Request By:
Requested by:
Ernie Sampson
Opinion
Opinion By: Albert B. Chandler III, Attorney General; Ross T. Carter, Assistant Attorney General
Subject: Municipal taxation of life insurance premiums
Written by: Ross T. Carter
Syllabus: Tax authorized by KRS 91A.080 applies to all premiums paid in first year, including amounts paid in advance
Statutes construed: KRS 91A.080(2)
OAGs cited: None.
Opinion of the Attorney General
KRS 91A.080 authorizes cities, counties, and urban-county governments to impose a tax on the privilege of engaging in the business of insurance. The tax is levied against the insurance premiums collected. For life insurance policies, the tax may be levied against the first year premium only.
We have been asked whether the tax on life insurance premiums applies to all premiums collected in the first year, or only to premiums collected during the first year and attributable to policy coverage for the first year. We conclude that the tax applies to all premiums collected during the first year regardless of how the premiums are applied.
KRS 91A.080(2) says:
Any license fee or tax imposed by a city, county, or urban-county government upon an insurance company with respect to life insurance policies, may be based upon the first year's premiums, and if so based shall be applied to the amount of the premiums actually collected within each calendar quarter upon the lives of persons residing within the corporate limits of the city, county, or urban-county government.
The expression "first year's premiums, " taken alone, is indeed ambiguous; arguably the expression could refer either to premiums collected during the first year or to premiums paid for one year's worth of policy coverage. That ambiguity is removed in the next sentence of the statute, which clarifies that the tax "shall be applied to the amount of the premiums actually collected. " We do not believe that "premiums actually collected" can be construed to mean anything other than "premiums actually collected. " Those are the plain words and the plain meaning that must be ascribed to them. KRS 446.080; Inter-County Rural Electric Co-op Corporation v Reeves, 294 Ky 458, 171 SW 2d 978 (1943).
The statute makes no distinction as to the purpose for which the premium is collected. If an insured make one lump sum payment to provide coverage for a period of years, that entire lump sum is subject to tax. Any other interpretation would require us to read into the statute words that are not there.