October 5, 2015

Kentucky Board of Tax Appeals Addresses Its Jurisdiction

Written By

By Erica Horn and Maddie Schueler

The Kentucky Board of Tax Appeals (“KBTA”) recently held it lacked jurisdiction over disputes concerning the State’s 911 fund.  The fund is operated and maintained by the Commercial Mobile Radio Service (“CMRS”) Board.  In T-Mobile South LLC v. Kentucky Commercial Mobile Radio Serv. Emer. Telecommunications Bd.[1], T-Mobile appealed a ruling issued by the CMRS Board denying T-Mobile’s claim for a refund of service charges it had remitted.  The case was held in abeyance pending final resolution of Virgin Mobile U.S.A., L.P. v. Commonwealth of Kentucky[2], which addressed the same substantive issue, i.e., the collection of the service charge by wireless prepaid phone providers.  The CMRS Board moved for dismissal based on lack of jurisdiction.  Interestingly, the motion to dismiss initially was denied by the KBTA without explanation, but the issue was revisited when new members of the KBTA took office. 

The KBTA’s jurisdictional statute, KRS § 131.340, empowers it to hear final rulings “of any agency of state government affecting revenue and taxation”.  The issue presented was whether the KBTA had jurisdiction to hear an appeal in which the petitioner sought a refund of the 911 service charge.  Pursuant to statute, the CMRS Board collects the 911 service charge from wireless providers to implement and maintain an enhanced wireless 911 service.  The service charge goes into the “CMRS fund”. 

The parties’ arguments centered upon whether the service charge is a “fee” or a “tax”.  Unlike taxes, fees must bear a relationship to the cost of administering the regulatory program.  T-Mobile argued the service charge is a tax because the amounts collected from the service charge exceed those expended in administration and enforcement of the CMRS statutes.  However, the CMRS Board argued, and the KBTA agreed, that the statute governing the service charge – KRS § 65.7631 – clearly provides that all funds collected are used to establish and improve E911 services.  T-Mobile also claimed the service charge was paid directly to the Kentucky State Treasurer, and this direct payment made the charge a tax, although information at oral argument revealed the money was then transferred from the General Fund to the CMRS fund.  The KBTA found that whether money was initially deposited into the state treasury or a special fund was not dispositive of whether the charge was a “fee” or “tax”.  Because it found the service charge was a fee over which it had no jurisdiction, the KBTA dismissed T-Mobile’s appeal.


[1] File No. K09-R-24 (KBTA Sept. 23, 2015).

[2] 2012-SC-000621-DG & 2012-SC-00626-DG (Ky. Dec. 18, 2014) (to be published).