A popular source of revenue available to county governments is the local litigation tax. This tax may be levied on all original suits filed in general sessions, circuit, chancery and other special courts in each county but does not generally apply to juvenile proceedings. In 1981, after the General Assembly passed 1981 Public Chapter 488 which imposed a state litigation tax, the State Attorney General opined that counties may, by resolution of the county legislative body, levy a litigation tax in the same manner and in an amount not to exceed the amount of the state litigation tax.
In addition to this ability to match state litigation taxes, Tennessee Code Annotated § 16-15-5006 specifically authorizes counties to levy an additional local litigation tax in general sessions court for the purpose of helping to fund general sessions judges’ salaries. This authorization was granted in 1988 Public Chapter 698 as part of an act that significantly increased the salaries of General Sessions Judges for terms beginning in 1990 and thereafter. As it originally passed, this supplemental tax was limited to $6.00. At that time, this amount was enough to cover the costs of the salary increases in most counties, but not quite all. Two years later, in 1990, in response to complaints from a few counties where the $6.00 did not raise enough revenue to cover the increases, the General Assembly added language to § 16-15-5006, to provide that:
If, during any fiscal year, the amount of revenue generated by the local tax enacted pursuant to [T.C.A. § 16-15-5006] does not sufficiently fund the increase in the general sessions judge’s compensation mandated by [Title 16, Chapter 15, Part 50]..., the local litigation tax may be raised to an amount more than six dollars ($6.00) necessary to fund the increases mandated by this part... provided that any increase to fund such supplement shall be adjusted annually.
If the county uses this authority to exceed the $6.00 limitation, such increase should be adjusted on an annual basis to insure the tax does not exceed the amount of revenue needed to pay for the increases. Whether this tax is levied at or above the $6.00 rate, this litigation tax must be approved by a 2/3 vote of the county legislative body to become effective.
Since 1990, the compensation of general sessions judges has risen significantly due to population growth and annual salary adjustments based on inflation which are provided for in the law. As a result, in many counties the $6.00 tax no longer generates sufficient revenue to cover the increases in salary that have continued to occur as a result of the 1988 legislation. If you have not done so recently, your county should consider investigating this issue now and may re-visit the issue each fiscal year. The Division of County Audit is in agreement with the CTAS method of calculating the increase in litigation tax if the $6.00 tax no longer covers the increases in the general sessions judge’s salary mandated by Title 16, Chapter 15, Part 50. The compensation increases mandated by 1988 Public Chapter 698 took effect at the start of the term beginning September 1, 1990. Therefore, any increase in compensation occurring on that date or any date since that time may be covered by the tax authorized in T.C.A. § 16-15-5006. If your county wants to consider increasing this litigation tax in general sessions court, contact the CTAS County Government Consultant for your county for assistance in making the necessary calculations. A sample resolution that may be used for the purpose of raising this rate is included in this spotlight.