CoMMoNlirEALTt"l oF KENTUCHY

OrrIqE OF THE ATTONNEY GENEEAL

JACK CONWAY

ATTORIIEY GSNEBAL

CArrToL BulL-DlnG' SulTE I I A

7OO CAFI'AL AVEiIUE

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May 30, 2fi4

Rep. Jonilenkins20L0 O'BrienCourtShively, Kf 40216

Rs Insffance Premirrmo tax

Dear Rep. Jenkirrs:

Althougtr this is not a forrral Opinion of the Attorney General' we hopl

that the views errpressed herein will be of sorne assistance' You have inquired'

whether a coruolidated local govemment may dedicate revenue from an insur-

,*". pr*tit*" tax to an.affordable housing t.u$t fund. We advise that a consol-

idated local gover$merrt may dedicate reve1}ue from atinsutxrce peltrrinnts tax

to aIl a-ffordable housing tto*t n*a. The purpcme of the insurance pterdums tax

must be epecified in the ordinance enacting the tarc'

The Louisville Me&o Government is e consol.idated local government

containing a city of the firs't class pirm'uar* to KRS Chapter 67C' }n a previous

letrer datJd S*ft. Zf, 201,3, we advised tl'rat a consolidated local governrnent does

not have the arrthority to dedicate an insurance premiurrrs tax to an affofdable

houoing trust fund. dur previous letter relied upon KRS 91.200(5), which pro-

vides tt"t Au proceed.s &om license taxes in a consolidated local government

"shall be paid to the secreffi and treasurer of the sinking fund'" We previous$

adviscd that KRS 91.200(5) requires that the prxeeds from licenee taxes must be

ded.icated to a sinking t*a; a consotid.ated. local government could not dedicate

insurance premium taxs to an afford.able housing trust fund' At iesue is whether

we should reconsider our prior analysls in light oI KRS 67'1"01(2xd),'which

provides that "a consoJrdated.local governrnent . . . is a eeparate classification of

government which posssses the greater Povrers conferted upon, and iS subiect

OPPoRTUNITY

ffiA* EAUAL EMPLoYER M/F/o

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to the iesser restrictions applicabte to' county and cities of the first

class'" KRs 94281(1) provides that'cities

"f-'11 l"*:i-': llryYi-:*:l: *co{ect any and uu d** provided Ior in Section 181 of the constituson"' KY'

Colwr. $ 181 and KRS 92'2S1(U are the genTal.sour::t d taxing authority for

cities. IGs g2.2s1tal -p-in""gy provides hat "this section ohall also be subjectto

the provisions or *xs g12win cities of the first class having a sinking fund'"

KRS92.281(a)thucexpresslyprovidesthathxwirracityofthefirstdasswithasiri<inglrrrrda$subjecttoKRSgt'200.KRS91.200(2)providesthat,,licerrse{eeson a.bueiness, trade, occupation, or profession for revenue purl'CI8es may be

imposed . . . on . . (b) nt" n* pro{its o{ all bwiaesses, professiol"ts/ or ocsuPa-

tiorrsfromactivitiesconaucteainthecity.,,.KRggl.200(5)providesthaJ,,lilerye'fees or taxes ,f',uff i* .oUu"t"a by the clutmissioners of the sinking fund' The

proceeds from the taxes shaltr be'paid to the secxetarT and the fteasuret of the

sinking tund . . . ., }gs 91.200(5) tiruc requiree u .tg of the i:rst class to dedicate

ali of the revenue fromlicerrse ta:<es to the citls sinking fund'

In our previous letfier, we relied' upon the futt- Y.ltnuisville Mebo con-

tained a city of the first class, and. not tuing Presented with any sbtutory author-

ity tCI the co:rtrary, concluded that l"olli$Yiil; Metro was bound by KRS 91'200(5)

to dedicate all [cense tryes to ib sinking fund. Horuevl+ you havl asked {or

ctarification or o* frio, opinion,n light of KRs 67c'1-01(2xd)' whidr provides

that,a consolidatedlocal government is neither a city govemment nor a county

government . . . but it is alparaie classification of gavernment whidr posses$es

tlre greater tr}0wels con{ured upon" and is sublect to the lesser restrictrons appli-

cable to, county gorru*,tuq and cities o{ the first class"' KRS 67C'L01(2Xd)

establishes the distinct entity of the eonsolid'ated' local goverrrrrent' and provides

that it has all of the pow#ana the lessef of the restricfions applicable to coun-

tres and citiee.

Although KRS 91.200(5) requires cities of the first class to dedicate license

taxes to the cit5/s sinking fundo a county tax is not so restricted' KRS 91A'0s0(14)

expressly p*,;d* that,,a county may impose a license.fee or tax,, on irrsurafice

companies. There is no parallei requirement tlrat a county must dedicate the

proceeds of a licerrse fee or tax jo a sinking fil1ld. since a mnsolidated local

government is only sublect to the 1eesff of the resbictionE appiicable to counties

I

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and cities, and, the res'tfictions on the use of inrurarrce' premium fees or taxeF are

leseer for counfles, a congolidated locai govemurent is only subject to couxly

restrictions on insurance premium lees or taxes'

Given that a consolid"ated.l0cal govelmert is only sub,ect l mulB

restrictions on the use of insuraffe prd:o* {ees or taxgs' t}e resUictions t'hat

apply {epen{ uponwhether tlhe insuranee prenriurn chdrge is a fee or a hx' }cY'

Cor'1sf,. S 180 prortrideo that "evyy *di*ot* and resolution passed by any

county, city, town or municipal boad ot local legislative body' levying a tax'

sha1l specify distinctiy tlte pr:rpose for which 8tiid tax is levied'" similarly' KRS

6s.100(1)providestlrat,,allcountytaxesshallbeteviedbyorderorreso}utionofrhe fiscal court. Td;*p*" ror w6ictt each tax is levied st*11 be specified in the

otder or resolution " . ' '; fv' CoNs"r' $ 180 and KSS 68'100 both require a county

to specify the purpooe of any tax levied'

However, fur Pute NIik Produsrs & Diattibators Ass'ra v' Morfun' 7?5

s.w,zd n6 tKy,ttlll,it was held tt'at,,in respect of section 180 of the Consfitu-

tion, it has been held in this iruisdiction *ai Ucens* feeo are not a 'tax' in tt$

senge of that section of the Corstihrtioo and it is not necassary that an ordinance

impooing license fees specify the purpoees o{ yme-1rf ihat license fes are

authorlabd by section rg1 of the constilfltion" ld' at218-19' License fees are not

taxes for the purposes of $ 180. lnsteadit}ey are governed by Kv' coNsr' $ 181'

whichprovides *:.,*r*rr"ct"ra Assernblymay delegate'the power to counties '

. . to impose and" coll*t tifensb fees . . .-on ftaachises, trades, occupafions and

profeesions-' $ 181 arrthorizes counties to impose fees onprofesions' and

contains no requirexrentthat fte purpose of thefee be specified'

Both lGs 91.200 and KRS 91A.080 tmtlicense fues and taxee onirrsurance

compaerie* as interc}angeable, and allow the irnposition of either' The diednction

between a licenee Iee and a license tax i8 ftat "a licen$e carriss with it a rcgUlato-

ry function and a ficense tax is a hx on the right to exercise a business ptivilege

which ie commonly regulated, carrying with it * *:f* of the police power

and superrristo4. an Jcupatior,al ta;<*is founded solely on tln pmduction o{

revernle." Cornrnissionsrs E Sir*l"g Pund o! City af l*'lnfiCIitle o' Hopy/n' 613 S'W'2d

62L,6?3(Ky.Cr app. rgao). License fees are authodzed under the police po\^retr

for regula*on of indirsgies, while license taxes are authorized for the purposes of

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genefating revenue, II} dlis casb, if the proceeds of an insffance PreilLium durge

are dedictted to an affordable housing tni.st iund, they would not be {or the

regulation of the insurance industry, but wauld be used to generate revenue'

Therefore, the iirsurance premiurn "i*g" would^ constitut: a talr' and be subject

to rhe requirements in Ky. coxsr. $ 180 and KES 68.100(1) that the p.urpose of the

tax must be speeified in the ordiaance'

h: eurnmary, we advise that a consolidated local govetnrnerrt'may dedi-

eate the proceeds of an infilrance premiums tax to any valid public pllxpo:e'

includinf an aJford^able housing hru$t/ as long as that purpose is specilied in the

ordinance levYi4g the tax,

Yours verY mlY,

IACf(COI{WAYATTORNEY GENERAL

wfr^*MattfamesAssistant AtiorneY General

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