Where did a Kentucky taxpayer seek a refund of real estate transfer tax?

Plain-English summary

In 1996, Kentucky's Attorney General said someone seeking a refund of real estate transfer tax had to present the claim to the county that collected it. County clerks collected the tax and deposited it in county funds, although a state statute imposed it. The state's two tax-refund statutes cited in the opinion applied to taxes paid into the state treasury, so the AG said neither provided the route for this county-held tax.

The AG treated the refund claim as governed by the common-law rule for taxes paid involuntarily. He said the county had to determine whether payment was voluntary. If it was voluntary, the county had no authority to refund it, even if the tax was improperly paid. The opinion assigned no refund-processing role to the Revenue Cabinet or the Attorney General.

Currency note

This opinion was issued in 1996. 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

Property owners and deed filers

The opinion directed a real estate transfer-tax refund application to the county that collected the tax. The AG identified involuntary payment as the condition under the common-law refund rule he cited. He expressly said an improper tax payment was not refundable by the county if made voluntarily.

County clerks and county officials

The AG explained that clerks collected the tax and paid it into the county general fund. That made the county the only governmental unit able to refund it under his analysis. The county had to decide whether the claimant paid voluntarily.

State tax administrators

The Revenue Cabinet could answer county questions about how the tax applied, but the opinion said refund requests belonged with the collecting county. The Attorney General also had no part in processing those requests.

Common questions

Should a Kentucky transfer-tax refund claim have gone to the Revenue Cabinet?
The AG said no. It belonged with the county that collected and held the tax.

Could the county refund a transfer tax paid voluntarily by mistake?
Under the rule the AG stated, no. He said a voluntary payment could not be refunded even if the tax had been improperly paid.

Why did the state tax-refund statutes not control?
The AG said KRS 134.580 and KRS 134.590 applied to taxes paid into the state treasury. The transfer tax went into the county's general fund.

Background and statutory framework

KRS 142.050 imposed and administered the real estate transfer tax, while county clerks collected it for county funds. The opinion distinguished KRS 134.580 and KRS 134.590 because they concerned state-treasury taxes. For the refund condition, the AG cited Spalding v City of Lebanon and Coleman v Inland Gas Corporation on involuntary tax payments.

Citations and references

• KRS 142.050
• KRS 134.580
• KRS 134.590
• Spalding v City of Lebanon, 156 Ky 37, 160 SW 751 (1913)
• Coleman v Inland Gas Corporation, 231 Ky 637, 21 SW2d 1030 (1929)

Source

• Landing page: https://www.ag.ky.gov/Resources/Opinions/Opinions/OAG96-022.htm

Original opinion text

OAG 96-22

April 29, 1996

Subject: Refund of Real Estate Transfer Tax

Written by: Ross T. Carter

Requested by: Pete A. Smith

Syllabus: Refunds of real estate transfer tax are available only through the common law and must be directed to the county that collected the tax

OAGs cited: None

Statutes construed: KRS 142.050; KRS 134.580; KRS 134.590

Opinion of the Attorney General

The question addressed is the proper procedure to apply for a refund of real estate transfer tax.

The real estate transfer tax has elements of both a state and a local tax. Although it is imposed by state statute and the Revenue Cabinet has authority to prescribe regulations necessary to administer the tax, it is collected by county clerks and deposited in the county general fund. KRS 142.050(4), 142.050(5).

This hybrid nature of the tax has led to confusion about the procedures applicable to refund requests. On behalf of a client, Pete A. Smith presented a claim to the Revenue Cabinet, who told him to obtain an opinion from the Attorney General. Although the Attorney General has issued numerous opinions on the real estate transfer tax, the Attorney General has no role in the refund application process. The Revenue Cabinet's confusion is no doubt precipitated by the scarcity of applications for refund of this particular tax.

Kentucky has two statutes dealing with tax refunds: KRS 134.580, the general statute, and KRS 134.590, which deals only with property taxes and taxes held unconstitutional. Both statutes apply only to taxes that have been paid into the state treasury. Because the real estate transfer tax is paid into the county treasury rather than the state treasury, the refund statutes do not apply.

In Kentucky, tax refunds are available under the common law when taxes are paid involuntarily. Spalding v City of Lebanon, 156 Ky 37, 160 SW 751 (1913); Coleman v Inland Gas Corporation, 231 Ky 637, 21 SW2d 1030 (1929). Because the real estate transfer tax is deposited in a county general fund, the county is the only unit of government able to refund it. It is therefore the opinion of the Attorney General that applications for refund of real estate transfer tax must be directed to the county that collected the tax rather than to the Revenue Cabinet or to this office. The county must then determine whether the tax was paid voluntarily; if it was, then the county has no authority to refund the tax, even if the tax was improperly paid.

Questions that the county may have regarding the application of the tax are properly directed to the Revenue Cabinet. KRS 142.050(5); 131.140(2).

A. B. Chandler III

Attorney General

Ross T. Carter

Assistant Attorney General