STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FIRST NATIONAL BANK OF )

POMPANO BEACH, )

)

Petitioner, )

)

vs. ) CASE NO. 77-853

) STATE OF FLORIDA, DEPARTMENT ) OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a hearing was held before Charles C. Adams, a Hearing Officer with the Division of Administrative Hearings, by a written stipulation of facts end supporting memoranda. This stipulation of facts was entered on lay 17, 1979, the date which had been assigned to conduct the formal hearing de novo.

APPEARANCES

For Petitioner: Bruce Culpepper, Esquire

716 Barnett Bank Building Tallahassee, Florida 32301

For Respondent: Barbara Staros Harmon, Esquire

Assistant Attorney General The Capitol

Tallahassee, Florida 32301 ISSUE

Whether the Petitioner, First National Bank of Pompano Peach, is liable for the payment of documentary stamp tax in the amount of $940.80 and a penalty of a like amount in accordance with the provisions of Section 201.08, Florida Statutes.

FINDINGS OF FACT

1. The parties in the person of their counsel have stipulated to the evidential facts which shall serve as the basis for the determination of the matters in dispute. The stipulation of facts and its attendant exhibits are attached to this Recommended Order and made a part thereof.

   
   

2. As can be seen in the examination of the stipulated facts and supporting exhibits, the amount of $940.80 tax due and $940.80 for penalty is the total amount pertaining to certain notes, including notes in the names of Newth and Smith, copies of which notes appear as Exhibits C and D to the stipulated facts. A review of the total audit, Exhibit A in the stipulated

   facts, reveals that the amount in issue on the notes of Newth and Smith totals

   $885.75 alleged tax due and $885.75 alleged penalty due. The balance of the

   $940.80 documentary stamp tax and $940.80 in penalty pertaining to notes of other named individuals have been conceded by the Petitioner as due and owing and are not in controversy through this hearing process.

   
   

3. The original notes on the accounts of Newth and Smith were issued in 1969. The Newth note was drawn on September 17, 1969, and the Smith note on April 14, 1969. At the time the notes were issued, national banks were immune from state and local taxes whose categories were not within the purview of Section 5219 of the Revised Statutes (12 USCA Sec. 548). Documentary stamp taxes were not one of the classes of taxes enumerated in Section 5219. Consequently, no documentary stamp taxes could be imposed against the notes drawn on accounts in the First National Hank of Pompano Beach because in 1969 it was a national bank, a status which it has continued to hold through the time of these proceedings.

   
   

4. The prohibition against documentary stamp taxes being imposed by a state government on transactions between a national bank and its customers existed until December, 1969, at which point Public Law 91-156 was enacted, on December 12, 1969, and it amended Section 5219 of the Revised Statutes (12 USCA Sec. 548) and subsequent to that amendment, Title 12 USCA Sec. 3548 allowed state governments to tax national banks. In particular, the language of that latter provision provided:

   
   

   For the purpose of any tax law enacted under the authority of the United States or any State, a national bank shall be treated as a bank organized and existing under the laws of the State or other jurisdiction within which its principal office is located.

   
   

5. This meant that transactions between the customers of a national bank and that bank with took place subsequent to the implementation of Title 12 USCA Sec. 3548 could be taxed pursuant to Chapter 201, Florida Statutes, by the process of a documentary stamp tax being levied. (The exhibits attached to the statement of facts show that Newth renewed his note with the Petitioner on April 20, 1971, and again on December 31, 1975. Smith renewed his note on June 12, 1973, and on December 31, 1975. Through the renewal process, documentary steep taxes were not paid on $683,000.00 involving the note of Newth and on $15,500.00 involving the note of Smith.)

   
   

6. The Petitioner claims that it need not pay the documentary stamp tax and penalty on the Newth and Smith notes, because it is except from the payment of such tax. While the Petitioner agrees with the Respondent that Subsection 201.08(1), Florida Statutes, calls for the payment of documentary taxes on promissory notes and the renewal of those promissory notes, Petitioner believes that Section 201.09, Florida Statutes, exempts it from the necessity to pay documentary stamp taxes and related penalties in the matter of the renewal of the Newth and Smith notes which took place on December 31, 1975.

   
   

7. The provision of Section 201.09, Florida Statutes, states:

   
   

   201.09 Renewal of existing promissory note; exemption.--Then any promissory note is given in renewal of any existing promissory note, which said renewal note only extends or

   continues the identical contractual obligations of the original promissory note and evidences part or all of the original indebtedness evidenced thereby, not including any accumulated interest thereon and without enlargement in any way of said original contract and obligation, such renewal note shall not be subject to taxation under this chapter if such renewal note has attached to it the original promissory note with canceled stamps of fixed thereon showing full payment of the tax due thereon.

   
   

8. Petitioner reads this provision to mean that the prohibition against the State of Florida levying taxes on the transactions that took place on the Newth and Smith notes in 1969, under the protection afforded by Section 5219 of the Revised Statutes (12 USCA Sec. 548); was tantamount to a declaration that full payment of the tax due thereon had been rendered and when the State attempted to impose the documentary stamp tax on the renewals which took place on December 31, 1975, Section 201.09, Florida Statutes, exempted the Petitioner from the payment of that tax. Under this theory, it was only necessary to attach the original promissory note issued in the Newth and Smith matters in 1969 to the renewal notes of December 31, 1975, and even though canceled stamps were not affixed to the 1969 notes, this could be analogous to attaching promissory notes with canceled stamps to renewal note documents. The analogy is supported in the mind of the Petitioner because both in the instance of the latter promissory notes with documentary stamp taxes attached and in the cases of Newth and Smith where original promissory notes were attached without canceled stamps attached; the key point was that under the hypothetical situation of documentary stamp taxes affixed to the original notes or the actual situation in the Newth and Smith cases, both had the real effect or effect in law of providing full payment of taxes due thereon.

   
   

9. The perception of the Petitioner does not comport with the basis for the exemption created by Section 201.09, Florida Statutes. That exemption only applies when tax has actually been paid on the original promissory note, which did not occur here, and that failure to pay tax on the original promissory notes precludes any claim for exemption when the notes were renewed.

   
   

10. There exists one further possibility open to the Petitioner in its efforts to resist the payment of the documentary stamp tax rate penalty on the notes of Newth and Smith. That possibility resides in the idea that the prohibition against taxing the notes when they were drafted in 1969, such prohibition appearing in the guise of Section 5219 of the Revised Statutes (12 USCA Sec. 548); it would continue to exist for the life of the note making all renewals exempt from taxation. That interpretation does not pass muster when viewed in the light of Title 12 USCA Sec. 3548, which removed future transactions from their exempt status and made them subject to tax by the Respondent. This change in position allowed Subsection 201.08(1), Florida Statutes, to be imposed on the renewals to the promissory notes, which occurred on December 31, 1975.

    
    

11. In summary, Petitioner having failed to demonstrate its entitlement to the exemption set out in Section 201.09, Florida Statutes, it is liable in the lull amount claimed for the payment of documentary stamp taxes and penalties in a like amount in accordance with the provisions of Chapter 201, Florida

    Statutes, on all transactions addressed in the audit, which is Exhibit A to the statement of facts.

    
    

    CONCLUSIONS OF LAW

    
    

12. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties in this cause.

    
    

13. Based upon a full consideration of the facts herein, it is concluded as a matter of law that the Petitioner, First National Bank of Pompano Beach, is liable for the payment of documentary stamp taxes in the amount of $940.80, together with a penalty of $940.80, in keeping with the requirements of Chapter 212, Florida Statutes.

RECOMMENDATION

It is recommended that the Petitioner, First National Bank of Pompano Beach, be required to pay documentary stamp taxes in the amount of $940.80 and penalties in the amount of $940.80 related to the transactions on these promissory notes set out in the stipulation of facts offered by the parties.

DONE AND ORDERED this 15th day of June, 1979, in Tallahassee, Florida.

CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 15th day of June, 1979.

COPIES FURNISHED:

Bruce Culpepper, Esquire 716 Barnett Bank Building Tallahassee, Florida 32301

Barbara Staros Harmon, Esquire Assistant Attorney General The Capitol

Tallahassee, Florida 32301

John D. Moriarty, Esquire Department of Revenue

Room 104, Carlton Building Tallahassee, Florida 32301

================================================================= AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FIRST NATIONAL BANK OF POMPANO BEACH,

Petitioner,

vs. CASE NO. 77-853

STATE OF FLORIDA, DEPARTMENT OF REVENUE,

Respondent.

/

NOTICE TO: BRUCE CULPEPPER, ESQUIRE

ATTORNEY FOR PETITIONER 716 BARNETT BANK BUILDING TALLAHASSEE, FLORIDA 32301

BARBARA STAROS HARMON ATTORNEY FOR RESPONDENT ASSISTANT ATTORNEY GENERAL THE CAPITOL LL04 TALLAHASSEE, FLORIDA 32301

You will please take notice that the Governor end Cabinet of the State of Florida, acting as head of the Department of Revenue, at its meeting on the 16th day of October, 1979, approved the Recommended Order of the Division of Administrative Hearings dated June 15, 1979 and modified staff recommendation and assessed penalty at 15 percent. This constitutes final agency action by the Department of Revenue.

JOHN D. MORIARTY, ATTORNEY DEPARTMENT OF REVENUE STATE OF FLORIDA

ROOM 104, CARLTON BUILDING TALLAHASSEE, FLORIDA 32301

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing Notice was furnished by mail to Bruce Culpepper, Esquire, 716 Barnett Bank Building, Tallahassee, Florida 32301, Attorney for Petitioner; by hand delivery to Barbara Staros Harmon, Assistant Attorney General, The Capitol LL04, Tallahassee, Florida 32301, Attorney for Respondent; and Charles C. Adams, Hearing Officer, Division of Administrative Hearings, Department of Administration, Room 530, Carlton Building, Tallahassee, Florida 32301, this 24th day of October, 1979.

JOHN D. MORIARTY

Docket for Case No: 77-000853

Orders for Case No: 77-000853