Corbin poised to challenge occupational tax law as unconstitutional

City leaders in Corbin are poised to vote Thursday to challenge a new state law that short-circuited an inevitable victory in a four-year-long legal battle with the Knox County Fiscal Court over collection of occupational taxes.

A special meeting to consider new legal action is set for 8:30 a.m. Thursday morning. Corbin Mayor Willard McBurney said the move is intended to get the law declared "special legislation," which is illegal. In Kentucky, it is unconstitutional for the state legislature to pass laws that unfairly target single communities or areas, or which focus on singular local problems.

"What got bulldozed through was connected to a House Bill that had nothing to do with occupational taxes and it unfairly targeted the city of Corbin," McBurney said. "All this was, and everyone knows it, was just a perfect example of someone who was politically desperate. This was just a desperate move to get votes."

In April, the General Assembly approved House Bill 499 March 30 – a measure that deals with interest and collection fees for tax delinquencies, and allows the Revenue Cabinet to develop a process for information sharing between licensing agencies along with other revenue proposals.

Attached to the rather technical bill were several amendments, and it’s one by State Senator Robert Stivers (R-Manchester) that has the city’s elected officials in a twist. Stivers senatorial district includes Knox County.

Stivers proposed changing the law to bar city taxpayers from claiming any credit or offset against a county occupational tax from applying "to a city and county unless both the city and county have both levied and are collecting license fees on March 15, 2012."

Corbin passed a citywide one percent occupational tax in 2005. Through an agreement with the Whitley County Fiscal Court, the city keeps 75 percent of revenue garnered from the tax in the Whitley County side of Corbin. But city leaders have never been able to reach a similar agreement with Knox County leaders, and so never collected the tax. Instead, the city filed a lawsuit in 2008 to settle a dispute over the issue. Corbin has long claimed city residents can claim a credit against the county tax, so that it would not "stack," – forcing Corbin residents and businesses in Knox County to pay two percent instead of just one.

For all intents and purposes, Corbin won the legal battle, but lost the war when Kentucky Gov. Steve Beshear signed the bill into law.

Corbin leaders have argued that the county provides little to nothing to city residents who live in the Knox County side of Corbin. In any event, they said they have tried numerous times to work out a deal similar to the one hashed out with Whitley County, but have been rebuffed.

Stivers argued in favor of the amendment, claiming that if Corbin were able to keep all occupational taxes generated within its city limits, it would compromise the ability of Knox County to provide services to its citizens because it would severely hamper the county’s budget.

The new legal action will be filed in Knox Circuit Court. McBurney said the city’s legal team has not given him any indication how long it will take to get a final ruling on the issue.

Local leaders have estimated that roughly $800,000 to over $1.2 million annually of tax revenue is at stake.