Judge takes arguments in Corbin, Knox tax dispute under advisement

Corbin and Knox County officials are now playing the waiting game after Circuit Court Judge Greg Lay announced he would take their respective arguments in the ongoing occupational tax dispute under submission.

At a hearing Thursday in Knox Circuit Court, Lay heard from attorneys for both parties concerning their respective motions for summary judgment. Corbin and Knox County, both have one-percent occupational tax levies on the books. However, when Corbin passed its ordinance, city officials declined to begin collecting the tax until an agreement could be reached with Knox County to split the revenue from the tax the county collects from businesses and employees within the Corbin City Limits.

Corbin has a similar agreement with Whitley County, which also has an occupational tax levy in place. Under the terms of that agreement, Whitley County collects the occupational taxes and then gives 75 percent of the revenue collected within the Corbin City Limits to Corbin. The county has a similar agreement with Williamsburg.

Corbin’s attorney in the case, Nick Birkenhauer, argued that the, “Stivers’ Amendment” to the tax amnesty bill, which was passed in the Kentucky General Assembly in 2012, violates the Kentucky Constitution.

Birkenhauer stated that the Kentucky Constitution forbids legislation that creates a classification that discriminates with no rational reason.

In this case, Birkenhaurer said the Stivers amendment used an arbitrary date of March 15, 2012. Cities and counties who both had occupational tax levies in place prior to that date could continue to collect the taxes as they had previously done. 

The amendment placed a two-year moratorium on other cities or counties enacting an occupational tax.

“The court of appeals says this is so unusual of a situation, it is highly unlikely that it will repeat itself in another county in the commonwealth,” Birkenhauer told the court.

In addition, Birkenhauer argued the “Stivers Amendment” is unconstitutional because Kentucky Law requires such amendments to be relevant to the legislation.

“This is a classic case of logrolling,” Birkenhauer said, describing the process of inserting random pieces of legislation into larger pieces of legislation in order to get them through the general assembly.

“This amendment had nothing to do with the Tax Amnesty Act.”

In arguing for Knox County, attorney Douglas McSwain argued that Corbin lacks standing to ask that the law be struck down because city officials have failed to show how the law has injured the city. In addition, McSwain noted the law does not affect Corbin’s ability to collect the occupational tax.

In countering the argument about the law creating an arbitrary special class, McSwain pointed to Bardstown and Nelson County and Winchester and Clark County, as others who may be affected by the law.

When asked by Lay, McSwain noted there are at least 34 counties across the state where the law may have an impact. However, without additional discovery it remains unknown how many cities within those counties may be subject to the law.

Finally, McSwain argued that Corbin has brought suit against the wrong entity, noting that it was the State of Kentucky, not Knox County, which enacted the law in question.

“I am struggling to understand why we are standing here,” McSwain said.

When Lay asked McSwain who Corbin should have sued, he replied that is something for the city and its attorneys to determine.

In initially offering the amendment, Senator Robert Stivers (R-Manchester) whose district includes Knox County, explained that the loss of revenue in Knox County would force the fiscal court to cut services.

Though no official breakdown has ever been provided, several officials have estimated that Knox County brings in $800,000 to $1.2 million from the businesses and employees in the Corbin City Limits.

When Knox County Judge-Executive J.M. Hall was asked if there was a way for the two sides to sit down and work out an agreement to resolve the issues, he replied there is nothing to work out. He reiterated there is nothing to stop Corbin from collecting the occupational tax.

Lay gave no indication as to when he would issue a ruling.