Request By:
Mr. Tim Firkins
Property Valuation Administrator
Jefferson County
504 Fiscal Court Building
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; By Alex W. Rose, Assistant Attorney General
In a letter dated November 24, 1981, from your predecessor, Robert J. Butler, Jr., to the Attorney General, a review of OAG 76-2 was requested since the fact situation involved therein has once again arisen and there is a conflict of views as to the correctness of this opinion.
The situation involves that part of § 170 of the Kentucky Constitution that grants a "homestead exemption. " Section 170 provides that each year persons 65 years of age or older or totally disabled persons are entitled to exempt up to $6500 of assessed valuation of "real property maintained as the permanent residence of the owner . . . and contiguous real property. . ." The question presented is whether an individual 65 years of age or older or totally disabled who owns the improvements but leases the land upon which the improvements rest, is entitled to the exemption or must the individual own both the land and improvements.
OAG 76-2 states that an individual must own both the land and improvements to be entitled to the exemption. It is our opinion, however, that OAG 76-2 is incorrect. That opinion relies on cases defining the word "homestead. " See KRS 132.220(3) and Fayette County Board of Supervisors v. O'Rear, Ky., 275 S.W.2d 577 (1955), interpreting the statute. The word "homestead" is not used in § 170, but rather "real property maintained as the permanent residence, " is the wording. Those cases defining "homestead" are, therefore, inapplicable. The opinion's reliance on the O'Rear case is misplaced. O'Rear interpreted KRS 132.220(3) to mean that the owner of a farm which was leased in its entirety is responsible for the payment of property taxes on the value of the farm regardless of the lease. The lease did not create a separate taxable estate. That holding, however, does not apply to the situation involved herein.
Here two distinct owners are involved -- the owner of the land and the owner of the building. If the owner of the building is otherwise qualified, i.e. over 65, but does not own the land, the exemption is still applicable if the building is the permanent residence of the owner. It is irrelevant that he does not own the land. The tax situation is that the qualified owner of the building should receive the exemption on the value of the building. The owner of the land should pay tax on the full value of the land. Furthermore, an owner of land who does not own the building cannot qualify for the exemption under this section since the intent of the Constitution is to apply the exemption to permanent residences.
Compare OAG 75-624 in which it is stated that the owner of a mobile home who has had the wheels removed from the home and has placed it on a permanent foundation qualifies for the homestead exemption even if the mobile home is situated on a rented lot.
In OAG 77-624 it is stated that where an individual builds a home on land that is leased for 99 years and the lease is transferable, then the individual owning the home is entitled to the homestead exemption. It should be noted that according to that OAG the leasehold interest is also taxed to the lessee, not the lessor. The length of the lease herein is unknown. It is our opinion, however, that the length of the lease is irrelevant to the question of entitlement to the exemption. The length of the lease pertains only to the taxability and to which person is responsible for payment of the tax.
For the above-cited reasons, OAG 76-2 is no longer applicable.