Latest occupational tax decision goes against Corbin

 The latest round of legal wrangling between the city of Corbin and the Knox County Fiscal Court over occupational taxes has gone Knox County’s way, but Corbin leaders vowed this week they will appeal the decision in the near future.

"I really don’t have a lot to say about it other than we are disappointed, but not surprised," said Corbin Mayor Willard McBurney in the wake of last weeks ruling.

At issue this time around is a controversial law called "The Stivers Amendment" for the State Senator who proposed the measure and guided it through the General Assembly last year. The law essentially thwarted numerous court rulings and roughly three years of litigation over the issue of which local government – the city of Corbin or the Knox County Fiscal Court – would receive the money collected from the occupational tax.

In an order dated May 21, Knox Circuit Judge Greg Lay ruled in favor of Knox County by saying the law did not amount to "special legislation" which is forbidden by the Kentucky Constitution.

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.

Both sides argued the case in April after several delays. The city of Corbin, along with local businessman Joe "Butch" White, filed the lawsuit asking for a hearing on the matter last summer.

The "Stivers Amendment" was added to HB 499, a "tax amnesty" bill that was eventually signed into law by Kentucky Gov. Steve Beshear. The law allowed citizens delinquent in paying state taxes to do so without heavy penalties and fees they would face otherwise. As of February, the state had collected roughly $60 million in back taxes because of the amnesty law.

Corbin leaders say Beshear opposed the "Stivers Amendment," but couldn’t veto the amnesty law because of its necessity.

In court, attorneys for Corbin argued that one reason why the amendment was illegal was because it was attached to a non-germane law. Lay, in his ruling, said since the title of the amnesty law claims to be about "fiscal maters and declaring an emergency" that it doesn’t run afoul of the constitution.

"We feel that anyone that thinks that amendment that was put on there is not special legislation must believe there’s not a cow in Texas," McBurney said.

Knox County Judge-Executive J.M. Hall said he was "very pleased" with the ruling, but didn’t understand why Knox County was named as a party to the latest litigation.

"This deals with an important issue. Corbin had sued Knox County, saying it was not constitutional what Senator Stivers had done. They actually sued us and what the court’s ruling was that Corbin and Joe Butch White had no standing," he said. "First of all, I don’t know why we were sued over that. That was a decision that the legislators had made. They should have sued the legislators…"

In his ruling, Lay further said the "Stivers Amendment" couldn’t be considered special legislation because the General Assembly had good reasons to pass it. It set a moratorium on the issue until 2014, which Lay said "allows the General Assembly time to assess the impact of the credit now that the most recent census data is published." He also agreed with attorneys for Knox County who argued that the law protects the "budgetary interests of local governments from upheaval due to population changes" and protects "cities and counties" from threatened financial hardship if one of the other decides to pass an occupational tax.

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. Knox County passed its tax in 1999. 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.

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.

Before the "Stivers Amendment" was passed, Corbin was awaiting only a lower court declaration regarding the population of Knox County before beginning to collect the tax. Since previous rulings had already decided the issue, it was destined to go Corbin’s way.