Could Lexington-Fayette's urban-county government set an occupational tax above one percent?
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This page answers the general question as of 1994. Ask about yours and see what current Kentucky law means for your facts, with citations you can check.
Plain-English summary
In 1994, Kentucky's Attorney General's office concluded that Lexington-Fayette Urban County Government was not bound by KRS 68.197's one-percent county occupational-tax cap when it acted under the separate city authority available to urban-county governments. KRS 67A.060 allowed an urban-county government to exercise the powers of counties and of the highest-class city within it. The opinion read KRS 92.280(2), the city occupational-license provision it quoted, as carrying no one-percent maximum.
The inquiry argued that an urban-county government was deemed a county under KRS 67A.040(1)(a), so it should follow the county cap. The office said that did not remove its specific statutory ability to act with city powers under KRS 67A.060. Its conclusion was about the statutes as they stood in 1994.
Currency note
This opinion was issued in 1994. 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.
Historical summary
Urban-county governments
The opinion said KRS 67A.060 expressly gave urban-county governments both county powers and powers of cities of the highest class within the county. It therefore treated Lexington-Fayette's use of city occupational-tax authority as a statutory choice, not an attempt to evade the county-law limit.
Taxpayers and local tax officials
The office distinguished the one-percent restriction in KRS 68.197 from KRS 92.280(2), which it said authorized qualifying cities to impose occupational license fees without that numerical cap. It concluded that Lexington-Fayette's tax above one percent did not violate the provisions it considered.
Common questions
Did the county tax statute's one-percent cap automatically apply to Lexington-Fayette?
The AG's office said no when the urban-county government used the city authority available under KRS 67A.060 and KRS 92.280(2).
Why did the office treat an urban-county government as able to use city taxing power?
It pointed to KRS 67A.060, which expressly allowed an urban-county government to exercise powers of the highest-class city within the county as well as county powers.
Did the opinion identify a one-percent cap in the city provision?
No. It quoted KRS 92.280(2) and said that provision did not carry the maximum imposed by KRS 68.197.
Background and statutory framework
The Vice Mayor forwarded a resident's letter challenging Lexington-Fayette's occupational tax above one percent. The resident relied on the county cap in KRS 68.197 and the county designation in KRS 67A.040(1)(a). The AG's office responded that KRS 67A.060 separately authorized city powers and that the city tax statute, KRS 92.280(2), had no equivalent cap. It also said the asserted upper population limit was not present in the KRS 68.197 text it reviewed.
Citations and references
- KRS 68.197: county occupational-tax provision and one-percent limit discussed.
- KRS 67A.040(1)(a): urban-county county-status provision raised by the requester.
- KRS 67A.060: urban-county authority to exercise city powers.
- KRS 92.280(2): city occupational-license authority relied upon by the office.
Source
Original opinion text
OAG 94-6
February 8, 1994
Hon. Teresa Ann Isaac, Vice Mayor
Lexington Fayette Urban County Council
Lexington-Fayette Government Center
200 East Main Street
Lexington, Kentucky 40507
Re: Whether Urban County May Lawfully Impose Occupational Tax in Excess of 1% Limit Set Forth in KRS 68.197.
Dear Mayor Isaac:
By note dated December 21, 1993, you asked, in substance, that this office treat the letter of Jim Spencer, of Lexington, Kentucky, which accompanied your note, as a request for an Attorney General's opinion. Mr. Spencer's letter, dated December 22, 1993, indicated, in substance and in part, that KRS 68.197 establishes a 1% limit on an occupational tax, that KRS 67A.040(1)(a) deems all urban county governments as counties for purposes of state laws, and that:
The Fayette Urban County government under the guise of being a 2d class city, is in violation of the spirit of the law if not the letter of the law by exceeding this 1% limit.
We do not agree with Mr. Spencer's view as expressed in his December 22, 1993 letter.
In our view, because KRS 67A.060 authorizes urban county governments to exercise the constitutional and statutory powers of cities of the highest class within the county, an urban county, in imposing an occupational tax, is not bound by the 1% limit set forth in KRS 68.197. An urban county may, by virtue of the specific authority provided by KRS 67A.060, impose an occupational tax pursuant to KRS 92.280(2), which does not carry the 1% limit set forth in KRS 68.197. Discussion follows.
Mr. Spencer's letter indicates that KRS 68.197 places a 1% limit on "occupation taxes in all counties over 30,000 and under 300,00 population in Kentucky."
By way of technical clarification, our review of such provision does not disclose the 300,000 population maximum stated by Mr. Spencer as being provided in KRS 68.197.
Mr. Spencer's letter further indicates that KRS 67A.040(1)(a) deems all urban county governments as counties for purposes of state laws. Presumably because of the designation of an urban county as a county (KRS 67A.040(1)(a)), Mr. Spencer believes that the Lexington Fayette Urban County Council is bound, at least in spirit, by the 1% limitation on an occupation tax imposed by a county, pursuant to KRS 68.197.
KRS 92.280(2) provides:
The legislative body of each city of the second to sixth class may impose license fees on stock used for breeding purposes, and on franchises, trades, occupations and professions and may provide for the collection of such fees.
It will be noticed that the above provision does not carry a 1% maximum. At the same time, KRS 67A.060 provides, in part, that:
(1) Urban-county governments may exercise the constitutional and statutory rights, powers, and privileges, immunities and responsibilities of counties and cities of the highest class within the county[.]
It follows that in enacting an occupational tax under the authority of a city, pursuant to KRS 92.280(2), an urban county does not "act under the guise" of being a city, as indicated by Mr. Spencer's letter, but acts instead pursuant to specific statutory authorization. KRS 67A.060(1).
For the reasons indicated, in our view the Lexington-Fayette Urban County Government is not in violation of either the spirit or letter of the law in enacting an occupational tax in excess of the 1% limit expressed in KRS 68.197.
Sincerely,
Gerard R. Gerhard
Assistant Attorney General
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