Treesh v. Directv, Inc., No. 2006-CA-001983-MR (Ky. App. 9/7/2007)
| Decision Date | 07 September 2007 |
| Docket Number | No. 2006-CA-001983-MR.,2006-CA-001983-MR. |
| Parties | Mark TREESH, In his Official Capacity as Commissioner of the Department of Revenue; Frankfort Independent School District, Appellants v. DIRECTV, INC.; Echostar Satellite, L.L.C., Appellees. |
| Court | Kentucky Court of Appeals |
Appeal from Franklin Circuit Court, Honorable Thomas Wingate, Judge, Action No. 05-CI-01623.
Bethany A. Rice, Office of Legal Services for Department of Revenue, Frankfort, Kentucky, Briefs and Oral Argument for Appellants.
Kenneth S. Handmaker, Bradley E. Cunningham, Louisville, Kentucky, Brief for Appellees.
Pantelis Michalopoulos, Mark F. Horning, Washington, D.C., Brief for Appellees.
Mark F. Horning, Washington, D.C., Oral Argument for Appellees.
Eric S. Tresh, Atlanta, Georgia, Brief for Amicus Curiae, Time Warner Cable, Inc.
Jackson W. White, Lexington, Kentucky, Brief for Amicus Curiae, Time Warner Cable, Inc.
Before: THOMPSON and WINE, Judges; HENRY,1 Senior Judge.
Mark Treesh, in his official capacity as Commissioner of the Department of Revenue, and the Frankfort Independent School District appeal an order of the Franklin Circuit Court granting motions for summary judgment filed by DIRECTV Inc., and EchoStar Satellite, L.L.C. At issue is whether the gross receipts of providers of direct satellite broadcast and wireless cable service ("DBS") are subject to taxation by local school districts pursuant to KRS 160.614(3). The trial court held § 602 of the Telecommunications Act of 19962 preempts KRS 160.614(3) as it applies to DBS providers. After our review of the record and briefs of each of the parties (including an amicus curiae brief filed by Time Warner Cable, Inc.), as well as oral arguments, we reverse and remand with directions.
The facts are not in dispute. In 2005, KRS 160.614 was amended to include the gross receipts derived from the furnishing of DBS and wireless cable service. The amendment provides:
(3) A utility gross receipts license tax initially levied by a school district board of education on or about July 1, 2005, shall include the gross receipts derived from the furnishing of direct satellite broadcast and wireless cable service in addition to the gross receipts derived from the furnishing of utility services defined in KRS 160.6131 and cable service.
Each board of education of a school district decides whether to "opt out" or to impose the utility tax according to the procedure set out in KRS 160.614(5). The Kentucky legislature transferred the collection and administration of the tax from the school districts to the Kentucky Department of Revenue. KRS 160.6145.
All providers of cable, utility and DBS services are required to register with the Department of Revenue and may utilize a website to file monthly tax returns. The website also identifies the school districts, geographic boundaries and tax rate information which can be utilized by the service providers. The site also acknowledges that the Department of Revenue collects the tax based on the rate established by the local authority. Finally, the superintendent of each school district is to provide the Department of Revenue and each utility provider the boundaries of the district where the utility service is provided. KRS 160.6152.
The Appellees, DIRECTV, Inc., and EchoStar Satellite, L.L.C., which are DBS service providers, have failed to register because they believe they are exempt from paying the utility tax, relying on § 602 of the Federal Telecommunications Act of 1996, which states in part:
(a) Preemption— A provider of direct-to-home satellite service shall be exempt from the collection or remittance, or both, of any tax or fee imposed by any local taxing jurisdiction on direct-to-home satellite service.
(b) Definitions—
. . . .
(3) Local taxing jurisdiction. — The term "local taxing jurisdiction" means any municipality, city, county, township, parish, transportation district, or assessment jurisdiction, or any other local jurisdiction in the territorial jurisdiction of the United States with the authority to impose a tax or fee, but does not include a State.
. . . .
(c) Preservation of State Authority— This section shall not be construed to prevent taxation of a provider of direct-to-home satellite service by a State or to prevent a local taxing jurisdiction from receiving revenue derived from a tax or fee imposed and collected by a State.
The parties filed cross-summary judgment motions, with the Appellants seeking imposition of the tax on providers and the Appellees seeking injunctive relief, as well as a declaration that § 602 preempted enforcement of KRS 160.614(3).
The Franklin Circuit Court held that the utility tax is preempted by § 602 of the Telecommunications Act insofar as it applies to DBS service providers. The Appellants now appeal the court's August 22, 2006, order granting summary judgment and permanently enjoining the Department of Revenue from requiring the Appellees to comply with KRS 160.614(3) as it applies to DBS service providers.
The standard of review on appeal when a trial court grants a motion for summary judgment is "whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law." Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App. 1996), citing Kentucky Rules of Civil Procedure (CR) 56.03. "The trial court must view the evidence in the light most favorable to the nonmoving party, and summary judgment should be granted only if it appears impossible that the nonmoving party will be able to produce evidence at trial warranting a judgment in his favor." Lewis v. B & R Corp., 56 S.W.3d 432, 436 (Ky.App. 2001), citing Steelvest v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480-82 (Ky. 1991). "Because summary judgment involves only legal questions and the existence of any disputed material issues of fact, an appellate court need not defer to the trial court's decision and will review the issue de novo." Lewis, supra. A reviewing court is not bound by the trial court's decision on questions of law. In the present case, the questions to be answered dealt with the interpretation of statutes. "The construction and application of statutes is a matter of law and may be reviewed de novo." Bob Hook Chevrolet Isuzu, Inc. v. Commonwealth, Transportation Cabinet, 983 S.W.2d 488, 490 (Ky. 1998).
In 1990, the Kentucky General Assembly, in response to the Supreme Court's directive in Rose v. Council for Better Education, Inc., 790 S.W.2d 186 (Ky. 1989), enacted an Education Reform Act which revised both state and local school taxing structures. KRS 160.470, which is among the statutes the Act amended, establishes a minimum base funding level, a portion of which is to be raised by local school districts with the levy of a minimum equivalent tax of thirty cents per $100.00 of assessed valuation. KRS 160.470(9)(a). The local effort may be composed of an ad valorem property tax, or the special taxes — occupational license tax, utility gross receipts license tax or excise tax — authorized by KRS 160.593 et seq., or a combination of these taxes.
The Kentucky Supreme Court held in Williams v. Kentucky Department of Education, 113 S.W.3d 145, 152 (Ky. 2003):
As we have previously emphasized, the sole responsibility for providing the system of common schools lies with the General Assembly. If they choose to delegate any of this duty to institutions such as the local boards of education, the General Assembly must provide a mechanism to assure that the ultimate control remains with the General Assembly, and assure that those local school districts also exercise the delegated duties in an efficient manner. [Rose, supra, at 216.]
This, of course, as Williams noted, was not a novel notion. "[P]ublic education has long been recognized as a function of State government. . . ." Board of Education of Louisville v. Society of Alumni of Louisville Male High School, Inc., 239 S.W.2d 931, 933 (Ky. 1951), and "every common school in the state . . . is a state institution . . . ." City of Louisville v. Board of Education of City of Louisville, 154 Ky. 316, 157 S.W. 379, 380 (1913).
The Court further held:
We have several times written, in substance and effect, that every common school in the state, whether it be located in a populous city or in a sparsely settled rural district, is a state institution, protected, controlled, and regulated by the state, and that the fact that the state has appointed agencies such as fiscal courts, school trustees, and municipal bodies to aid it in the collection of taxes for the maintenance of these schools does not deprive them of their state character. . . . Therefore, when a municipal body, or a county, or a school district, levies taxes for school purposes, the tax so levied is a state, and not a municipal, county, or district, tax, although it be levied and collected by municipal or county or district officers.
City of Louisville v. Board of Education of City of Louisville, supra (internal citations omitted).
In Board of Education of Louisville v. Board of Education of Jefferson County, 458 S.W.2d 6, 8 (Ky. 1970), the former Court of Appeals declared that boards of education were not municipal corporations. Specifically, the Court held:
[T]hough a school district possesses some of the attributes of a municipal corporation for some legal purposes as was recognized in Sims v. Board of Education of Jefferson County, Ky., 290 S.W.2d 491 [(1956], and though a school district is regarded as a political subdivision for some legal considerations as pointed out in Board of Education of City of Corbin v. City of Corbin, 301 Ky. 686, 192 S.W.2d 951 [(1946)], a school district is, nevertheless, an agency of the state subject to the will of the legislature and existing for one public purpose only—to locally administer the common schools within a particular area subject to the...
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