Local Occupational License Tax Information Available on Secretary of State Website
In the 2012 regular legislative session, the General Assembly enacted HB 277, which creates new sections of KRS 67.750 to 67.790 to facilitate efficient collection of local occupational license taxes.
It is important to note that the new law only applies to cities, counties, school districts and special districts that impose an occupational license tax on net profits or gross receipts. If your city only collects a payroll tax, the new law does not apply.
HB 277 required each tax district that imposes an occupational license tax on net profits or gross receipts to submit the following items to the Secretary of State before November 1, 2012:
1) an electronic or hard copy of its occupational license tax return form or forms;
2) accompanying instructions; and
3) a copy of its occupational license tax ordinance.
If your city has not submitted the documents listed above, please do so immediately. Missing the filing deadline could result in denial of services and funding from any state agency.
If your city did submit the required documents by November 1, 2012, but has since amended the tax ordinance or form or has plans to do so, the city must provide a copy to the Secretary of State within 30 days of the amendment.
Hard copies of the tax documents should be mailed to:
700 Capital Avenue
State Capitol Building, Suite 152
Frankfort, KY 40601
ATTN: Noel Caldwell
Electronic copies should be emailed to:
The legislation also requires the Secretary of State to post the local tax ordinances and forms on its website. Please visit this site to find listings of the filed documents, searchable by city name.
For more information on the requirements of HB 277, contact KLC’s Member Legal Services Department.
Legislative Prayer in the Spotlight
Many cities in Kentucky open their public meetings with a short prayer or invocation. This practice was upheld as constitutional by the U.S. Supreme Court decades ago, but recently legislative prayer policies have taken center stage in a flurry of court cases across the nation. Both the U.S. Supreme Court and the 6th Circuit Court of Appeals will soon be revisiting the issue and hopefully offering updated legal guidance for cities in Kentucky. Stay tuned for updates once these cases are decided, and look for an article discussing legislative prayer in the upcoming issue of Kentucky City Magazine.
You can also link to a sample invocation policy here.
Please be sure to review the policy with your city attorney to ensure it meets the needs of your city. For more information, please contact the KLC Member Legal Services Department.
FAQs About the PSC
Cities often have questions regarding how municipal utilities interact with the Public Service Commission (PSC), and under what circumstances municipal utilities are subject to PSC regulation. Gerald Wuetcher with Stoll Keenon Ogden, PLLC, has prepared a guide to assist cities with their frequently asked questions regarding the PSC and municipal utilities.
KLC Serves as "Friend of the Court" in Pivotal 911 Funding Case
KLC Serves as "Friend of the Court" in Pivotal 911 Funding Case
It's no secret that funding for local 911 emergency services is a crucial issue for Kentucky cities. It has been and remains a top legislative priority for KLC (see article in Kentucky City magazine) and recently the issue rose to the top of the Kentucky court system as well. Earlier this month, the Kentucky Supreme Court heard oral arguments in the case of Greater Cincinnati/ Northern Kentucky Apartment Association, Inc. v. Campbell County Fiscal Court. While the case involves the legality of a county ordinance assessing 911 funding fees, the question is of equal importance to KLC members, leading KLC to file an amicus curiae brief advocating cities' interests in protecting a meaningful user fee structure and effective 911 funding options.
KRS 65.760 authorizes cities and counties to fund 911 services through a subscriber charge imposed on each telephone landline, or by levying "any special tax, license or fee not in conflict with Constitution and statutes of this state." To make up from declining revenue from landline phones, the Campbell County Fiscal Court enacted an ordinance imposing a flat annual fee on each occupied residential and commercial unit within the county to fund 911 emergency services. The apartment association sued, claiming the fee was not a valid user fee or any other statutorily authorized fee, and therefore was an unconstitutional tax. The association argued that to be a valid user fee, the 911 fee must only be charged for each actual use of 911 services -- i.e., each time a person calls 911 to report an emergency, he should be charged a fee.
The legal distinction between taxes and fees has never been clear, even to Kentucky's highest court. "User fees" are not defined under Kentucky law. KLC got involved in this case to urge the Supreme Court not to adopt a ruling that all user fees must be based on each actual use of a particular service. Such a ruling would not only render the statutory 911 funding options virtually meaningless, leaving cities with no feasible method to assess a fee for funding the services, but would also harm the flexibility the Legislature granted cities to assess any user fee for city services.
KLC asked the Court not to dismiss the concept that user fees could be based on availability of use, or the relationship to the benefit to be received from the service, rather than a rigid, "fee-per-actual-use" standard. The result, especially for 911 services, would be absurd: If individuals must pay a high fee every time they dial 911, they will be more reluctant to call. Deterring the use of emergency services could never be something the Legislature intended. KLC worked to persuade the Court to preserve broad 911 funding options for this vital local service, and avoid limiting the flexible user fee statutory scheme the Legislature has given to cities. KLC will update members on the outcome of this important case as soon as the Court issues its ruling.
The KLC Legal Advocacy Program represents the collective legal interests of KLC's member cities in the courts throughout the Commonwealth. As apparent in this case, much of the law affecting municipal government in Kentucky is shaped and made in the courts.
KLC will intervene as amicus curiae or otherwise assist municipal counsel with the preparation of a city's case-in-chief where KLC's participation is likely to positively advance cities' collective legal interests by establishing legal precedent that will help cities more effectively serve their citizens. In the past five years, KLC has participated in or assisted with at least 12 cases, and notably helped with important victories for cities regarding legislative prayer, open records exemptions, and annexation.
Any member city or agency may make a request to the KLC for intervention or assistance. For more information about this program or the latest cases in which KLC has participated, please contact Laura Ross, Managing Counsel for Member Legal Services, at 800-876-4552. To read KLC's amicus brief in the Greater Cincinnati case, click here.
Time to Take Your Tourism Commission in for a Tune-Up
It has been almost 50 years since the first Kentucky statutes authorizing local tourism and convention commissions (TCCs) were enacted. Since 1968, the numerous amendments to these laws show that the General Assembly has revisited them many times. Unfortunately, many cities can't say the same. Some TCCs have existed for decades without oversight and direction from the local governments that created them.
Think about it: If you buy a car, and never consult the operator's manual or take it in for service, would you expect it to take you where you want to go? Would you take your hands off the wheel and hope for the best?
TCCs can be an effective vehicle city governments can use to promote their communities, but only if city officials and TCC members all have a clear understanding of how the commission is supposed to work.
So let's dust off the statutes and your local ordinances, and start by taking a look at the fuel that keeps the whole thing running: the money. State law establishes certain funding and financial requirements, but also leaves some decisions to the local government that created the TCC. It's important to know the difference.
KRS 91A.390 is the statute that largely governs tourism revenue, including where it comes from and how it is distributed. Here are some of the basic rules you need to know to comply with the law. (NOTE: Consolidated local governments, urban county governments, and multicounty TCCs may have different requirements and should consult the statute.)
1) Annually, every TCC must submit a request for operating funds to the local governing body or bodies that established it. This is a mandatory, and very important, part of the funding process. While the local government is required to include the TCC in its annual budget, it needs the TCC's request to be submitted before the budget is enacted so that it can consider the TCC's needs when allocating funds.
2) The legislative body of the local government(s) that established the TCC is required to enact a transient room tax, and use revenue from this tax to fund the TCC. The tax rate cannot exceed three percent. If the legislative body wishes, it can impose an additional special transient room tax of up to one percent to fund operating expenses of a convention center.
3) The local government body or bodies must enact an ordinance providing for enforcement and monthly collection of the transient room tax. The details of who collects the tax and how it is enforced are completely within the discretion of the local government. While a TCC is required by statute to have its own treasurer to manage the funds allocated to it, the law does not require the TCC to be the collection agent, so cities may feel free to collect the tax themselves. However, there is one limit on collections: hotel and motel operators who are subject to the tax may not receive a collection fee for collecting the tax.
4) In addition to funding the operation of the TCC, transient room tax revenue can also be used to fund costs associated with acquiring and operating facilities that are useful in promoting tourism and convention business. The statute requires the local governing body to determine the amount to be used for this purpose, with the advice and consent of the TCC.
5) The remaining balance of the transient room tax revenue must be used only for developing and promoting convention and tourist activities and facilities. It is important to note that, unlike restaurant tax revenue discussed below, the law does not require the transient room tax revenue balance to be turned over to the TCC. This means the local governing body could itself utilize the remaining balance, as long as it is using the money for tourism-related purposes. However, the transient room tax proceeds may not be used to subsidize any hotel, motel, or restaurant.
6) If the TCC does not spend all of the funds allocated to it during the fiscal year, the money must be used to make up part of the TCC's budget for the following year.
7) In addition to the transient room tax, cities formerly classified as fourth or fifth class as of January 1, 2014 may enact a restaurant tax to provide tourism revenue (check the Department for Local Government registry for qualifying cities). The tax may not exceed three percent of the retail sales of all restaurants in the city. Unlike the transient room tax, money collected from the restaurant tax must be turned over to the TCC. Any portion of an ordinance that restricts the use of the tax revenue is in danger of being voided by a court. However, cities and TCCs can and do enter into consensual agreements regarding how the revenue will be spent.
8) All money collected from both the transient room tax and the restaurant tax must be kept in a separate account.
Ultimately, it is important that city officials recognize that TCCs are creatures of city governments, funded primarily by city tax dollars. As such, the city has the responsibility to ensure its tax revenue is properly managed and its TCC continues to be a valuable resource for the community.
So there's your TCC finance tune-up. Get in the driver's seat, and see how far your city can go.
The KLC Legal Team is compiling quarterly updates of the Kentucky Attorney General Opinions, as well as Open Record and Open Meeting Opinions
Office of the Attorney General (OAG) Quarterly Summary from KLC
As an additional service to members, KLC Member Legal Services attorney Chris Johnson has summarized recent Kentucky Attorney General opinions that are relevant to cities.
For specific questions or more information, contact the KLC Member Legal Services team at 800.876.4552.