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Kentucky Court of Appeals Upholds Statutory Provision Related to License Tax Credit Against Constitutional Challenge

By Erica Horn and Maddie Schueler

The Kentucky Court of Appeals recently affirmed a ruling of the Knox Circuit Court upholding the constitutionality of KRS § 68.197(8), which prescribes the applicability of providing for a credit against the county occupational license tax for a city occupational license tax – from March 14, 2012 through July 15, 2014. See City of Corbin and Joe White v. Knox County, 2013-CA-000984 and 2013-CA-001090 (May 23, 2014). The provision provides that any credit of city license fees against county license fees existing between a city and county as of March 15, 2012, shall remain in effect as it is on March 15, 2012. This provision also states that the provisions of subsection (7) providing for a credit against the county occupational license tax for a city occupational license tax shall not apply to a city and county unless both the city and county have levied and are collecting license fees on March 15, 2012.

In 1999, the Knox County Fiscal Court established and began collecting an occupational license tax on trades and professions within Knox County. In 2005, the City of Corbin, a city partially situated within Knox County, established a similar license tax. However, the City of Corbin never has attempted to collect its occupational license tax. Therefore, under KRS § 68.197(8), the statutory credit would be unavailable to the City’s citizens through July 15, 2014.

The City of Corbin and Joe White, a business owner and resident of Corbin and Knox County, sought a declaration that KRS § 68.197(8) is unconstitutional. The City and White claimed the provision is unconstitutional because: (1) it was enacted in violation of the title or notice requirement of Section 51 of the Kentucky Constitution; (2) it violates the constitutional prohibition against special legislation set forth in Sections 59 and 60 of the Kentucky Constitution; and (3) it is arbitrary, unreasonable, and discriminatory in violation of Sections 2 and 3 of the Kentucky Constitution.

The Court of Appeals disagreed, finding KRS § 68.197(8) is constitutional in all respects. The Court noted that the title or notice requirement requires the title of an act to provide at least “a clue” as to the act’s contents in order to prevent surprise or fraud upon the legislature. The Court found this requirement is satisfied with respect to KRS § 68.197(8). The Court noted that the bill providing for KRS § 68.197(8) was entitled, “AN ACT relating to fiscal matters and declaring an emergency.” The Court found credits of city occupational license taxes against county occupational license taxes are logically included within the broad category of “fiscal matters,” as “fiscal” generally is understood as relating to public revenue. Therefore, the Court found the title of the act gives fair notice of its provisions and does not violate Section 51 of the Kentucky Constitution.