tax such as to bring under its operation persons or companies engaging in the severance and processing of coal? We must keep in mind that a fiscal court, under §§ 171 and 181 of the Kentucky Constitution, can levy only two kinds of taxes: (1) ad valorem taxes and (2) license or occupational taxes. Driver v. Sawyer, Ky., 392 S.W.2d 52 (1965).
Since § 181 requires statutory implementation [as to a license or occupational tax], the Supreme Court of Kentucky, in Fiscal Court, Etc. v. City of Louisville, Ky., 559 S.W.2d 478 (1977), declared the original 1972 "home rule" statute, KRS 67.083, unconstitutional as being a too general delegation of legislative authority. However, as to that part of the statute which declared that a fiscal court could "levy all taxes not in conflict with the constitution and statutes of this state now or hereinafter enacted," the court held that provision to be constitutional as a thoughtful, purposeful and deliberate action of delegated power. (Emphasis added). The present KRS 67.083(2) adopts that precise terminology about taxes just quoted.
Thus all fiscal courts in Kentucky can levy a license or occupational tax for general revenue purposes or for any specific county governmental purpose authorized by statute pursuant to KRS 67.083(2). However, in counties having a population of thirty thousand (30,000) or more, under KRS 68.197 any fiscal court imposing a license or occupational tax is subject to a maximum rate of one percent (1%) of salaries and net profits earned in the county, and is subject to submitting the question as to the license tax to the voters of the county at the next general election. A fiscal court under the latter statute may, in lieu of the percentage rate applied against wages and profits, provide for an annual fixed amount license fee.
To answer your immediate question as to a coal tax, it is our opinion that a county ordinance which levies a license or occupational tax on coal producers engaged in the extractive business enterprise of coal production would be constitutional, provided that the license or occupational tax as applied to coal producers [the same principle would apply to other mineral producers] is fairly and equitably integrated with a general county occupational or license tax applying to an overall occupational or license tax. Such a general county occupational or license tax must be based upon reasonable classifications, must not be discriminatory, and must not be arbitrary or confiscatory. Such general tax must be uniform as applied to each classification. See § 171, Kentucky Constitution, and City of Lexington v. Motel Developers, Inc., Ky., 465 S.W.2d 253 (1971) 257.
The trouble with the ordinance in the Pike County case, above, was that the tax was not levied upon "coal producers" as a license tax. The Pike County coal tax was levied upon the receiving and/or processing of coal at a fixed place of business for distribution. The court pointed out that the latter was not an independent trade, occupation or profession. It was but one of a series of events which occur in the business of production. The court wrote: "This is not a license tax laid upon a trade, occupation or profession. It is an attempt to levy a license tax on but a single aspect of a trade, occupation or profession. " Thus the Pike County case suggests, as we just outlined, that the County Phoenix can rise from the ashes of its abortive enactment if the principles and limitations we mentioned are carefully followed. The Pike County coal tax, since it fell short as a license or occupational tax [the terms "license" and "occupational" are interchangeable], was merely a tax on certain uses made of coal, and thus was an excise tax. See OAG 79-361, of similar interest, copy enclosed.
In summary, a valid ordinance must enact a general occupational or license tax covering the various trades, occupations and professions carried on in the particular county. Within the general ordinance "coal producers" [those individuals or corporations engaged in the extractive business of coal production] must be integrated as a trade or business. In counties of 30,000 or more, certain restrictions described above must be observed. In counties of less than 30,000 population, the occupational or license tax placed upon coal producers could be measured in terms of a percentage of coal produced. See Raydure v. Board of Supervisors of Estill County, 183 Ky. 84, 209 S.W. 19 (1919); and Cumberland Pipe Line Co. v. Commonwealth, 228 Ky. 453, 15 S.W.2d 280 (1929). OAG 74-427 is modified accordingly.