Court Opinion

ID: 9666344
Source: CourtListenerOpinion
Date Created: 2023-08-24 01:11:21.555642+00
Date Added: 2024-06-11T14:56:38.771654
License: Public Domain

WINTERSHEIMER, Justice,
concurring.
I concur with the result achieved by the majority but wish to express my reasons separately.
This case specifically involves the constitutionality of KRS 132.020(5) which classifies unmined coal differently from other real property and provides a tax rate of $.001 per hundred of assessed valuation.
Unmined coal in place in the ground is real property distinct and separate from the surface estate. Williams’ Admr. v. Union Bank & Trust Co., 283 Ky. 644, 143 S.W.2d 297 (1940). Unmined coal is subject to taxation as real property. Severance of the coal from the surface has recently been affirmed by a majority of this Court in Akers v. Baldwin, et al., Ky. 736 S.W.2d 294 (1987). Section 3 of the Kentucky Constitution does not permit exemptions from taxation. Section 171 of the constitution provides that annual taxes along with other resources shall be sufficient to support the expense of government and shall be uniform. Section 172 provides that all property shall be assessed at its fair cash value, and Section 174 provides that all property shall be taxed in proportion to its value. Clearly the Constitution requires uniformity and equality in taxation.
The proper way to distribute the burdens of government justly is to allow taxation to rest equally on all. See 2 Debates, Constitutional Convention 2372-2423 (1890); Kentucky Finance Co. v. McCord, Ky. 290 S.W.2d 481 (1956).
KRS 132.020(5) effectively exempts un-mined coal from property taxation. The evidence in the circuit court indicates that it produces almost no revenue with only $2,067 being recorded in 1983 on assets estimated at between $6 and $12 billion. The rate, $.001, makes it uneconomical for local PVAs and the Revenue Cabinet to assess or collect the tax because the cost of administering it far exceeds any possible yield.
Section 171 as originally adopted in 1891 did not authorize the legislature to create different classifications of property for ad valorem tax purposes. In 1915 Section 171 was amended by the addition of the words “of the same class” to the sentence which required uniform taxation. The legislature was specifically authorized to classify property for both state and local taxation. Uniformity of rate of property in the same class was still required and there was no permission to exempt any property from taxation. Martin v. Highsplint Coal Co., 268 Ky. 11, 103 S.W.2d 711 (1937).
In 1976 the legislature amended KRS 132.020 by adding § (5) which imposed a separate tax on unmined coal. In 1978, the legislature reduced the tax rate for the newly created classification of unmined coal from 31%$ per hundred to .001 per hundred. The sole issue is whether the separate classification by the legislature of “unmined coal” for the purposes of taxation is invalid. Constitutional limitations prohibit only such classification which is not arbitrary and unreasonable and has no fair and substantial relation to the permissible governmental purpose of the legislation. See Department of Revenue v. Spalding Laundry & Dry Cleaning Co., Ky. 436 S.W.2d 522 (1968). The classification for taxation is a policy matter for legislative determination. Ordinarily the judgment of the legislature is to be deferred to if there is any just and reasonable basis to support such a decision. The question then becomes whether it was arbitrary and unreasonable for the legislature to create a separate classification for unmined coal and to tax it at a much lower rate than that applicable to other real property. The existence of vast unmined and untaxed coal *366reserves does not promote the coal industry and does not provide jobs in support of the economy of the state. It is difficult to see how the creation of a separate classification and the unusually low rate of taxation serves any governmental or public purpose. Consequently the separate classification for unmined coal is arbitrary and unreasonable and has no fair substantial relation to a permissible governmental purpose.
The words used in the constitution should be given their ordinary meaning. The plain meaning of the word “tax” is a charge upon property for the purpose of raising revenue to defray the cost of government. The debates which the framers of the Kentucky Constitution of 1890 recorded clearly show that the burden of taxation should be spread widely in order to distribute the cost of government among all forms of property and that all property not specifically exempted should bear a real part of the public responsibility for financing governmental services. 2 Debates, Constitutional Convention, 2372-2423 (1890). The levy imposed by KRS 132.020(5) is not truly a tax within the meaning of Section 174 of the constitution. The legislature is prohibited by Section 3 from exempting any class of property from taxation and the legislature may not do indirectly what the Constitution forbids it to do directly. Commonwealth v. O’Harrah, Ky., 262 S.W.2d 385 (1953).
The tax rate enacted in KRS 132.020(5) has effectively allowed the owners of un-mined coal to be free of contributing to the cost of government. It results in a de facto exemption from property tax. The freedom to classify property does not permit the legislature to exempt property. Therefore the statute, KRS 132.020(5) is unconstitutional.
The determination that this statute is unconstitutional does not in any way affect other sections of KRS 132.020. It is not the place of this Court to determine the adequacy of a tax rate unless such a rate is so clearly and manifestly insufficient that it becomes in fact an exemption which is prohibited by the Constitution or that it is so high as to become confiscatory and unfair.
LEIBSON, J., concurs with this concurring opinion.