Request By:
Ms. Karen M. Campbell
Middleton & Reutlinger
2500 Brown & Williamson Tower
Louisville, Kentucky 40202-3410
Opinion
Opinion By: Chris Gorman, Attorney General; Amye B. Majors, Assistant Attorney General
In your letter to the Kentucky Attorney General, you pose a question concerning the application of an exemption to the real estate transfer tax provided for in KRS 142.050. You state that your law firm "represents a parent corporation that has transferred its real estate for a nominal consideration to a wholly-owned subsidiary created by the parent for the purpose of holding the real estate. " The issue you present is whether this transaction is exempted from the real estate transfer tax by KRS 142.050(7)(k).
The real estate transfer tax is governed by KRS 142.050. This tax is imposed upon the grantor "named in [a] deed" for "the privilege of transferring title to real property. " KRS 142.050(1)(a) and (2). It is levied at a rate of 50 "for each $ 500 of value or fraction thereof." KRS 142.050(2). Value is defined "in the case of any deed not a gift" as the "full actual consideration paid" for the real property interest in question and "in the case of a gift, or any deed with nominal consideration or without stated consideration" as the fair market value of the real property interest in question. KRS 142.050(1)(b).
Exemptions from the real estate transfer tax are set forth in KRS 142.050(7). You contend that KRS 142.050(7)(k) applies to the transaction described in your letter. This provision exempts transfers of title to real property
between individuals and a corporation, with only nominal consideration therefor, if those individuals are the exclusive owners of that corporation.
It is readily apparent from the foregoing language that the answer to the questions posed by your letter hinges on whether the term "individuals" as used in this provision includes corporations. This particular issue has evidently not been addressed before in any judicial decision or formal opinion of the Kentucky Attorney General.
Statutes must be construed as a whole.
Henry v. Commonwealth, 312 Ky. 490, 228 S.W.2d 32 (1950);
State Text Book Commission v. Weathers, 184 Ky. 748, 23 S.W. 207, 214 (1919). Hence, KRS 142.050(7)(k) must be read in conjunction with the other exemptions found in KRS 142.050(7). Specifically, KRS 142.050(7)(i) exempts transfers
by a subsidiary corporation to its parent corporation for no consideration, nominal consideration, or in sole consideration of the cancellation or surrender of the subsidiary's stock.
By the foregoing language, the General Assembly has delineated precisely when intercorporate real estate transfers for nominal consideration are exempt from the tax imposed by KRS 142.050. The transaction your letter concerns plainly does not qualify for exemption under this provision. See OAG 91-5 (concluding that a transfer of real estate from "a parent corporation to a subsidiary corporation [i.e., the very situation your letter presents] is not exempt [under KRS 142.050(7)(i)] from the real estate transfer tax" ).
Thus, your construction of KRS 142.050(7)(k) would place it in direct conflict with KRS 142.050(7)(i) by exempting a transaction clearly subject to tax under the latter provision. Your interpretation would render KRS 142.050(7)(i) meaningless or mere surplusage -- any intercorporate real estate transfer for nominal consideration would always qualify for an exemption under your view of KRS 142.050(7)(k), regardless of whether it met the requirements of KRS 142.050(7)(i).
It is a familiar and well-established principle that a statute should be construed so that no part of it is meaningless or ineffectual.
Brooks v. Meyers, Ky., 279 S.W.2d 764, 766 (1955). See also
Colautti v. Franklin, 439 U.S. 379, 392, 99 S. Ct. 675, 684, 58 L. Ed. 2d 596 (1976). ("[T]hat a statute should be interpreted so as not to render one part inoperative" is an elementary canon of construction.) Similarly, any apparent inconsistencies between statutory provisions should be harmonized or reconciled so as to give effect to both.
Ledford v. Faulkner, Ky., 661 S.W.2d 475 (1983).
In light of the foregoing, we cannot accede to your construction of KRS 142.050(7)(k) and are instead of the opinion that the term "individuals" as employed in that provision does not encompass corporations.
We are mindful of the cases you rely upon that hold that the term "individuals" may include corporations.
National Accounting Co. v. Dorman, 11 F.Supp. 872 (E.D. Ky. 1935);
Georgetown College v. Webb, Ky., 230 S.W.2d 84 (1950). However, the meaning of a word may vary greatly depending upon the context or circumstances in which it is used.
Towne v. Eisner, 243 U.S. 418, 425, 28 S. Ct. 158, 62 L. Ed. 372 (1918);
District of Columbia v. Carter, 409 U.S. 418, 420, 93 S. Ct. 602, 34 L. Ed. 2d 613 (1973). Indeed, the very cases you cite clearly indicate that the definition of "individuals" they adopted would not be applicable in other statutory contexts or factual situations -- i.e., where the context required a different meaning.
National Accounting Co. v. Dorman, supra, at 873;
Georgetown College v. Webb, supra, at 86. Your letter implicates just such a context, one that requires that the term "individuals" means natural persons only.
Our opinion in this matter is further fortified by the firmly established principle that exemptions from taxation are disfavored and strictly construed, with any and all doubts resolved against the application of an exemption.