Request By:
Mr. James Terry Hodges
City Attorney
108 North Reed Street
Columbia, Kentucky 42728
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Alex W. Rose, Assistant Attorney General
In your letter of August 19, 1982, you ask if an insurance company may pass on a municipal license tax to a church. You state that the City of Columbia imposes a license tax on every company engaged in the business of selling insurance. You have been informed that a local church's insurance carrier is passing this tax on to the church by adding it to the premium and labeling it as a municipal tax. You ask whether this violates Section 170 of the Kentucky Constitution.
KRS 92.285 provides for a license tax by cities on insurance companies. Subsection 5 of the statute provides for a collection fee to be retained by the insurance company.
In OAG 74-231A, copy attached we addressed a similar situation. There we stated that a city's license tax on insurance premiums is a tax on the insurance company. Therefore, it is applicable to premiums paid by otherwise exempt organizations, such as the church which you have mentioned. See also OAG 72-627, a copy of which is attached.
In OAG 80-75, copy attached, we addressed KRS 92.285(5) concerning the collection fee. That opinion illustrates how the tax is to be collected and the amount to be charged. The tax, as well as the collection fee, is collected from the policyholder. This, however, does not change the incidence of the tax. It remains a tax on the insurance company. Therefore, Section 170 of the Kentucky Constitution is not violated.
In response to your question of whether Section 170 of the Kentucky Constitution applies only to ad valorem taxes pursuant to