Request By:
John D. Meyers
Executive Director
Kentucky Bar Association
Opinion
Opinion By: Jack Conway, Attorney General; Jacob C. Walbourn, Assistant Attorney General
Opinion of the Attorney General
Kentucky Bar Association Executive Director John D. Meyers has requested an opinion of this office on whether LaGrange City Ordinance Section 110.02 is a valid exercise of the city's power. Specifically, he has inquired whether the ordinance is unconstitutional and/or otherwise invalid. As discussed below, it would appear that while generally the ordinance is an acceptable exercise of the city's power, the current enforcement efforts are an invalid exercise of the city's power.
By way of background, the La Grange City Council passed an ordinance which requires any attorney or law firm "engaged in the practice of law within the city limits of La Grange" to "make an application for a business license. " Attorneys who violate this ordinance would be subject to monetary penalties. According to the Kentucky Bar Association, this ordinance is actively being enforced not only against law firms and attorneys with offices within the city limits of La Grange, but also against attorneys from other areas of the Commonwealth (or beyond) who "have had little or no contact with the City in their practices." The question, then, is not only whether the license fee is generally appropriate, but also, to what extent it may be enforced against attorneys with only limited contacts with the city of La Grange.
Cities draw their power to impose license fees/ taxes from both the Kentucky Constitution and statute, and impose the same on any variety of occupations. See Ky. Const. § 181 and KRS 92.281. In imposing license fees on various professions, "it has long been recognized that a legislative body may discriminate between classes in the imposition of license taxes."
City of Lexington v. Motel Developers, Inc., 465 S.W.2d 253, 257 (Ky. 1971) (internal citations omitted). "The principle [is] that a legislative body may not, without some rational basis, select a certain type of business enterprise and impose upon it a substantially heavier tax than that imposed upon other businesses within the same general classification." Id.
Procuring a business license in order to practice law in a specific community is a practice that has been required, and subjected to challenge via litigation, for over a century. In 1897 and 1899, the cities of Louisville and Lexington both imposed a flat fee on the practice of law, and such was challenged in the Courts. Both cities' ordinances were upheld as permissible and constitutional. See
Elliot v. City of Louisville, 40 S.W. 690 (Ky. 1897);
Baker v. City of Lexington, 53 S.W. 16 (Ky. 1899). It appears, however, it was not until 1905 that an issue was raised regarding attorneys who may come temporarily to a community to appear in a specific case, but then return to their home communities. In that case, the Court actually upheld the city of Mayfield's ordinance imposing a license fee on "resident" attorneys, but noted "the power given by the statute to tax occupations refers to occupations followed in the city, and not to people who come there under specific employment to attend to a special matter. "
Evers v. City of Mayfield, 85 S.W. 697, 698 (Ky. 1905). Indeed, the Court went on to note "it would be a great hardship if lawyers were required to pay an occupation tax in every town to which they might be called to attend to some specific business for a client." Id. The business license requirement for attorneys has been litigated intermittently since that time, but it appears that each time a challenge has been raised, the imposition of the license fee requirement has been upheld by the Courts with respect to "resident" attorneys. See, e.g.
Yantis v. City of Lexington, 94 S.W. 653 (Ky. 1906);
Dreidel v. City of Louisville, 105 S.W.2d 807 (Ky. 1937);
Newlin v. Stuart, 117 S.W.2d 608 (Ky. 1938)
The principles articulated in the "attorney license fee" cases have been extrapolated to other professions. In fact, the Evers decision cited supra has been cited as recently as 1962 in striking down a license fee imposed on delivery drivers who only occasionally made deliveries to Richmond. See
H.H. Leet Furniture Co. v. City of Richmond, 357 S.W.2d 329 (Ky. 1962). The Leet Furniture case is actually quite instructive on what is permissible and what is not in regards to license fees under the Kentucky Constitution. Taxes and licenses imposed on non-residents have been permitted to stand, but only when such a tax/license is non-discriminatory and when the non-resident' s connections to the taxing community are continuous or regular. Id. at 331-32. "As a general rule, the performance of a single act, or even a number of isolated acts, pertaining to a particular business, will not be considered as engaging in or carrying on such business within the meaning of a law imposing a license tax; but it may be so considered where an intent to engage in the business is clearly apparent." Id. at 332, citing
Karnes v. City of Benton, 80 S.W.2d 558 (Ky. 1935). See also
W.T. Sistrunk & Co. v. City of Paris, 266 S.W.2d 656, 657 (Ky. 1924) ("It is well settled that a municipality may impose a license fee upon nonresidents who perform an act or engage in an occupation within its limits, provided no discrimination is made against them in favor of the municipality imposing the charge? [but] not to people who come there under specific employment to attend to a special matter. "); accord OAG 82-543 ("It is important that such an occupational license tax can only be applied to those regularly engaged in carrying on a trade or occupation within county boundaries.")
There also may exist an argument that any regulation regarding attorneys is preempted, as either the Commonwealth, or the Supreme Court (based on the Constitutional amendment passed in 1975) is solely responsible for regulation of the state Bar. However, these arguments have typically been unavailing in the Courts, both prior to and after the Constitutional amendment placing regulation of attorneys under the exclusive authority of the Kentucky Supreme Court. See Dreidel, 105 S.W.2d 807; Newlin, 117 S.W.2d 608; Ex parte Auditor of Public Accounts, 609 S.W.2d 682 (Ky. 1980) 1.
On balance, then, it appears that there is no general issue with imposing a license fee on attorneys practicing in a community. However, there needs to be a determination of the amount of business being done in that community. Isolated or infrequent business in a community is not a sufficient basis to impose a license fee. Conversely, continuous and regular business likely would be subject to a license fee. Based on the information provided, it appears La Grange is attempting to license all attorneys attending court in La Grange regardless of the regularity of such appearances. Based on Evers and Leet Furniture , this is an improper exercise of the city's power. Accordingly, while generally the city of La Grange is free to impose a license tax upon the city's resident attorneys, it is inappropriate to impose a licensing requirement upon attorneys with only isolated or infrequent contacts with the city.
Footnotes
Footnotes
1 Ex parte Auditor is not a direct factual analogue regarding license fees. However, it did recognize the General Assembly's ability to levy taxes on attorneys. Arguably, this would mean that the ability to tax lawyers remains even after the 1975 Constitutional amendment. See also "Validity of state or municipal tax or license fee upon occupation or practicing law," 50 A.L.R. 4th 467 (1986).