Justia Kentucky Supreme Court Opinion Summaries

After the owners of a parcel of real property in Manchester, Kentucky, died, no one paid the property taxes, resulting in the issuance of multiple certificates of delinquency for unpaid taxes. Clay County sold the 2011 and 2012 tax liens to third parties: the 2011 lien was eventually assigned to Keith and Jessica Smith, and the 2012 lien was purchased by Apex Fund Services. The Smiths recorded their lien before Apex recorded its own. Both the Smiths and Apex sought to enforce their liens, and Apex initiated a foreclosure action in Clay Circuit Court, naming all lienholders and heirs as defendants. The property was ultimately sold at a master commissioner’s auction, with the Smiths purchasing it for $2,500.The Clay Circuit Court initially ruled that the Smiths’ lien had priority because it was recorded first, applying the “first in time, first in right” doctrine. The court allowed the Smiths to receive a credit against the purchase price for the amount owed to them under their lien, plus costs and attorney fees. Apex appealed, and the Kentucky Court of Appeals reversed, holding that all tax liens were of equal rank and that the proceeds from the sale should be distributed pro rata among all tax lienholders, including the county.The Supreme Court of Kentucky affirmed the Court of Appeals’ decision. The Court held that, under Kentucky statutes, tax liens held by the state, county, city, or third-party purchasers are of equal rank and are not subject to the common law “first in time, first in right” rule. Instead, when the proceeds from a foreclosure sale are insufficient to pay all tax liens and associated costs, the proceeds must be distributed pro rata among all tax lienholders. The case was remanded for the circuit court to determine the amounts owed and to distribute the proceeds accordingly. View "SMITH V. APEX FUND SERVICES AS CUSTODIAN FOR CERES TAX RECEIVABLES, LLC" on Justia Law

Several individuals who allegedly owed debts to Kentucky public institutions—either for medical services at the University of Kentucky or for educational services at the University of Kentucky, Morehead State University, or the Kentucky Community & Technical College System—challenged the referral of their debts to the Kentucky Department of Revenue for collection. The plaintiffs argued that the statutes used to justify these referrals did not apply to their debts and that the Department unlawfully collected the debts, sometimes without prior court judgments or adequate notice. The Department used its tax collection powers, including garnishments and liens, to recover these debts, and in some cases, added interest and collection fees.In the Franklin Circuit Court, the plaintiffs sought declaratory and monetary relief, including refunds of funds collected. The Circuit Court ruled that the Department was not authorized by statute to collect these debts and held that sovereign immunity did not protect the defendants from the plaintiffs’ claims. The court also certified the medical debt case as a class action. The Court of Appeals reviewed these interlocutory appeals and held that while sovereign immunity did not bar claims for purely declaratory relief, it did bar all claims for monetary relief, including those disguised as declaratory relief.The Supreme Court of Kentucky reviewed the consolidated appeals. It held that sovereign immunity does not bar claims for purely declaratory relief or for a refund of funds that were never due to the state, nor does it bar constitutional takings claims. However, the court held that sovereign immunity does bar claims for a refund of funds that were actually due to the state, even if those funds were unlawfully or improperly collected. The court affirmed in part, reversed in part, and remanded for further proceedings to determine which funds, if any, were never due to the state and thus subject to refund. The court also found that statutory changes rendered prospective declaratory relief in the medical debt case moot, but not retrospective relief. View "LONG V. COMMONWEALTH OF KENTUCKY" on Justia Law

T-Mobile sought a refund for statutory service fees paid to the Kentucky Commercial Mobile Radio Service Emergency Telecommunications Board, arguing that the fees did not apply to prepaid cellular customers based on a prior court decision. The Board denied the refund request, leading T-Mobile to file a lawsuit in Franklin Circuit Court. The trial court ruled against T-Mobile, stating that it did not meet the common law refund requirements as outlined in Inland Container Corporation v. Mason County, which necessitates that payments be involuntary or made under misrepresentation.The Court of Appeals affirmed the trial court's decision, agreeing that T-Mobile's payments were voluntary and not subject to refund. T-Mobile then sought discretionary review from the Supreme Court of Kentucky. The Supreme Court granted review, heard oral arguments, and examined the record.The Supreme Court of Kentucky affirmed the Court of Appeals' decision. The court held that T-Mobile was not entitled to a common law refund because the payments were voluntary and not made under misrepresentation. The court emphasized that the payments were not collectible by summary process or fine and imprisonment, and T-Mobile had the opportunity to challenge the fees in court before paying them. Additionally, the court found no evidence of actual misrepresentation by the Board. Therefore, T-Mobile's claim for a common law refund was denied. View "Powertel Memphis, Inc. v. Commercial Mobile Radio Service Emergency Telecommunications Board" on Justia Law

The Supreme Court reversed the opinion of the court of appeals affirming the decision of the circuit court concluding that with Century Aluminum of Kentucky, GP's interpretation of the statutes which categorize tangible personal property as either tax-exempt "supplies" or taxable "repair, replacement, or spare parts" was incorrect, holding that that the Kentucky Claims Commission's final order was supported by substantial evidence.In the proceedings below, the Commission agreed with Century's interpretation of the relevant statutes and rejected the interpretation of the Department of Revenue. The circuit court and court of appeals reversed, agreeing with the Department's interpretation. The Supreme Court reversed, holding (1) a tax-exempt "supply" is consumed within the manufacturing process and has a useful life of less than one year; (2) a taxable "repair, replacement, or spare part" does not necessarily have a known, limited useful life; and (3) the Commission's final order in this case was supported by substantial evidence in the record. View "Century Aluminum of Ky., GP v. Department of Revenue" on Justia Law

The Supreme Court affirmed the judgment of the circuit court prohibiting a vote tabulation regarding a school board tax recall based upon alleged violations of Ky. Rev. Stat. 132.017 and Ky. Rev. Stat. Chapter 369, holding that there was no error.This case involved a tax increase adopted by the Jefferson County Board of Education (JCBE) in 2020. A recall committee was formed to challenge the excess portion of the tax. A recall petition was subsequently certified. JCBE filed suit, seeking review of the county clerk's certification pursuant to section 132.017(2)(i). The recall committee intervened and counterclaimed for failure to comply with Ky. Rev. Stat. 133.185 and the notice requirements of Ky. Rev. Stat. 160.470(7)(b). The circuit court dismissed the counterclaim and ordered no further action regarding the regular ballot votes for the tax recall. The Supreme Court affirmed, holding that the public's right to vote on a tax recall is rendered null by the inadequacy of the recall petition occasioned by the alterations and lack of required information. View "Friedmann v. Honorable Bobbie Holsclaw" on Justia Law

In this action brought by Great Lakes Minerals, LLC against the State of Ohio and Joseph Testa, the Supreme Court reversed the decision of the circuit court denying Ohio's motion to dismiss, holding that Ohio was protected by sovereign immunity and that Testa was immune from suit in his official capacity as Tax Commissioner of Ohio and that Testa, in his personal capacity, was dismissed based on the principle of comity.Great Lakes sued Defendants seeking a declaratory judgment that it was not subject to Ohio's commercial activity tax, monetary relief for the forced collection of taxes not owed, and a determination that it would be inequitable to require Great Lakes to defend an action in a foreign state. Ohio unsuccessfully moved to dismiss the complaint. The Supreme Court reversed, holding (1) the State of Ohio and Testa in his official capacity were protected by sovereign immunity; and (2) under the principle of comity Testa is dismissed in his personal capacity. View "State of Ohio v. Great Lakes Minerals, LLC" on Justia Law

Ky. Const. section 170 does not exempt a qualifying charitable institution from the use tax imposed by Ky. Rev. Stat. 139.310.The Finance and Administration Cabinet’s Department of Revenue, the Board of Tax Appeals, and the circuit court concluded that the section 170 constitutional exemption speaks only to ad valorem property taxes and does not relieve a “public charity” from the use tax imposed by section 139.310. The court of appeals disagreed, ruling that the use tax imposed under section 139.310 is similar enough to an ad valorem tax to render its enforcement on governmental entities unconstitutional under section 170. The Supreme Court reversed, holding (1) section 170 of the Kentucky Constitution provides for exemptions from property taxes only; and (2) the holding in Commonwealth ex rel. Luckett v. City of Elizabethtown, 435 S.W.2d 78 (Ky. 1968), that the section 170 exemption applies to the use tax is not sustainable. View "Commonwealth, Finance & Administration Cabinet, Department of Revenue v. Interstate Gas Supply Inc." on Justia Law

A provision in the Multichannel Video Programming and Communications Services Tax (the Telecom Tax) prohibiting “every political subdivision of the state” from collecting franchise fees or taxes on franchises subject to the Telecom Tax is unconstitutionally void as applied to protesting cities.Four Kentucky cities and the Kentucky League of Cities, Inc. (collectively, Cities) filed a petition for declaratory relief alleging that the Telecom Tax’s Prohibition Provision violated their right to grant franchises and to collect franchise fees as provided in sections 163 and 164 of the Kentucky Constitution. The circuit court dismissed the petition. The court of appeals vacated the judgment of the circuit court and remanded, concluding that the Telecom Tax’s Prohibition Provision violated sections 163 and 164. The Supreme Court affirmed, holding that the Telecom Tax’s Prohibition Provision was unconstitutionally void as applied to the Cities. View "Kentucky CATV Ass’n v. City of Florence" on Justia Law

The Department of Revenue assessed additional inheritance taxes on an estate. The court of appeals affirmed the Department’s assessment of tax. At issue on appeal was whether inheritance taxes may be deducted from the value of distributive shares of an estate and whether inheritance tax paid from the estate on behalf of a beneficiary - a bequest of tax - is itself a taxable event. The Supreme Court affirmed, holding (1) a reviewing court does not owe any deference to the Kentucky Board of Tax Appeals as to questions of law; (2) inheritance taxes paid by the estate on behalf of a beneficiary of the estate are not “costs of administration” under a will’s tax-exoneration provision but, rather, are separate bequests that are subject to inheritance taxes; (3) the payment of inheritance tax by an estate on behalf of a beneficiary under a tax-exoneration clause is itself a taxable “bequest of tax”; and (4) like the Department, the court of appeals did not properly apply the law to the facts of this case, but because the end result of the court of appeals’ opinion was to uphold the Department’s assessment of additional tax, its judgment upholding the assessment is affirmed. View "Estate of McVey v. Dep’t of Revenue, Fin. & Admin. Cabinet" on Justia Law

In 2004, AT&T Corp. filed refund claims with the Finance and Administration Cabinet arguing that, under Ky. Rev. Stat. 139.505, AT&T was entitled to refunds for tax years 2002 and 2003. The Cabinet granted a partial refund for AT&T’s 2002 claim. In 2008, AT&T filed refund claims for tax years 2004 through 2008. In 2011, AT&T filed a declaration of rights action bringing administrative and as-applied constitutional challenges to the amendments to section 139.505. The circuit court dismissed the case, determining that AT&T’s challenges must be adjudicated by the Kentucky Board of Tax Appeals (KBTA) before the court would address AT&T’s facial constitutional challenges. The court of appeals reversed, concluding that the facial constitutional issue was one that the KBTA could not decide, but that the other claims were properly dismissed. The Supreme Court reversed the court of appeals’ decision and reinstated the trial court’s order of dismissal, holding that there were several administrative issues that must be resolved prior to addressing the constitutional claims. View "Commonwealth v. AT&T Corp." on Justia Law