Can a Tennessee county redirect wheel tax money to a different purpose than the one the county originally said the tax would fund?

Subject

What "county purposes" means in Tenn. Code Ann. § 5-8-102(b), and whether and how a county may change the stated intended use of motor vehicle privilege tax (wheel tax) revenue.

Plain-English summary

Senator Frank Niceley asked the AG two related questions about the wheel tax, the county-level tax on the privilege of operating a motor vehicle within the county. Both questions matter because counties commonly levy the wheel tax with a stated purpose (a road bond, a school construction fund, a particular debt) and later face pressure to redirect the money to something else.

On Question 1, the AG defines "county purposes" by reference to Tennessee Supreme Court doctrine. The phrase appears in both Article II, § 29 of the Tennessee Constitution and the wheel tax statute. The Supreme Court has defined county purposes as charges "fixed upon the counties" appertaining to the general administration of county affairs (police duties, court expenses, and the like), and the term has been read to include any purpose for which the county may appropriate funds as "expressly given by or necessarily implied from state law." Section 5-9-101 et seq. and § 5-9-201 et seq. set out express appropriation authorities. Other statutes can limit the use of wheel tax revenue. The opinion gives two examples: counties cannot use wheel tax revenue to fund solid waste collection because § 5-19-109(b) does not list it as an authorized funding source, and counties cannot use it for school purposes without "specific statutory authorization."

On Question 2, the AG draws a clean line: no retroactive change, prospective changes only, and the procedure to change the use must mirror the procedure used to levy the tax. The "no retroactive diversion" rule is a long-standing Tennessee principle: tax revenue raised for a stated purpose must be used for that purpose. The AG cites Conger and Pollard for the doctrine, and applies it here. Going forward, the county can change the use, but it must use the levy procedure in § 5-8-102(c) (which provides for action by the county legislative body, with the option of approval by referendum or by a two-thirds vote on second reading).

What this means for you

If you are a county considering redirecting wheel tax money

The opinion holds that a county may not change the stated intended use of wheel tax revenue retroactively. Revenue already raised for a stated purpose must be put to that purpose. The use may be changed prospectively, but only by following the same procedure required for levying the tax under Tenn. Code Ann. § 5-8-102(c).

If you are a county finance director or budget officer

The opinion holds that once wheel tax revenue has been raised for a stated use, it must be used for that purpose; it may not be diverted to other uses. The opinion does not address budgeting or accounting practices.

If you are a county attorney

The opinion holds that "county purposes" under § 5-8-102(b) are the purposes for which the county may appropriate funds as expressly given by or necessarily implied from state law, and that a prospective change in the stated use must be approved through the § 5-8-102(c) levy procedure. The opinion does not analyze any particular county's levy resolution or specify which of the § 5-8-102(c) approval paths a given county must use.

If you are a taxpayer or advocacy group watching county finance

The opinion restates the principle, drawn from Tennessee Supreme Court decisions, that tax revenues raised by a county for stated public purposes may not be diverted to other uses. AG opinions are persuasive, not binding.

If you are a state legislator considering wheel tax legislation

The opinion reads "county purposes" against Article II, § 29 of the Tennessee Constitution and the Supreme Court's interpretation of that phrase. It notes that a county's use of wheel tax revenue may be limited by other law, and that counties may not use the tax for school purposes without specific statutory authorization.

Common questions

Q: What does "county purposes" mean for the wheel tax?
A: The opinion holds that "county purposes" under § 5-8-102(b) are the purposes for which the county may appropriate funds as expressly given by or necessarily implied from state law, citing State ex rel. Witcher v. Bilbrey, 878 S.W.2d 567, 571 (Tenn. Ct. App. 1994). The opinion notes that the General Assembly has expressly authorized appropriations for the purposes specified in §§ 5-9-101 et seq. and §§ 5-9-201 et seq., and that a county's use of the revenue may be limited by other law.

Q: Can wheel tax revenue fund schools?
A: The opinion states that counties may not use wheel tax revenue for school purposes without specific statutory authorization, citing City of Harriman v. Roane County, 553 S.W.2d 904, 907 (1977).

Q: Can a county change the stated use of wheel tax revenue?
A: The opinion holds that a county may not change the stated intended use retroactively. Revenue already raised for a stated use must be put to that use. A county may change the use prospectively by following the same procedure required for levying the tax under § 5-8-102(c).

Q: What is the levy procedure under § 5-8-102(c)?
A: The opinion states that § 5-8-102(c) details the ways in which imposition of the wheel tax may be approved, and that a prospective change in the stated use must be approved as provided in that subsection. The opinion does not itself recite each approval path.

Background and statutory framework

Tennessee's constitution authorizes the General Assembly to "authorize the several counties and incorporated towns in this State, to impose taxes for County and Corporation purposes, respectively, in such manner as shall be prescribed by law." Tenn. Const. art. II, § 29. The General Assembly exercised this authority to allow counties to levy a "motor vehicle privilege tax as a condition precedent to the operation of a motor vehicle within the county," § 5-8-102(b), commonly known as the wheel tax.

The phrase "county purposes" is not defined in § 5-8-102 itself. It mirrors the same phrase in Article II, § 29, which the Tennessee Supreme Court interpreted in Nashville & C. & St. L. R. Co. v. Franklin County, 73 Tenn. 707 (1880), as "purposes [that] meet such charges in the way of expenditure as by law are fixed upon the counties, and appertain to the general administration of county affairs." A county purpose may share the same objective as a state purpose under Hancock v. Davidson County (1937). And the doctrinal capstone in State ex rel. Witcher v. Bilbrey, 878 S.W.2d 567 (Tenn. Ct. App. 1994), reads "county purposes" as those for which the county may appropriate funds as "expressly given by or necessarily implied from state law."

The "no retroactive diversion" doctrine has deep roots. State ex rel. Davidson County Board of Education v. Pollard, 124 Tenn. 127, 136 S.W. 427 (1911), and State ex rel. Conger v. Madison County, 581 S.W.2d 632 (Tenn. 1979), establish that revenue raised for a stated purpose must go to that purpose. AG Opinions in 84-121, 92-41, and 99-137 apply the rule to specific wheel-tax fact patterns.

For the procedural question on changing the use, the AG borrows from Op. Tenn. Att'y Gen. 15-29 (Apr. 1, 2015), which addressed the analogous problem of changing the wheel tax rate. That opinion held that the levy procedure governs because the statute provides no separate procedure for change. The same logic applies here.

Citations

Constitutional and statutory provisions:

• Tenn. Const. art. II, § 29 (county/municipal taxing power)
• Tenn. Code Ann. § 5-8-102(b) (wheel tax)
• Tenn. Code Ann. § 5-8-102(c) (procedure for levying)
• Tenn. Code Ann. §§ 5-9-101 et seq.; 5-9-201 et seq. (appropriation authority)
• Tenn. Code Ann. §§ 5-19-101 et seq.; § 5-19-109(b) (solid waste collection funding limits)

Cases:

• Nashville & C. & St. L. R. Co. v. Franklin County, 73 Tenn. 707 (1880), defining county purposes
• Hancock v. Davidson County, 104 S.W.2d 824 (Tenn. 1937), overlap of county and state purposes
• State ex rel. Witcher v. Bilbrey, 878 S.W.2d 567 (Tenn. Ct. App. 1994), modern formulation
• City of Harriman v. Roane County, 553 S.W.2d 904 (Tenn. 1977), schools require specific authorization
• State ex rel. Conger v. Madison County, 581 S.W.2d 632 (Tenn. 1979), no diversion of raised revenue
• State ex rel. Davidson County Bd. of Educ. v. Pollard, 136 S.W. 427 (Tenn. 1911), same

Prior AG opinions:

• Op. Tenn. Att'y Gen. 84-121 (Apr. 10, 1984)
• Op. Tenn. Att'y Gen. 92-41 (May 6, 1992)
• Op. Tenn. Att'y Gen. 99-137 (July 22, 1999)
• Op. Tenn. Att'y Gen. 15-29 (Apr. 1, 2015)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2023/op23-05.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
March 8, 2023
Opinion No. 23-005

Uses of Wheel Tax Revenue and Changing the Intended Use

Question 1

What are "county purposes" within the scope of Tenn. Code Ann. § 5-8-102(b), which authorizes counties to levy a motor vehicle privilege tax and to use that tax revenue for "county purposes"?

Opinion 1

"County purposes" within the scope of Tenn. Code Ann. § 5-8-102(b) are the purposes for which the county may appropriate funds as "expressly given by or necessarily implied from state law." State ex rel. Witcher v. Bilbrey, 878 S.W.2d 567, 571 (Tenn. Ct. App. 1994).

Question 2

May the intended use of the revenue from the motor vehicle privilege tax levied by a county under Tenn. Code Ann. § 5-8-102(b) be changed, and if so, by what process may the intended use be changed?

Opinion 2

While a county may not change the stated intended use of the motor vehicle privilege tax revenue retroactively, it may change the use prospectively by following the same procedure as the procedure required for levying the tax, which is detailed in Tenn. Code Ann. § 5-8-102(c).

ANALYSIS

1. Use of Wheel Tax Revenue for "County Purposes"

The General Assembly has the "power to authorize the several counties and incorporated towns in this State, to impose taxes for County and Corporation purposes, respectively, in such manner as shall be prescribed by law." Tenn. Const. art. II, § 29. Pursuant to that constitutional power, the General Assembly has authorized counties "to levy for county purposes by action of its governing body a motor vehicle privilege tax as a condition precedent to the operation of a motor vehicle within the county." Tenn. Code Ann. § 5-8-102(b) (2022 Supp.). This tax is known as the wheel tax.

The term "county purposes" is not defined in the wheel tax statute, but it mirrors the term "county purposes" in article II, § 29, of the Constitution which the Tennessee Supreme Court has defined as "purposes [that] meet such charges in the way of expenditure as by law are fixed upon the counties, and appertain to the general administration of county affairs—police duties, the expenses of courts and the like." Nashville & C. & St. L. R. Co. v. Franklin County, 73 Tenn. 707, 710 (1880). Also, a county purpose may share the same objective as, or have a common purpose with, a state purpose. Hancock v. Davidson County, 171 Tenn. 420, 104 S.W.2d 824, 827 (1937). Thus, "county purposes" are the purposes for which the county may appropriate funds as "expressly given by or necessarily implied from state law." State ex rel. Witcher v. Bilbrey, 878 S.W.2d 567, 571 (Tenn. Ct. App. 1994). For example, the General Assembly has expressly authorized counties to appropriate funds for the purposes specified in Tenn. Code Ann. §§ 5-9-101, et seq. (2015 and 2022 Supp.), and §§ 5-9-201, et seq. (2015). But the ability of counties to use revenue from the tax may be limited by other law. For example, this Office has opined that revenue from the wheel tax could not be used to pay the costs of a waste disposal pick-up service within the county but outside the municipalities under Tenn. Code Ann. §§ 5-19-101, et seq., because the tax was not one of the permissible means of financing stated in Tenn. Code Ann. § 5-19-109(b). Op. Tenn. Att'y Gen. 99-137, at 2 (July 22, 1999). Also, counties may not use tax revenue for school purposes "without specific statutory authorization." City of Harriman v. Roane County, 553 S.W.2d 904, 907 (1977).

2. Changing the Intended Use of Wheel Tax Revenue

A county may not retroactively change the stated intended use of revenue from the wheel tax. Once the revenue has been raised for a stated use, that revenue must be put to that use. As this Office has opined, "tax revenues raised by a county for stated public purposes may not be diverted for other uses." Op. Tenn. Att'y Gen. 84-121, at 5 (Apr. 10, 1984) (noting the decisions of the Tennessee Supreme Court summarized in State ex rel. Conger v. Madison County, 581 S.W.2d 632, 637-638 (Tenn. 1979)). County tax revenues "must be used for the purposes for which they were raised." Op. Tenn. Att'y Gen. 92-41, at 2 (May 6, 1992) (citing State ex rel. Davidson County Board of Education v. Pollard, 124 Tenn. 127, 136, 136 S.W. 427, 429 (1911), and City of Harriman, 553 S.W.2d at 907).

But a county may change the stated intended use prospectively. And if a county chooses to do so, it would be required to effect the prospective change through the same procedure as the procedure required by Tenn. Code Ann. § 5-8-102(c) for levying the wheel tax. Although the wheel tax statute does not provide a separate procedure for changing the intended use of the wheel tax, as this Office opined in the analogous context of changing the rate of the wheel tax,

[t]he fact that the statute provides no separate procedure for changing the tax rate supports what both logic and the legislative history dictate: to increase or decrease a wheel tax rate, a county must follow one of the two alternate statutory procedures for levying a wheel tax.

Op. Tenn. Att'y Gen. No. 15-29, at 2 (Apr. 1, 2015) (emphasis added). Accordingly, a prospective change in the stated use of the wheel tax revenue must be approved as provided in Tenn. Code Ann. § 5-8-102(c), which details the ways in which imposition of the wheel tax may be approved.

JONATHAN SKRMETTI
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

NICHOLAS G. BARCA
Senior Assistant Attorney General

Requested by:
The Honorable Frank Niceley
State Senator
425 5th Avenue North
712 Cordell Hull Building
Nashville, Tennessee 37243-0117