Opinion ID: 480215
Heading Depth: 1
Heading Rank: 3

Heading: Constitutional Provisions

Text: 27 Martin Marietta contends that the Board's administration of the Tax statute violates its rights under the equal protection clause of the fourteenth amendment to the United States Constitution and sections 171 and 172 of the Kentucky Constitution. 10 Martin Marietta alleges that its constitutional rights have been violated because the Board gives refunds or credits to taxpayers who pay according to the Direct Payment Method when their cost of energy or energy-producing fuels used exceeds three percent of their cost of production, but denies it to those who fail to use that method. 28 Because this case involves economic regulation, the equal protection clause of the fourteenth amendment requires the Board to have a rational basis for the regulation. Williamson v. Lee Optical, 348 U.S. 483, 487-88, 75 S.Ct. 461, 464-65, 99 L.Ed. 563 (1955). The Tax statute authorizes, but does not require, school boards to levy the Tax. The statute does not enumerate any procedures for the collection of the Tax or for the grant of the cost of production exemption. As discussed above, the Hancock County regulation authorizes two methods for paying the Tax. Under the Utility Payment Method, the Tax is collected from the utility in gross although it is calculated by multiplying the amount of the taxpayer's utility bill by three percent. Neither the utility nor the Hancock County Treasurer know how much of the Tax collected, according to this method, is subject to the cost of production exemption. 29 Taxpayers using the Direct Payment Method must make monthly payments to the Treasurer of Tax applicable to nonexempt energy and energy-producing fuels based on an estimate that the taxpayer makes at the beginning of its fiscal year. At the end of its fiscal year, the taxpayer reconciles its estimate to the amount of Tax due. Because the taxpayer paying according to the Direct Payment Method makes an estimate in the beginning of its fiscal year of the amount of Tax due, the taxpayer will factor in the cost of production exemption, and it is unlikely that the taxpayer will substantially overpay the Tax. The Direct Payment Method, then, will cause less disruption in the finances of the Hancock County School District because the Board will not be required to refund large amounts of Tax. This is a rational basis for conditioning the availability of the statutory exemption on the use of the Direct Payment Method. Accordingly, the regulation does not violate the equal protection clause of the fourteenth amendment. 30 Martin Marietta also alleges a violation of sections 171 and 172 of the Kentucky Constitution. Although section 171 is applicable to the collection of license taxes, Davis v. Pelfrey, 285 Ky. 298, 299, 147 S.W.2d 723, 724 (1941), it prohibits only unreasonable and arbitrary classifications. Id. The Hancock County regulation is neither arbitrary nor unreasonable. 31 Finally, the regulation does not violate section 172 of the Kentucky Constitution. Section 172 requires property to be assessed for taxation at its fair cash value. As discussed above, the Board did not assess Martin Marietta for the excess Tax. 11 32