Could La Grange require every visiting lawyer to buy a city business license?

Plain-English summary

Kentucky’s Attorney General concluded that La Grange could impose an occupational business license on resident attorneys and those who practiced in the city regularly and continuously. But the opinion found the city’s reported effort to license all attorneys appearing in its courts improper when it reached lawyers with only isolated or infrequent contacts.

The AG distinguished ongoing practice in the city from a visit to handle a particular client matter. The city’s general power to impose occupational license fees did not, in the AG’s view, make every visiting lawyer subject to the fee.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Could La Grange charge resident attorneys a business license fee?

Yes. The opinion said the city was generally free to impose a license tax on attorneys resident in the city.

Did one court appearance make an out-of-town lawyer subject to the license?

The AG said isolated or infrequent business was insufficient. The opinion described La Grange’s reported attempt to license all court attendees without regard to regularity as improper.

Could a nonresident lawyer with ongoing work in the city be licensed?

The opinion said continuous and regular business likely would be subject to a fee. It cited authority permitting nondiscriminatory licenses on nonresidents with regular or continuous connections to the city.

Background and statutory framework

The Kentucky Bar Association asked whether La Grange’s ordinance was valid and how far it could reach. The AG identified Ky. Const. §181 and KRS 92.281 as sources of city licensing power. It relied particularly on Evers v. City of Mayfield, 85 S.W. 697, 698 (Ky. 1905), which distinguished resident practice from a specific client assignment, and H.H. Leet Furniture Co. v. City of Richmond, 357 S.W.2d 329 (Ky. 1962), which discussed isolated business activity.

Citations and references

Authorities: Ky. Const. §181; KRS 92.281; Evers v. City of Mayfield, 85 S.W. 697, 698 (Ky. 1905); H.H. Leet Furniture Co. v. City of Richmond, 357 S.W.2d 329 (Ky. 1962).

Source

• Landing page: https://www.ag.ky.gov/Resources/Opinions/Pages/Opinions.aspx
• Original Word document: https://www.ag.ky.gov/Resources/Opinions/Opinions/OAG14-002.doc

Original opinion text

OAG 14-002

June 13, 2014

Subject: Whether LaGrange City Ordinance Section 110.02 which imposes an occupational license fee on attorneys working in the city of LaGrange is a valid exercise of the city’s power

Requested by: John D. Meyers

Executive Director

Kentucky Bar Association

Written by: Jacob C. Walbourn

Syllabus: A “business license” may only be imposed on residents or attorneys who “regularly and continuously” practice within the city of LaGrange, and attorneys with “isolated or infrequent” contacts with the city should not be subject to the licensing requirement.

Statutes construed: Ky. Const. §181; KRS 92.281

OAGs cited: OAG 82-543

Opinion of the Attorney General

Kentucky Bar Association Executive Director John D. Meyers has requested an opinion of this office on whether LaGrange City Ordinance Section 110.02 is a valid exercise of the city’s power. Specifically, he has inquired whether the ordinance is unconstitutional and/or otherwise invalid. As discussed below, it would appear that while generally the ordinance is an acceptable exercise of the city’s power, the current enforcement efforts are an invalid exercise of the city’s power.

By way of background, the La Grange City Council passed an ordinance which requires any attorney or law firm “engaged in the practice of law within the city limits of La Grange” to “make an application for a business license.” Attorneys who violate this ordinance would be subject to monetary penalties. According to the Kentucky Bar Association, this ordinance is actively being enforced not only against law firms and attorneys with offices within the city limits of La Grange, but also against attorneys from other areas of the Commonwealth (or beyond) who “have had little or no contact with the City in their practices.” The question, then, is not only whether the license fee is generally appropriate, but also, to what extent it may be enforced against attorneys with only limited contacts with the city of La Grange.

Cities draw their power to impose license fees/taxes from both the Kentucky Constitution and statute, and impose the same on any variety of occupations. See Ky. Const. §181 and KRS 92.281. In imposing license fees on various professions, “it has long been recognized that a legislative body may discriminate between classes in the imposition of license taxes.” City of Lexington v. Motel Developers, Inc., 465 S.W.2d 253, 257 (Ky. 1971) (internal citations omitted). “The principle [is] that a legislative body may not, without some rational basis, select a certain type of business enterprise and impose upon it a substantially heavier tax than that imposed upon other businesses within the same general classification.” Id.

Procuring a business license in order to practice law in a specific community is a practice that has been required, and subjected to challenge via litigation, for over a century. In 1897 and 1899, the cities of Louisville and Lexington both imposed a flat fee on the practice of law, and such was challenged in the Courts. Both cities’ ordinances were upheld as permissible and constitutional. See Elliot v. City of Louisville, 40 S.W. 690 (Ky. 1897); Baker v. City of Lexington, 53 S.W. 16 (Ky. 1899). It appears, however, it was not until 1905 that an issue was raised regarding attorneys who may come temporarily to a community to appear in a specific case, but then return to their home communities. In that case, the Court actually upheld the city of Mayfield’s ordinance imposing a license fee on “resident” attorneys, but noted “the power given by the statute to tax occupations refers to occupations followed in the city, and not to people who come there under specific employment to attend to a special matter.” Evers v. City of Mayfield, 85 S.W. 697, 698 (Ky. 1905). Indeed, the Court went on to note “it would be a great hardship if lawyers were required to pay an occupation tax in every town to which they might be called to attend to some specific business for a client.” Id. The business license requirement for attorneys has been litigated intermittently since that time, but it appears that each time a challenge has been raised, the imposition of the license fee requirement has been upheld by the Courts with respect to “resident” attorneys. See, e.g. Yantis v. City of Lexington, 94 S.W. 653 (Ky. 1906); Dreidel v. City of Louisville, 105 S.W.2d 807 (Ky. 1937); Newlin v. Stuart, 117 S.W.2d 608 (Ky. 1938)

The principles articulated in the “attorney license fee” cases have been extrapolated to other professions. In fact, the Evers decision cited supra has been cited as recently as 1962 in striking down a license fee imposed on delivery drivers who only occasionally made deliveries to Richmond. See H.H. Leet Furniture Co. v. City of Richmond, 357 S.W.2d 329 (Ky. 1962). The Leet Furniture case is actually quite instructive on what is permissible and what is not in regards to license fees under the Kentucky Constitution. Taxes and licenses imposed on non-residents have been permitted to stand, but only when such a tax/license is non-discriminatory and when the non-resident’s connections to the taxing community are continuous or regular. Id. at 331-32. “As a general rule, the performance of a single act, or even a number of isolated acts, pertaining to a particular business, will not be considered as engaging in or carrying on such business within the meaning of a law imposing a license tax; but it may be so considered where an intent to engage in the business is clearly apparent.” Id. at 332, citing Karnes v. City of Benton, 80 S.W.2d 558 (Ky. 1935). See also W.T. Sistrunk & Co. v. City of Paris, 266 S.W.2d 656, 657 (Ky. 1924) (“It is well settled that a municipality may impose a license fee upon nonresidents who perform an act or engage in an occupation within its limits, provided no discrimination is made against them in favor of the municipality imposing the charge… [but] not to people who come there under specific employment to attend to a special matter.”); accord OAG 82-543 (“It is important that such an occupational license tax can only be applied to those regularly engaged in carrying on a trade or occupation within county boundaries.”)

There also may exist an argument that any regulation regarding attorneys is preempted, as either the Commonwealth, or the Supreme Court (based on the Constitutional amendment passed in 1975) is solely responsible for regulation of the state Bar. However, these arguments have typically been unavailing in the Courts, both prior to and after the Constitutional amendment placing regulation of attorneys under the exclusive authority of the Kentucky Supreme Court. See Dreidel, 105 S.W.2d 807; Newlin, 117 S.W.2d 608; Ex parte Auditor of Public Accounts, 609 S.W.2d 682 (Ky. 1980).

On balance, then, it appears that there is no general issue with imposing a license fee on attorneys practicing in a community. However, there needs to be a determination of the amount of business being done in that community. Isolated or infrequent business in a community is not a sufficient basis to impose a license fee. Conversely, continuous and regular business likely would be subject to a license fee. Based on the information provided, it appears La Grange is attempting to license all attorneys attending court in La Grange regardless of the regularity of such appearances. Based on Evers and Leet Furniture, this is an improper exercise of the city’s power. Accordingly, while generally the city of La Grange is free to impose a license tax upon the city’s resident attorneys, it is inappropriate to impose a licensing requirement upon attorneys with only isolated or infrequent contacts with the city.

Jack Conway

Attorney General

Jacob C. Walbourn

Assistant Attorney General