‘This is wrong.’ Tax refund to bankrupt coal company could cost Kentucky school $73,000.

State and local officials are grappling with the touchy issue of a tax refund to a bankrupt coal company that could cost the Harlan County school system enough money to pay two teachers.

The school district has not disputed that Revelation Energy overpaid a utility tax to the district by $73,000.

However, it has balked at refunding the money because Revelation owes delinquent property taxes that support local services, including the school system.

The amount owed to the school system from those delinquent taxes is greater than the amount Revelation overpaid on the utility tax, said Harlan County schools Superintendent Brent Roark.

“Don’t give the money to them while they still owe us money,” Roark said.

The issue of the refund also raises hackles because Revelation’s sister company, Blackjewel, laid off several hundred miners in Harlan and other Eastern Kentucky counties after filing for bankruptcy on July 1.

Worse still, the final paychecks the company issued to miners bounced. When the local banks that had cashed the checks couldn’t redeem them from Blackjewel’s bank, they took the money back out of miners’ accounts, leaving them not only out of work but overdrawn by $1,000 or more in many cases.

The layoffs have put a damper on the local economy, and one grocery store ended up stuck with more than $90,000 in cold checks after cashing them for miners.

Miners began blocking a train loaded with coal from leaving a Blackjewel mine three weeks ago out of frustration at not being paid.

Out-of-work Blackjewel miners play a game of corn hole on the railroad tracks near Cumberland on Tuesday after blocking a train Monday afternoon. Will Wright

The issue of a potential refund to the coal company involves a tax on utility bills. The state collects the tax and remits it to the school system, Roark said.

An auditor for the Kentucky Department of Revenue notified the school by email in March that she had just finished reviewing Revelation’s 2016 tax return and it showed the company had paid $73,611.96 too much through the tax, according to an email.

The school system received the extra money, so it would be responsible for the refund.

The auditor followed up on Aug. 1, telling school finance director Gary Hensley she understood the refund would be a financial hit for the school system but that managers had instructed her to continue with the refund process.

That process is governed by state law.

The auditor asked Hensley whether the school system preferred to pay the $73,611 refund at one time, or if it would like to perhaps spread the refund over several payments.

Hensley’s response reflected how many residents would view the refund.

“I’m sure the people from our county will not feel very happy knowing the company that has damaged so many families and individuals in our county are now damaging the school system,” he wrote.

Roark had Hensley notify the Department of Revenue about delinquent taxes that Revelation and related companies owe in Harlan County.

Richard Dobson, who heads the office of sales and excise taxes at the Department of Revenue, said in an Aug. 6 message to school officials that the department had not decided what to do about the refund request.

There had been no resolution of the situation as of Monday.

A spokeswoman said the department could not comment on issues involving an individual taxpayer such as Revelation.

Roark said Revelation and sister companies owe more than $300,000 in delinquent property taxes in Harlan County. Revelation alone owes $197,000 from 2017, according to county Clerk Donna Hoskins.

Hoskins said the county school system gets nearly half the money from local property tax collections. That means it would receive nearly $100,000 from Revelation’s 2017 bill if the company ever pays.

Roark said he agrees that Revelation overpaid the school system through the utility tax. However, the situation has changed since the district received the money.

Coal jobs have dropped and the state changed the way it values unmined coal, cutting tax revenue to schools in coal-producing counties.

Harlan County, like many schools systems in Eastern Kentucky, also lost enrollment for several years until this school year.

Local officials don’t think it would be fair to require the school to refund Revelation’s money for the utility tax while the company owes delinquent property taxes.

“This is wrong,” Hensley told the state auditor in one email.

The refund would be roughly equal to the salary of two beginning teachers, Roark said.

The refund question is complicated by Revelation’s bankruptcy. The judge over the case should have a role in deciding the issue, Hensley told state officials in one email.

Roark said if the school system has to refund the money, the payment should go to former Blackjewel miners who haven’t been paid, or to the county to be divided among local agencies that receive funding from property taxes.

Those include the school system and the county, but also services such as the library and the health department.

Roark said at least one thing seems clear about the situation.

“If it goes to Revelation, we’ll never see it,” he said.