Request By:
Mr. William I. Markwell
Henderson County Attorney
Courthouse
Henderson, Kentucky 42420
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
On behalf of Mr. A. G. Pritchett, the Henderson County Judge Executive, you request our opinion regarding the legality of the Henderson County Fiscal Court's imposing a tax on insurance companies, doing fire and casualty insurance business in the county, for the purpose of providing funds for the county's volunteer fire department.
You have informed us that the volunteer fire departments are maintained as private corporations, and thus a volunteer fire department district under KRS Chapter 75 is not involved.
The fiscal court has authority, under KRS 75.050 and 67.083(3)(u), to contract with the volunteer fire departments for fire protection purposes. KRS 75.050 provides in part that "The personnel and equipment of a contracting party, in going to and returning from a fire, or in answering and responding to a false fire alarm or call, and while endeavoring to extinguish fires within the area covered by the contract, shall be deemed and is hereby declared to be engaged in the exercise of a governmental function." (Emphasis added).
Now, let us examine the ultimate question as to whether the fiscal court can impose a tax on fire and casualty insurance companies in order to fund the county's volunteer fire departments.
Since Henderson County has over 30,000 population, the fiscal court may by order or resolution impose an occupational or license tax on all businesses, trades, occupations or professions. The tax cannot exceed one percent (1%) of (a) salaries; and (b) the net-profits of individuals, partnerships; and (c) the net profits of corporations resulting from businesses, trades, occupations or professions conducted in the county. However, the fiscal court imposing such "licensing fees", as described above, must submit the question of the license fee to the voters of the county at the next general election.
But it is important that where an occupational or license fee or tax is imposed, it must apply generally to all professions, trades, and businesses conducted in the county. You cannot single out a single business, such as insurance companies or insurance companies doing fire and casualty business with such a tax. It must be "across the board." Further, a license tax must be based upon reasonable classifications, must not be discriminatory, and must not be arbitrary or confiscatory. Such an overall license 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 requirement of across the board means that a single industry, such as all insurance business conducted in the county, cannot be singled out for the occupational or license tax.
Remember that a county may only levy two kinds of taxes: (1) and valorem taxes and (2) occupational or license taxes. Driver v. Sawyer, Ky., 392 S.W.2d 52 (1965).