Glasgow Daily Times, Glasgow, KY

State News

March 11, 2014

Revenue bill already raising eyebrows

FRANKFORT — A revenue bill to help finance the Democratic-controlled House’s budget plan contains some controversial tax measures that are already drawing attention.

One would apply a pari-mutuel tax on bets on “instant racing” which currently exists at thoroughbred tracks in Henderson and Franklin but which is being challenged in court. Instant or “historical racing” allows bettors to wage on recorded races displayed on a slots-like machine without knowing the winner.

The Kentucky Racing Commission approved such games but anti-gambling groups challenged the legality of the games and that litigation continues. But a preliminary ruling said Kentucky cannot tax the races under current law.

The provision in House Bill 445, the revenue measure sponsored by budget chairman Rick Rand, D-Bedford, would “retroactively authorize the imposition of the existing pari-mutuel tax against historical horse races.”

Senate President Robert Stivers, R-Manchester, said he has concerns about retroactively applying the tax as well as about its effect on litigation.

“Does it impact the case in Franklin Circuit Court?” Stivers wondered when told about the provision Tuesday afternoon. “You’re placing a retroactive tax on something that hasn’t been adjudicated.”

House Speaker Greg Stumbo, D-Prestonsburg, said later the tax structure of the instant racing provision may be amended by a floor amendment when the revenue bill comes up for a vote Wednesday on the House floor.

The other tax measure in the revenue bill that raised eyebrows was one to clarify how many libraries set their tax rates. Kentucky has 106 library districts, some of which were created under different statutes. But 79 of them were originally created by petition under a law which said they must go back to voters any time they wish to increase tax rates.

Subsequently, however, in 1979 the General Assembly passed House Bill 44 which limits taxing entities to a 4 percent increase in tax revenues (not rates) each year. If they want to raise more than 104 percent of what they received the previous year, local governments, school boards and taxing entities must submit that to voters.

After passage of HB 44, libraries argued they were subject to its provisions rather than the petition law and for years have raised tax rates under that 1979 law. But taxpayer groups in Kenton and Campbell counties sued, arguing the tax rates should be rolled back to 1978 levels and two lower court rulings have agreed. The libraries have appealed, saying they will be financially devastated if they have to return to 1978 funding levels.

Rand’s revenue bill attempts to fix the problem with a provision that says, “Any tax rate levied by the board of a public library district from February 13, 1979, thought the effective date of this ACT . . . shall be deemed a valid levy of an ad valorem tax.”

Stivers raised the same issue of retroactivity with the library provision as he did with the racing provision. Bob Leeper, I-Paducah, the Senate budget chairman, said he’d have to wait to see how the Republican majority felt about the provision before taking a stance.

“That’s a big issue,” said Leeper, who caucuses with Republicans. “We’ll have to have a group discussion on that one.”

The provision does not affect libraries created under other procedures such as voter referendum or by an act of a local legislative body.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.

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