April 29, 1996
Subject: Refund of Real Estate Transfer Tax
Written by: Ross T. Carter
Requested by: Pete A. Smith
Syllabus: Refunds of real estate transfer tax are available only through the common law and must be directed to the county that collected the tax
OAGs cited: None
Statutes construed: KRS 142.050; KRS 134.580; KRS 134.590
Opinion of the Attorney General
The question addressed is the proper procedure to apply for a refund of real estate transfer tax.
The real estate transfer tax has elements of both a state and a local tax. Although it is imposed by state statute and the Revenue Cabinet has authority to prescribe regulations necessary to administer the tax, it is collected by county clerks and deposited in the county general fund. KRS 142.050(4), 142.050(5).
This hybrid nature of the tax has led to confusion about the procedures applicable to refund requests. On behalf of a client, Pete A. Smith presented a claim to the Revenue Cabinet, who told him to obtain an opinion from the Attorney General. Although the Attorney General has issued numerous opinions on the real estate transfer tax, the Attorney General has no role in the refund application process. The Revenue Cabinet's confusion is no doubt precipitated by the scarcity of applications for refund of this particular tax.
Kentucky has two statutes dealing with tax refunds: KRS 134.580, the general statute, and KRS 134.590, which deals only with property taxes and taxes held unconstitutional. Both statutes apply only to taxes that have been paid into the state treasury. Because the real estate transfer tax is paid into the county treasury rather than the state treasury, the refund statutes do not apply.
In Kentucky, tax refunds are available under the common law when taxes are paid involuntarily. Spalding v City of Lebanon, 156 Ky 37, 160 SW 751 (1913); Coleman v Inland Gas Corporation, 231 Ky 637, 21 SW2d 1030 (1929). Because the real estate transfer tax is deposited in a county general fund, the county is the only unit of government able to refund it. It is therefore the opinion of the Attorney General that applications for refund of real estate transfer tax must be directed to the county that collected the tax rather than to the Revenue Cabinet or to this office. The county must then determine whether the tax was paid voluntarily; if it was, then the county has no authority to refund the tax, even if the tax was improperly paid.
Questions that the county may have regarding the application of the tax are properly directed to the Revenue Cabinet. KRS 142.050(5); 131.140(2).
A. B. Chandler III
Ross T. Carter
Assistant Attorney General