Request By:
Mr. Columbus Sexton
Property Valuation Administrator
Letcher County Courthouse
Whitesburg, Kentucky 41858
Opinion
Opinion By: David L. Armstrong, Attorney General; By Alex W. Rose, Assistant Attorney General
In your letter to the Attorney General, you ask two questions. The first question is as follows:
Property owned by the Appalachian Regional Hospital, a non-profit corporation, is leased to the Daniel Boone Clinic, a for-profit corporation. You ask whether the property should be listed on the tax roll.
We are assuming that the Appalachian Regional Hospital is exempt from property taxation pursuant to § 170 of the Kentucky Constitution. KRS 132.220(5) and (6) relate to property exempt from taxation pursuant to § 170 of the Kentucky Constitution. Such property must be listed with the PVA. The PVA must maintain an inventory record of such property, but it is not placed on the tax roll. Such property must be reviewed annually by the PVA to determine if it is still exempt.
A tax-exempt institution may lease property to a non-exempt corporation. Such a lease does not necessarily vitiate the exemption. City of Louisville v. Presbyterian Orphans Home Society of Louisville, 299 Ky. 566, 186 S.W.2d 194 (1945). Buildings erected by a non-exempt corporation on land owned by a tax-exempt institution and leased to the non-exempt corporation may be taxable to the non-exempt corporation. Broadway & Fourth Avenue Realty Co. v. City of Louisville, 303 Ky. 202, 197 S.W.2d 238 (1946). Therefore, if the building is owned by the Clinic, it must be placed on the tax roll.
Furthermore, if the leasehold interest itself has a fair market value, it must be listed and assessed. Kentucky Department of Revenue v. Hobart Manufacturing Co., Ky., 549 S.W.2d 297 (1977); Standard Oil Co. v. Boone County Board of Supervisors, Ky., 562 S.W.2d 83 (1978). Thus, the leasehold interest must also be placed on the tax roll.
In your second question, you ask whether it is legal to exclude amounts exempt pursuant to the homestead exemption from the computation of the PVA's salary.
KRS 132.590(2) states as follows:
"The grade classification system provided in subsection (1) of this section shall in all respects, be equivalent to the grade classification for state employees as established by the department of personnel and subject to the provisions of subsection (4) of this section and be determined on the basis of the total area of the county as determined from information provided by the Kentucky agricultural statistics or other reliable data, the United States Bureau of the Census and the assessment of property subject to state tax as certified by the department of revenue, including the amount of assessment on which taxes are deferred under the provisions of the agricultural and horticultural land act, except that the amount of assessment of livestock and farm machinery shall be excluded in determining the grade classification. " (Emphasis added)
The homestead exemption, KRS 132.810, is just that - an exemption of a portion of an assessment for qualifying taxpayers. As such, it is not part of the assessment of property subject to state tax and may not be used in computing a PVA's salary. The amount deferred as agricultural and horticultural land is specifically included by statute in the salary computation.