Corbin leaders vow court battle over attempts to change occupational tax law

There is now competing legislation in the Kentucky General Assembly to change how cities and counties divvy up occupational tax revenues, but leaders from the city of Corbin say if either of the versions is signed into law, they plan to fight it in court as illegal legislation.

Kentucky Senate President David Williams (R-Burkesville) and State Senator Robert Stivers (R-Manchester) both have introduced amendments to a tax amnesty bill that would essentially change the ground rules for how occupational taxes are divided.

Leaders in Corbin and Knox County are keenly interested in the fate of these measures because it would directly affect a four-year-long fight between the county and city governments over the issue.

"The net effect of these floor amendments is to permanently deprive Corbin of over $1 million per year in revenues, and redistribute that money to Knox County," reads a press release, distributed by the city of Corbin and its attorney’s this week.

"Corbin is faced with either a permanent and substantial loss of revenue or double taxing Corbin residents – something Corbin leadership has refused to contemplate."

Recently, the Kentucky Supreme Court refused to hear an appeal filed by Knox County over the issue, paving the way for Corbin to begin keeping all of the one percent tax on employee gross wages and business net profits. All that stands in the way of Corbin beginning collection of the tax is a hearing over county population likely to go Corbin’s way.

In response, earlier this month, Stivers introduced SB 200 as a way to fend off the court decisions that would allow Corbin to keep all tax revenue collected within the city limits. Currently, all the money goes to the Knox County Fiscal Court. Recently, Stivers introduced an amendment to House Bill 499 that mirrors his senate bill.

Also attached is an amendment by Williams, whose senatorial district includes the Whitley County side of Corbin, which would change occupational tax distribution as well, but is somewhat more favorable to cities. It says that a city that has levied the tax, but has not collected it before March 15, 2012, would get to keep one half of the money collected upon passage of the law.

City leaders worry that even if Williams’ more favorable amendment becomes law, it could imperil a deal they already have in place with the Whitley County Fiscal Court that allows the city to keep 75 percent of the taxes collected inside the city limits.
Stivers has defended his version of the legislation as a way to protect Knox County from being financially unable to provide necessary services to its citizens if it is deprived of revenue from the Corbin portion of the tax.

Corbin originally filed a lawsuit asking for a ruling on the issue in 2008. In that time, Corbin Mayor Willard McBurney said the city has spent about $165,000 on legal fees to fight the case.

Corbin City Commissioner Joe "Butch" White, who is a plaintiff in the lawsuit against the Knox County Fiscal Court, said Tuesday that Corbin would take the fight "back to the courts" if the law is changed.

"We would most definitely do that," White said. "There’s no question about it."

Todd McMurtry, the attorney who is representing the city in the lawsuit, said he feels both measures are "special legislation," something that is illegal under the Kentucky constitution. Essentially, laws cannot be crafted to target single communities or areas.

"The reason Corbin thinks that the proposed floor amendments are special legislation is because they apply only to Corbin and because there is no natural reason for introducing the legislation other than undoing the [Kentucky] Court of Appeals decision that was affirmed by the Kentucky Supreme Court."

HB499 has passed the house and is current in Senate committees being discussed.

Knox County officials have been silent on the issue.