News

Tax Updates

KY - Opinion issued on calculation of real property tax rates

The Kentucky attorney general has issued an opinion regarding the proper method of calculating real property tax rates under KRS 132.010. The opinion notes that KRS 132.010(6) mandates a two-step process for calculating the "compensating tax rate." The first step consists of identifying the rate that would yield approximately the same revenue from the current assessed value of real property, excluding new property, as was produced from the real property in the previous year. That rate is rounded up to the next higher tenth of a cent per $100. In the second step, the rate obtained in the first step is "applied to the total current year assessment of all classes of taxable property" to determine the amount of revenue it produces. If that resulting amount is less than the revenue produced in the previous year "from all classes of taxable property," then the compensating tax rate must be adjusted upward until the revenue is no longer less than that produced in the previous year. This higher rate is generally known as the "substitute rate." This substitute rate then becomes the compensating tax rate.

The opinion concludes that the recall provisions of KRS 68.245(6) are triggered only when a real property tax rate exceeds, by more than 4%, the compensating tax rate. In the calculation of the compensating tax rate, personal property must be included when applying a rate to "all classes of taxable property" to determine whether use of a substitute rate is required by KRS 132.010(6). Opinion No. 10-005, Kentucky Attorney General, June 14, 2010