Yount v. Calvert, Nos. 90-CA-454-M

• Court: Court of Appeals of Kentucky
• Writing for the Court: McDONALD
• Citation: 826 S.W.2d 833
• Parties: William D. YOUNT and Scott Barbour Suing On Their Own Behalf And On Behalf Of All Other Persons In The Commonwealth of Kentucky Similarly Situated, Appellants, v. C. Emmett CALVERT, Secretary Kentucky Revenue Cabinet; Jim Beam Brands Company, Appellees. JIM BEAM BRANDS COMPANY, Cross-Appellant, v. William D. YOUNT and Scott Barbour Suing On Their Own Behalf And On Behalf Of All Other Persons In The Commonwealth of Kentucky Similarly Situated, Appellants/Cross-Appellees, and C. Emmett Calvert, Secretary Kentucky Revenue Cabinet, Cross-Appellee.
• Docket Number: 90-CA-1398-MR,Nos. 90-CA-454-M
• Decision Date: 13 September 1991

Page 833

826 S.W.2d 833 William D. YOUNT and Scott Barbour Suing On Their Own Behalf
And On Behalf Of All Other Persons In The
Commonwealth of Kentucky Similarly
Situated, Appellants,
v.
C. Emmett CALVERT, Secretary Kentucky Revenue Cabinet; Jim
Beam Brands Company, Appellees.
JIM BEAM BRANDS COMPANY, Cross-Appellant,
v.
William D. YOUNT and Scott Barbour Suing On Their Own Behalf
And On Behalf Of All Other Persons In The
Commonwealth of Kentucky Similarly
Situated, Appellants/Cross-Appellees,
and
C. Emmett Calvert, Secretary Kentucky Revenue Cabinet, Cross-Appellee. Nos. 90-CA-454-MR, 90-CA-1398-MR. Court of Appeals of Kentucky. Sept. 13, 1991.
Rehearing Denied Dec. 13, 1991.
Discretionary Review Denied by
Supreme Court May 6, 1992.

Joseph J. Leary, Frankfort, for appellants/cross-appellees.

Celia M. Dunlap, Div. of Legal Services, Revenue Cabinet, Frankfort, for cross-appellee Calvert.

Bruce F. Clark, Stites & Harbison, Frankfort, for cross-appellant Jim Beam Brands Co.

Before CLAYTON, HOWERTON and McDONALD, JJ.

McDONALD, Judge.

This is a tax case involving the constitutionality of the Kentucky ad valorem tax

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on distilled spirits. On September 29, 1989, the Franklin Circuit Court entered a judgment which held that the state ad valorem tax classification of distilled spirits, KRS 132.020(10) ¹ is a manifest violation of Section 171 of Kentucky's Constitution. The court held that distilled spirits should be taxed under the general provisions of KRS 132.020. By further order entered October 24, 1989, the court ruled that under KRS 132.020(1), a state tax rate of $.45 per $100 of assessed valuation should be applied to distilled spirits. The trial court's final judgment entered on February 28, 1990, held that the general property tax rate under KRS 132.020 was to be applied prospectively beginning with the tax year in which the court's final summary judgment was entered. This appeal and cross-appeal followed.

The appellants/cross-appellees, Yount and Barbour, have appealed the order which applies the general tax rate prospectively instead of retrospectively. Appellee/cross-appellant, Jim Beam Brands Co., has appealed the orders which hold that KRS 132.020(10) is unconstitutional and that the general state tax rate under KRS 132.020 should be applied to distilled spirits.

Section 171 of the Kentucky Constitution provides in pertinent part:

... [T]axes shall be levied and collected for public purposes only and shall be uniform upon all property of the same class subject to taxation within the territorial limits of the authority levying the tax; and all taxes shall be levied and collected by general laws....

The Constitution of Kentucky, Section 172, provides in pertinent part:

All property, not exempted from taxation by this Constitution, shall be assessed for taxation at its fair cash value, estimated at the price it would bring at a fair voluntary sale....

In 1982, KRS 132.020 became effective. The statute created a different classification for distilled spirits for purposes of imposing a different rate of taxation from the rate imposed upon other tangible property in Kentucky. The rate imposed under the general provisions for property tax set forth in KRS 132.020 was $.45 per $100 of value. However, subparagraph 10 of KRS 132.020 set a special rate for state ad valorem tax on distilled spirits at a rate per $100 of assessed value of $.225 in 1982, $.1125 in 1983, and $.001 in 1984 and after.

The lower court stated in its judgment of September 29, 1989:

... After numerous hearings on motions which address many substantive matters of this complaint, and being otherwise sufficiently advised, plaintiffs' motion for partial summary judgment declaring KRS 132.020 unconstitutional is GRANTED. As directed by the Kentucky Supreme Court in Gillis v. Yount, Ky., 748 S.W.2d 357 (1988) at page 362, "our 'duty' is 'to lay the article of the constitution which is evoked beside the statute which is challenged and decide whether the latter squares with the former.' " Quoting United States v. Butler, 297 U.S. 1, at 63, 56 S.Ct. 312, 318, 80 L.Ed. 477 (1936).

Appellee/cross-appellant contends that they should have been granted an opportunity to present evidence to demonstrate the rational basis for the classification contained in the statute. The lower court addressed this issue and stated:

Under the authority of Gillis v. Yount, supra, this statute is unconstitutional on its face. As the Supreme Court pointed out in Gillis v. Yount, supra, at page 358: "the connection between classifying unmined coal separately from other interests in real property subject to ad valorem tax and then imposing the new

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one mil rate for such property is abundantly clear from review of the legislative history of the one mil rate." That connection is also abundantly clear in this case. Indeed the same statute both creates the classification and imposes the one mil rate for purposes of ad valorem taxation. This is a manifest violation of Section 171 of Kentucky's Constitution. In Gillis v. Yount, supra, the Supreme Court clearly held that a classification for such purpose "serves no legitimate purpose to promote the governmental function directly involved." Page 363.

Clearly, Kentucky law holds that distilled spirits are property within the meaning of Section 171 and 172 of the State Constitution. Reeves v. Jefferson County, Ky., 245 S.W.2d 606 (1952).

..." 'personal property' includes every species and character of property, tangible and intangible, other than real property." ...

Since distilled spirits are property within the meaning of Section 172 of our Constitution, which subjects "all property" to taxation, it necessarily follows that distilled spirits are "property" within the meaning of the provisions of the Constitution, which mandatorily requires uniformity in the assessment of property for ad valorem taxes.

The U.S. Supreme Court held in Dawson, Att'y General of the State of Kentucky...