Request By:
Mr. David Gullett
License Fee Administrator
City of Ashland
Office of the City Clerk
P.O. Box 1839
Ashland, Kentucky 41105-1839
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Alex W. Rose, Assistant Attorney General
Your letter requested an opinion regarding the Net Profits License Fee, Ordinance Number 57, 1980, enacted by the City of Ashland. You stated that the ordinance requires each business to file a return and pay the city one and one-half percent (1 1/2%) of net profits, and that the net profits are to be the same as reported for federal income tax purposes. The ordinance requires that businesses file a copy of the applicable federal forms or schedules with city returns.
Your question, specifically, is whether the City of Ashland may require businesses to file federal forms or schedules with city returns. For state income tax purposes, KRS 141.160(2) permits the Revenue Cabinet, in its discretion, to compel production of federal income tax returns or copies thereof in order to audit a taxpayer's return, including all statements and schedules. Under KRS 141.050(2), every person subject to KRS Chapter 141 must keep such records, make such returns, and comply with such rules as the Revenue Cabinet may prescribe.
KRS 92.281(1) authorizes cities of all classes to levy and collect any and all taxes provided for in Section 181 of the Constitution of the Commonwealth of Kentucky. KRS 92.330 provides that "all taxes and license fees levied or imposed by cities of the second to sixth class shall be levied or imposed by ordinance. " The courts have held that political subdivisions of the Commonwealth are creations of the General Assembly and possess only those powers which have been granted to them expressly plus those powers necessarily implied or incident thereto as to enable them to carry out the expressed powers. See City of Louisville vs. Fisher Packing Company, Ky., 520 S.W.2d 744 (1975); Holsclaw vs. Stephens, Ky., 507 S.W.2d 462 (1973); City of Horse Cave vs. Pierce, Ky., 437 S.W.2d 185 (1969).
Ordinance Number 57, 1980 states that the Finance Director, or any agent or employee designated in writing by him, has the authority "to examine the books, papers, and records of any licensee or supposed licensee to determine the accuracy of the return, or if no return was made, to ascertain the amount of license fee. " The Finance Director is also authorized to compel production of books, papers, records, and the attendance of all persons before him as parties or witnesses, whom he believes to have knowledge of such compensation or net profits. The statutes expressly authorize the levy and collection of the license fee and provide that it must be issued and enforced as prescribed by ordinance. The statutes authorize by implication the power to require the filing of a return, and the production of any books, papers, and records to assist in the auditing of the return. The requirement that businesses file federal forms or schedules with city returns is neither unreasonable nor arbitrary.
In City of Louisville vs. Fisher Packing Company, supra, the Court held that KRS 91.200, which authorized cities of the first class to license any business, trade, occupation or profession and provided that the license be issued and enforced by ordinance, by implication authorized a city to require the filing of a return and enforcement by means of a penalty. In the present situation, the filing of federal forms and schedules would assist in the enforcement of the ordinance and assist in the prompt processing of city returns. The ordinance provides for the confidentiality of information submitted to the city. Therefore, the requirement that businesses file federal forms or schedules with city returns is proper and is impliedly authorized by statute.