Request By:
Mr. Herman G. Johnson
Administrator
Cumberland Valley District
Health Department
Post Office Box 126
Manchester, Kentucky 40962
Opinion
Opinion By: Steven L. Beshear, Attorney General; Penny R. Warren, Assistant Attorney General
In your letter to the Attorney General you asked whether the City of McKee, Kentucky, could impose an occupational license fee on the Cumberland Valley District Health Department as a business operating within the city limits of McKee.
It is our opinion that the city is without power to impose such a tax on a governmental unit.
Section 181 of the Kentucky Constitution provides in part:
. . . The general assembly may, . . . delegate the power to counties, towns, cities and other municipal corporations, to impose and collect license fees on stock used for breeding purposes, on franchises, trades, occupational and professions. . . .
KRS 92.280(2) states:
The legislative body of each city of the second to sixth class may impose license fees on stock used for breeding purposes, and on franchises, trades, occupations and professions, and may provide for the collection of such fees.
Authority to levy such taxes is provided in KRS 92.281.
The Kentucky courts have held that an "occupational tax" is a "license fee" under Constitution § 181 and that this constitutional provision does not of itself grant any taxing powers to cities but only authorizes the General Assembly to delegate its taxing power.
George Wiedeman Brewing Company v. City of Newport, Ky., 321 S.W.2d 104 (1959). The courts have further defined "license" as follows:
[T]o license means to confer on a person the right to do something which otherwise he would not have the right to do -- a special privilege rather than a right common to all persons. It imports regulation. A 'license fee' implies the imposition or exaction on the right to exercise a business privilege.
City of Louisville v. Sebree, 308 Ky. 420, 214 S.W.2d 248, 253 (1948).
While we do not have a copy of the ordinance in question, it is assumed that, by its nature, it would be subject to these general principles regarding the taxing power of cities. Additionally, we have been advised by the Department for Human Resources that the Cumberland Valley District Health Department was created pursuant to KRS Chapter 212, and we assume it was duly created and is carrying on its statutory functions of improving the delivery of health services to the people and administering and enforcing all public health laws. (See KRS 212.280, 212.850, 212.880).
Under these circumstances, the Cumberland Valley Health Department is a governmental unit having full authority to exist and to carry out its functions as required by statute, rather than a "business" which, absent a special privilege, has no right to engage in activity in McKee, Kentucky. Since the Health Department cannot be characterized as a business, trade, occupation or profession, the city is without power to impose a license fee on it or its receipts. It has long been recognized that the power to tax is the power to destroy and, therefore, the power for the assessment and collection of taxes must clearly appear.
City of Newport v. Klatch, 189 Ky. 300, 224 S.W. 844 (1920).
Surprisingly, we have been unable to locate any Kentucky cases directly on point regarding the power of one governmental unit within the state to tax another governmental unit also within the state. However, our opinion is supported by the concepts of intergovernmental immunity familiar to all first-year law students through the famous case of
McCullough v. Maryland, 4 Wheat. 316, 4 L. Ed. 579 (1819). After determining that Congress has the power to create a national bank, the Court turned to the question of whether the State of Maryland had the power to impose a tax on it. Recognizing that the power to tax involves the power to destroy and that the power to destroy may nullify the power to create, the Court stated:
If the states may tax one instrument, employed by the government in the execution of its powers, they may tax any and every other instrument. They may tax the mail; they may tax the mint; they may tax patent-rights; they may tax the papers of the custom house; they may tax judicial process; they may tax all the means employed by the government, to an excess which would defeat all the ends of government. This was not intended by the American people. Id. at 432.
Similarly, in the present case, if a city had the power to tax other governmental units, it could use that power to interfere with or destroy all government functions. It cannot be assumed that the General Assembly, by delegating to the cities the power to tax certain objects, intended to give to those cities the power to interfere with or destroy governmental operations.
In short, it is our opinion that the City of McKee, Kentucky, cannot impose an occupational tax on the Cumberland Valley District Health Department.