Local leaders hoping for ruling on occupational tax law by year’s end

Local leaders are hoping to have a court ruling by the end of the year on a controversial, retroactive law that allows Knox County to keep all occupational tax revenue collected within the city of Corbin, passed in the final hours of the 2012 General Assembly.

Called "The Stivers Amendment" for the State Senator who proposed the measure, the law essentially thwarted numerous court rulings and roughly three years of litigation over the issue of which government – the city of Corbin or the Knox County Fiscal Court – would receive the money collected from the occupational tax.

House Bill 499, an emergency tax amnesty bill, was signed into law on April 11. Attached to the bill was an unrelated amendment that changed the ground rules between cities and counties for how occupational taxes are distributed.

The amendment was introduced by State Senator Robert Stivers (R-Manchester) whose 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." Both Knox County and Corbin have one percent occupational license tax levies in place.

Corbin seemed poised to soon start collecting the tax as court rulings had gone the city’s way. That is, until the new law was passed.

Soon thereafter, Corbin filed another lawsuit in Knox Circuit Court claiming the law was "special legislation." 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.

"We are hoping for the end of the year on this, but it’s not set in stone. That’s kind of what are lawyers are telling us," said Corbin Mayor Willard McBurney. "What Senator Stivers has done has really put a hardship on the city of Corbin. He has cost us a lot of money. To me, all of this was unnecessary."

Stivers defended the move, saying that allowing Corbin to collect the tax would result in the Knox Count Fiscal Court being unable to provide necessary services to its citizens. But his defense also seems to indicate the legislative move was indeed aimed at the situation between Corbin and Knox County, with little applicability anywhere else in the state.

Stivers also denied the law was special legislation, saying it could impact other communities and that the bill it was attached to was germane since it dealt with taxation.

McBurney said Kentucky Attorney General Jack Conway refused to take a look at the law and offer a ruling, saying his office was "too busy" to deal with the situation.

"We have also talked to some other legislators from around the state to show it to them and let them know what is going on … what has happened to us," McBurney said. "They can’t believe how it was done."

McBurney said he met with Kentucky Gov. Steve Beshear’s Chief of Staff before the bill was signed in an effort to lobby for a veto of the legislation, to no avail. Since the bill wasn’t an appropriations measure, Beshear could not utilize his line-item veto. A wholesale veto of the legislation would have been unpopular and, most likely, overridden during the General Assembly’s special session. It received widespread support in both houses when it passed in late March.

Originally, Stivers offered the law as a standalone bill, but it gained little traction in the Kentucky Senate.

To date, Corbin has spent roughly $200,000 in legal fees for litigation regarding the occupational tax dispute.