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.

TRANSCRIPT

  • CoMMoNlirEALTt"l oF KENTUCHY

    OrrIqE OF THE ATTONNEY GENEEAL

    JACK CONWAYATTORIIEY GSNEBAL

    CArrToL BulL-DlnG' SulTE I I A7OO CAFI'AL AVEiIUE

    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 afford.able 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

    OPPoRTUNITY

    ffiA* EAUAL EMPLoYER M/F/o

  • Page2

    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

    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

  • I1

    Page 3

    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

    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 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;

  • Page4

    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 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,

    IACf(COI{WAYATTORNEY GENERAL

    wfr^*MattfamesAssistant AtiorneY General

    zA13/#48e

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