affordable housing conway letter

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May 30 advisory letter on whether Louisville can earmark an insurance tax increase for the city's affordable housing trust fund.






    FhANKroFr' KENrucl$ 4oso tt50e! ss6'53OO

    rex: (8O?! 544-eOe4May 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 hoplthat 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 taxto aIl a-ffordable housing tto*t n*a. The purpcme of the insurance pterdums taxmust be epecified in the ordinance enacting the tarc'

    The Louisville Me&o Government is e consol.idated local governmentcontaining a city of the firs't class pirm'uar* to KRS Chapter 67C' }n a previousletrer datJd S*ft. Zf, 201,3, we advised tl'rat a consolidated local governrnent doesnot have the arrthority to dedicate an insurance premiurrrs tax to an affofdablehouoing 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 beded.icated to a sinking t*a; a consotid.ated. local government could not dedicateinsurance premium taxs to an housing trust fund' At iesue is whetherwe should reconsider our prior analysls in light oI KRS 67'1"01(2xd),'whichprovides that "a consoJrdated.local governrnent . . . is a eeparate classification ofgovernment which posssses the greater Povrers conferted upon, and iS subiect


    ffiA* EAUAL EMPLoYER M/F/o

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    to the iesser restrictions applicabte to' county and cities of the firstclass'"

    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


    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'"


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


    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 anycounty, 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 theotder 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?5s.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 areauthorlabd 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' andcontains no requirexrentthat fte purpose of thefee be specified'

    Both lGs 91.200 and KRS 91A.080 tmtlicense fues and taxee onirrsurancecompaerie* as interc}angeable, and allow the irnposition of either' The diednctionbetween 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 powerand superrristo4. an Jcupatior,al ta;

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

    are dedictted to an affordable housing 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 subjectto 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,


    wfr^*MattfamesAssistant AtiorneY General



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