Affordable Housing Conway Letter
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Transcript of Affordable Housing Conway Letter
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
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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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