on May 11, 1977, in Room 103 of the Collins Building, Tallahassee, Florida.
APPEARANCES
For Petitioner: M. Lewis Hall, Jr.
Hall and Hedrick
Greater Miami Federal Building
200 Southeast First Street Miami, Florida
For Respondent: E. Wilson Crump, II
Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303
INTRODUCTION
By a petition for hearing, petitioner seeks relief from proposed deficiencies of Florida corporate income tax for the calendar years 1972 and 1973. Petitioner further challenges the method of computing the consolidated income of affiliated corporations for the year 1974, although no deficiency was assessed for that year.
The parties stipulated that the amounts contained in the proposed assessments for 1972 and 1973 were correctly computed and due if liability of the petitioner is determined. Petitioner further stipulated that the 1972 assessment did not involve the issue of consolidation and therefore did not warrant further challenge. Accordingly, petitioner agreed to pay this deficiency in the amount of $3,786.33, plus interest.
The issue presented for determination in this proceeding is whether a parent corporation qualified and authorized to do business in Florida, but not incorporated in Florida, may for Florida corporate income tax purposes, file a return which includes the returns for its Florida and non-Florida members.
FINDINGS OF FACT
Upon consideration of the pleadings, stipulations and oral representations of the parties, the following facts are found:
During the years in question, petitioner was a corporation organized under the laws of the State of Delaware and was duly qualified and authorized to do business in the State of Florida. Petitioner is the parent corporation of a consolidated group of corporations, two of which (including petitioner) had Florida transactions or were otherwise separately subject to the Florida corporate income tax code. None of the other members of the consolidated group were subject to taxation in Florida.
For the fiscal and calendar years 1972 through 1974, Petitioner filed federal and Florida income tax returns on behalf of the parent corporation, which included the returns for the consolidated group of corporations -- both the Florida and non- Florida members. Each member of the group consented to such consolidated filing and the component members of the Florida return group were identical to the members of the federal return group.
Respondent issued its proposed deficiencies for the 1972 and 1973 tax years, ruling that for a parent corporation to include all of its subsidiary corporations for the purposes of consolidating its taxable income, it must be incorporated in Florida.
For the years 1972, 1973 and 1974, respondent's Rule 12C-1.131(1), F.A.C., contained a definition of a "Florida parent company" as the term is used in the second sentence of Florida Statutes 220.131(1). This rule was amended on August 4, 1975, to delete said sentence defining the term "Florida parent company."
CONCLUSIONS OF LAW
The issue in this case is determined by the meaning of the term "Florida parent company" used in Florida Statutes 220.131(1). It is petitioner's contention that the term includes any parent corporation qualified and authorized to do business in Florida. Respondent takes the position that the term applies only to those companies which are incorporated in Florida.
Under Florida Statutes 220.131(1), there are two consolidated return elections for a parent company of an affiliated group of corporations. The first sentence of that section pertains only to those members of the group which are subject to Florida taxation. The second sentence of 220.131(1) is the election made by petitioner in this case. That sentence permits a "Florida parent company" of an affiliated group of corporations to elect to consolidate its taxable income with all other members of the affiliated group, even though some are not subject to Florida taxation, if certain conditions are met. These conditions are set forth in subsections (a), (b) and (c) of 220.131(1) and have been met in this case.
As noted in the Findings of Fact, for the tax years in question, a "Florida parent company" was defined in F.A.C., Rule 12C-1.131(1) as meaning "any corporation qualified to do business in Florida or otherwise subject to tax under the Code, irrespective of its place of incorporation .
It is the conclusion of the undersigned that this definition controls the matter in dispute herein since it was applicable during the tax years in
question. Respondent is bound by its own rules and regulations in its determination of taxes to be assessed. While normally the law as it exists at the time of review will be applied to a pending case, petitioner herein was entitled to rely upon respondent's rule defining a statutory term, which definition was in full force and effect during the 1972-74 tax years. See State of Fla., Department of Transportation v. Pan American Construction Co., etc., et al, 338 So.2d 1291 (Fla. App. 1st 1976). Even the deletion of said definition in August of 1975 does not compel a different result. A reading of other rules of the respondent illustrates that the term "Florida parent" is used to denote a corporation subject to the Florida tax, and not merely a company incorporated in Florida. See F.A.C. Rule 12C-1.03(1) and Examples (1) and (2) cited therein.
Also see Schine Enterprises, Inc. v. Dept. of Revenue, DOAH Docket No. 76-1619, Recommended Order entered April 26, 1977.
Petitioner has raised equal protection and public policy arguments, contending that to preclude it from consolidating income because it is not incorporated in Florida would constitute discrimination against a qualified foreign corporation and be contrary to State policy. Petitioner also cites cases requiring a liberal construction of tax statutes in favor of the taxpayer. In view of the conclusion reached as to the applicability of respondent's rules and regulations, it considered unnecessary to address these contentions.
In conclusion it is found that petitioner, as a parent corporation qualified to do business in Florida and having met the requirements of the statute, is entitled to consolidate its taxable income with all other members of its affiliated group. Petitioner is therefore not liable for any assessment based upon a finding that a Florida parent company must be incorporated in Florida before it is entitled to consolidate its income with members which are not subject to the Florida corporate income tax code.
