Request By:
William Donald Overbey
Overbey Building - 291 Main Street
P.O. Box 7
Murray, Kentucky 42071
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Robert L. Chenoweth, Assistant Deputy Attorney General and Chief Counsel
As the attorney for the Murray Board of Education, you have asked the Office of the Attorney General to consider an issue that involves the distribution of a utility gross receipts license tax jointly levied by the city board and the county board and apportioned between the two districts.
As background to your questions, you informed us that the Murray Board of Education and the Calloway County Board of Education made a joint determination to request the Fiscal Court of Calloway County to levy a utility gross receipts license tax for schools as provided in KRS 160.613. This resolution was adopted by the two school districts on June 24, 1969, and was acted upon by the Fiscal Court of Calloway County on July 8, 1969. You further informed us that following the enactment of the utility gross receipts license tax, the respective boards of education have continued to collect the tax as provided under KRS 160.613 and have made distribution of same as required by KRS 160.644. You stated that, at the present time and for the last eight or nine years, customers residing within the school boundaries of the Murray Board of Education have paid approximately 60% of the total utility gross receipts license tax. However, you related, when the funds are apportioned as between the two districts of the total receipts generated by KRS 160.613, the Murray Board of Education receives only 39% of the total utility gross receipts license tax. You stated the Murray Board of Education has asked that we assist in resolving this believed patent inequity on the collection and distribution of the utility gross receipts license tax. In this regard, you request our opinion on the following issues:
"1. May the Murray Board of Education acting pursuant to KRS 160.593 levy a 3% Utility Gross Receipts License Tax as permitted under KRS 160.613 before unilaterally rescinding the joint resolution of June 24, 1969?
"2. May the Murray Board of Education levy a Utility Gross Receipts License Tax of 2.99% and thereby avoid the application of Subsection 2 of KRS 160.593 and its companion statute KRS 160.644?"
It is the official opinion of this Office that the Murray Independent Schools and the Calloway County Schools are no longer a combined taxing district for the levying of the 3% utility gross receipts license tax, unless at some time after June 19, 1976, the two school districts sought and were granted written approval from the State Board of Education to continue to levy an identical tax as a combined taxing district.
In support of our position, we believe it is necessary to trace at least a part of the statutory history regarding the utility gross receipts license tax for school districts. In 1966, the General Assembly enacted into law provisions codified as KRS 160.613 (Utility gross receipts tax, exemptions) and, among others, KRS 160.593 (Occupation tax, utility gross receipts tax or excise on income for schools, when levied) and KRS 160.644 (Tax proceeds, apportionment to districts). KRS 160.593, which is of primary importance in answering your questions, as enacted in 1966 read as follows:
"One or more boards of education of school districts which contain at least ninety percent of the county's inhabitants may, after compliance with the public hearing requirement contained in KRS 160.603, request the fiscal court to levy one of the school taxes authorized by KRS 160.593 to 160.597, 160.601 to 160.627, 160.633 to 160.648. The fiscal court shall levy, within fifteen days of such request, the school tax at the rate requested."
KRS 160.644, as enacted in 1966, read:
"The school taxes and penalties collected under KRS 160.593 to 160.597, 160.601 to 160.627, 160.633 to 160.648 shall be distributed to the treasurer of the board of education of each school district in the county in proportion to the number of pupils in average daily attendance in each district as shown by the final certification by the Superintendent of Public Instruction for the previous school year pursuant to the provisions of KRS 157.310 to 157.440."
In 1966, it must be remembered, local school districts were not the local school tax levying authority. The tax levying authority for county districts was the county fiscal court. School districts were made their own tax levying authority by legislation passed by the 1976 General Assembly.
From a reading of the 1966 utility gross receipts tax laws, in effect in 1969 when the Calloway County Board of Education and the Murray Independent Board of Education were considering the matter, it is clear that the county district which contained at least 90% of the county's inhabitants, had to be the moving force in approaching and requesting the fiscal court to levy the utility tax. The statutes then in effect also called for the tax to be levied in the entire county and the proceeds collected were to be distributed to the school districts in the county based on average daily attendance. Additionally, KRS 160.635 then read:
"School taxes imposed under the provisions of KRS 160.593 to 160.597, 160.601 to 160.627, 160.633 to 160.648 shall remain in full force and effect from year to year until all boards of education within the county have certified to the fiscal court requests for a reduction of the rate in effect. If a reduction in rate is requested, the fiscal court shall reduce the rate to the requested amount. The fiscal court may require each board of education to make an annual certification as to the need and necessity for the continuance of the current tax." (Emphasis ours.)
This last section of school law highlights the forced "unity" mandated at that time of all of the boards of education within a county. Acting pursuant to these referenced statutes, the Calloway County School District and the Murray Independent School District, in 1969, presented a "joint resolution" to the Calloway County Fiscal Court requesting that body to levy a 3% utility gross receipts license tax.
Most of the statutes under consideration here have been amended several times since 1969. In 1972, the General Assembly amended KRS 160.593 so as to permit any board of education to ask the fiscal court to levy a utility tax as well as other school taxes, and established a procedure by which the tax would be levied just in a particular school district in a county. See attached House Bill 76, 1972 Kentucky Acts. However, the General Assembly provided that in those counties where a special school tax, such as the utility gross receipts tax, was already being levied on the effective date of the 1972 amendment, the taxes were to continue to be levied on a county-wide basis. The required distribution pattern based upon average daily attendance mandated under KRS 160.644, also was perpetuated. Although KRS 160.593 was amended in 1974, the net effect of the provision remained unchanged where the tax was already being levied county-wide. See attached House Bill 517, 1974 Kentucky Acts.
In 1976, the General Assembly significantly amended KRS 160.593. See attached House Bill 73, 1976 Kentucky Acts. Taken out of subsection (1) was any reference to the situation where taxes had been levied county-wide and the requirement that such taxes continued to be levied on a county-wide basis. Subsection (1) was further amended to read:
"The imposition of any tax levied under the provisions of KRS 160.593 to 160.597, 160.601 to 160.633, and 160.635 to 160.648 shall be limited to the territory of the school district except as provided in subsection (2) of this section." (Emphasis added.)
Subsection (2) was amended to read:
"Two or more boards of education may agree in writing, which shall be approved by the state board of education, to levy identical school taxes authorized by KRS 160.605 to 160.611, 160.613 to 160.617, and 160.621 to 160.633. After the levying in each district so agreeing to a tax under the terms of such agreement, the receipts from said tax shall be held in a common fund and disbursed therefrom to each district on the basis of average daily attendance, as set forth in KRS 160.644. Any districts levying taxes under the terms of such an agreement shall be deemed to constitute a combined taxing district for the purposes of reference in KRS Chapter 160."
We believe the consequence of these 1976 amendments was to let school districts that had been mandatorily tied together by preexisting law go their separate ways unless they requested in writing and had that request approved by the State Board of Education to levy an identical tax as a combined taxing district. School districts that had their request approved by the State Board would have the receipts from the tax distributed between the districts based upon average daily attendance as set forth in KRS 160.644. It is to be recalled here that in 1976 in the same House Bill, the General Assembly made school boards their own tax levying authority. See as to the levying of the ad valorem tax, KRS 160.460.
Thus, school districts after the 1976 legislation (effective date June 19, 1976) that had been a combined taxing district for a special tax were required to take a positive step to continue to be a combined district levying an identical tax rate. If this positive step of requesting the State Board of Education approval was not sought, each school district by itself continued to levy the tax, but was limited to the territory of its school district. Of course, any school district wishing to decrease the rate of its tax or cease levying the tax altogether could do so. See KRS 160.635.
In view of the above, we do not believe any action is required for the Murray Board of Education to continue to levy a 3% utility gross receipts license tax. You have informed us that there was no request made to the State Board of Education for approval to continue to be a combined taxing district as noted above. Therefore, it is our opinion this tax should be levied for the Murray Independent School District only in the territory comprising the district and that the school district is entitled to the entire amount collected. KRS 160.644 is no longer applicable to the collection and distribution of the utility gross receipts tax as levied in the Murray Independent School District. And, of course, the Calloway County School District is entitled to continue to levy and collect this tax in that school district.
We trust the above adequately responds to your questions.