STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FANPAC CORPORATION, )

)

Petitioner, )

)

vs. ) CASE NO. 77-912

)

STATE OF FLORIDA, )

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice a hearing was scheduled for August 26, 1977 at 1:30 P.M., at the Conference Room, Suite 205, 6501 Arlington Expressway, Building "B", Jacksonville, Florida. At the commencement of the hearing the parties indicated that they could arrive at a stipulation of facts in this cause, to be submitted at a later date, thereby negating the necessity to. produce in- hearing testimony. The parties have arrived at such a factual stipulation in writing, which was signed by the Petitioner's attorney on October 21, 1977. A copy of the written stipulation, together with the petition for administrative hearing and the exhibit thereto, are attached and made a part of the record.

APPEARANCES

For Petitioner: Paul M. Harden, Esquire

Smith Davenport, Peek and Bloom 2601 Gulf Life Tower Jacksonville, Florida 32207

For Respondent: Daniel C. Brown, Esquire

Assistant Attorney General Department of Revenue

The Capitol

Tallahassee, Florida 32304 ISSUES

1. Whether or not the Petitioner is required to pay documentary stamp tax, interest and a penalty as alleged in the assessment, A-54, stated by the Respondent under the terms of Chapter 201, F.S.

   
   

2. Whether or not the Petitioner is required to pay documentary surtax, interest and a penalty as alleged in the assessment, A-54, stated by the Respondent under the terms of Chapter 201, F.S.

FINDINGS OF FACT

1. This case comes on for consideration based upon the request of the Petitioner, Fanpac Corporation, for a formal administrative hearing on the

   question of the propriety of the December 8, 1976 assessment, A-54, of the Respondent, State of Florida, Department of Revenue. The claimed assessment pertains to an assignment of lease, recorded at Book 4182, Page 562, Public Records, Duval County, Florida. The assessment states that documentary stamp tax is owed in the amount of $5,404.50, together with accrued interest and a penalty in the amount of the claimed documentary stamp tax. The assessment also states that documentary surtax is owed in the amount of $370.15, together with accrued interest and a penalty in the amount of the claimed documentary surtax.

   
   

2. In furtherance of the consideration of the case, the parties have submitted a factual stipulation to be examined by the undersigned in arriving at the terms of the recommended order. Quoting from the stipulation it states:

   
   

   STIPULATION

   
   

3. The parties hereto, by and through their undersigned counsel, hereby stipulate that the following facts are not in dispute and shall be deemed established at hearing without further proof:

   
   

   1. On February 1, 1974, the date of recordation of the assignment of lease between Prince Manor Apartments, Inc. and Imre J. Rosenthal, the department's policy was that documentary taxes were not due upon such transactions.

      
      

   2. The law firm of Smith, Davenport, Peek & Bloom prepared the assignment of lease between Prince Manor Apartments, Inc. and Imre J. Rosenthal. Prior to recordation inquiry was made of representatives of the department who advised that no tax was due on the assignment of lease.

      
      

   3. On November 13, 1974, Attorney General's Opinion number 74-350 was issued. Based on this opinion, the department changed its policy regarding documentary taxes on assignments of leases for real property.

      
      

   4. The law firm of Smith, Davenport, Peek & Bloom also prepared the reassignment of lease between Imre J. Rosenthal and Fanpac Corporation which was recorded on June 6, 1976. As a result of discussions with the Department of Revenue on February 1, 1974, and due to the fact that change in the policy of the Department of Revenue in regard to taxing of assignments of lease was unpublished and not publicly stated, the firm and petitioner were unaware of the change in the Department's policy at the time of the recording of the reassignment of the lease to Imre J. Rosenthal.

      
      

   5. Fanpac agrees to compromise and pay the allegedly outstanding tax and interest in the sum of $6,519.06.

      
      

   6. The parties agree to withdraw all outstanding discovery.

      
      

   7. The parties agree that the Hearing Officer will enter a recommended order to include a recommendation on the penalty issue.

      
      

4. By an examination of the facts, it is shown that the Petitioner has agreed with the Respondent to compromise and pay the outstanding documentary stamp tax and documentary surtax, together with interest on those items for a total of $6,519.06. Therefore, the propriety of those assessments and the attendant interest, is established. The remaining question, which is unresolved by the stipulation pertains to the assessment of a penalty on the amount of documentary stamp tax and documentary surtax.

5. The initial question which must be resolved in addressing the implementation of penalties concerns the law which must be applied to this transaction. The section of Chapter 201, F.S., which sets out the conditions for claiming a penalty may be found in Section 201.17, F.S. Prior to July 1, 1977, that section read as follows:

   
   

   "201.17 Penalties for failure to pay tax required.-

   * * *

   1. Any document, instrument, or paper upon which the tax under this chapter is imposed

      and which, upon audit or at time of recordation, does not bear the proper value of stamps shall subject the person or persons liable for the

      tax upon the document, instrument or paper to:

      1. Purchase of stamps not affixed; and

      2. Payment of penalty to the Department of Revenue equal to the purchase price of the stamps not affixed. This penalty is to be in addition to and not in lieu of any other penalty imposed by law."

   
   

   On July 1, 3.977, the law was amended to read:

   
   

   "201.17 Penalties for failure to pay tax required.--

   * * *

   1. Any document, instrument, or paper upon which the tax under this chapter is imposed and which, upon audit or at time of recordation, does not bear the proper value of stamps shall subject the person or persons liable for the tax upon the document, instrument, or paper to:

      1. Purchase of the stamps not affixed.

      2. Payment of a penalty to the Department of Revenue equal to 25 percent of the purchase

         price of the stamps not affixed. If it is deter- mined by clear and convincing evidence that any part of a deficiency is due to fraud, there shall be added to the tax as a civil penalty, in lieu of the aforementioned penalty under this paragraph, an amount equal to 100 percent of the deficiency. These penalties are to be in addition to, and not in lieu of, any other penalties imposed by law.

      3. Payment of interest to the Department of Revenue, accruing from the date of recordation until paid, at the rate of 1 percent per month or fraction thereof, based on the purchase price of the stamps not affixed.

         
         

   2. The department may compromise any penalty or any proposed assessment which has not become final

   on the effective date of this act if its investigation reveals that the penalty would be too severe or unjust.

   Section 2. This act shall take effect July 1, 1977."

   
   

   It can be seen in reading Section 201.17, F.S., as effective July 1, 1977, that the intention was to have the amended law have application to all of those cases that had not been finally resolved included within the provisions of the amended law. Consequently, the Petitioner, having agreed to the correctness of the assessment for documentary stamp tax and interest and documentary surtax and interest, as compromised, is going to be required to pay a penalty in the amount of 25 percent or less, on the face amount of documentary stamp tax and documentary surtax claimed by the Respondent.

   
   

6. An examination of the amended provisions of Section 201.17, F.S., establishes two possible theories for imposing a penalty in an amount of less than 23 percent of the face amounts of documentary stamp tax and documentary surtax owed. The first theory is established under the terms of Section 201.17(3), F.S., which states that the Respondent, State of Florida, Department of Revenue, may compromise a penalty which has not become final on the effective date of the amendment, which is July 1, 1977. As stated before, the penalty question has not been finally resolved and the Respondent would have the authority to enter into a compromise of the penalty; however, at the time the factual stipulation was submitted, no compromise had been made of the penalty. Therefore, this form of compromise is moot for purposes of this hearing.

   
   

7. The second possible reduction of the 25 percent penalty to be imposed against the documentary stamp tax and documentary surtax, pertains to the possibility that other provisions of the amended Section 201.17, excluding Section 201.17(3), F.S., would allow reduction of the 25 percent penalty based upon an examination of the facts at issue. To resolve that possibility it is necessary to look at the history of Section 201.17, F.S., prior to the amendment. In the case of Dominion Land and Title Corp. v. Department of Revenue, 320 So.2d 815 (Fla. 1975), the Supreme Court upheld the constitutionality of the existing Section 201.17(2), F.S., on the subject of penalty stating, "If the law is too harsh, it should be changed by the legislature and not by this court." This case was further supported by the case of Associated Dry Goods Corporation v. Department of Revenue, 335 So.2d 832 (1st DCA, 1976). The opinion of the court as to the 100 percent mandatory penalty requirements in the former Section 201.17, F.S., continued until the opinion of the court in Zuckerman Vernon Corp. v. Department of Revenue, 339 So.2d 685 (1st DCA, 1976), a case in which the court applied its equity powers in reducing the amount of the penalty called for under Section 201.17(2), F.S. These court decisions were followed by the amendment to Section 201.17, F.S., which reduced the amount of mandatory penalty from 100 percent to 25 percent and gave a further permission to the State of Florida, Department of Revenue to reduce the penalty, under a compromise agreement between the parties. This action of the legislature constitutes a redress of any harshness found under the 100 percent mandatory penalty, and there is nothing found in those provisions, which would seem to indicate the necessity to further reduce the penalties beyond the 25 percent mark found in Section 201.17(2)(b), F.S. (excluding Section 201.17(3), F.S.), unless it is inherent in some difference in the language found in Section 201.17(2), F.S., and the previous statement of that provision, or through the court decisions on that prior provision.

   
   

8. In contrasting the language found in Section 201.17(2), F.S., in effect prior to July 1, 1977 and that language of 201.17(2), F.S., which took effect on July 1, 1977, there is no apparent difference in the language which would support a further reduction of the stated 25 percent penalty. Furthermore, based upon an evaluation of the court cases which considered the prior Section

   201.17(2), F.S., and the comparison of the language of that prior section and the amended section 201.17(2), F.S., no statement of authority is found in those cases which would justify the further reduction of the 25 percent penalty imposed to the extent the issue is raised in this forum.

   
   

9. This analysis of the current law found in Section 201.17, F.S., leads to the conclusion that the relief which may be afforded from a mandatory 25 percent penalty must come by agreement with the Respondent or the possible equity jurisdiction of some appellate court; notwithstanding, the demands of equity supported by the Respondent's treatment of the Petitioner in this cause.

   
   

10. For the reasons stated, the Petitioner is liable for a 25 percent penalty to be imposed on the amount of documentary stamp tax of $5,404.50 and is liable for a 25 percent penalty grounded on the amount of $370.15, documentary surtax claimed.

    
    

    CONCLUSIONS OF LAW

    
    

11. The Division of Administrative Hearings has jurisdiction in this cause.

    
    

12. The Petitioner is liable for documentary stamp tax under the terms of Section 201.02, F.S., together with interest under the terms of Section 201.17,

    F.S. The Petitioner is liable for a penalty in the amount of 25 percent of

    $5,404.50, under the terms of Section 201.17, F.S.

    
    

13. The Petitioner is liable for documentary surtax under the terms of Section 201.021, F.S., together with interest under the terms of Section 201.17,

1. The Petitioner is liable for a penalty in the amount of 25 percent of

   $370.15, under the terms of Section 201.17, F.S.

   
   

   RECOMMENDATION

   
   

   It is recommended that the compromise agreement entered into by the parties, that the Petitioner pay documentary stamp tax and documentary surtax and interest on those amounts in the aggregate of $6,519.06 be accepted. It is further recommended that penalties in the amount of 25 percent of $5,404.50, documentary stamp tax, together with a penalty in the amount of 25 percent of

   $370.15 documentary surtax, be imposed.

   
   

   DONE AND ENTERED this 7th day of November, 1977, in Tallahassee, Florida.

   
   

   CHARLES C. ADAMS

   Hearing Officer

   Division of Administrative Hearings

   530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675

   
   

   
   

   COPIES FURNISHED:

   Paul M. Harden, Esquire

   Smith, Davenport, Peek and Bloom 2601 Gulf Life Tower Jacksonville, Florida 32207

   
   

   Daniel C. Brown, Esquire Assistant Attorney General Department of Revenue

   The Capitol

   Tallahassee, Florida 32304

   
   

   John D. Moriarty, Esquire Department of Revenue

   Room 104, Carlton Building Tallahassee, Florida 32304

   
   

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

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

   
   

   STATE OF FLORIDA

   DIVISION OF ADMINISTRATIVE HEARINGS

   
   

   FANPAC CORPORATION

   
   

   Petitioner,

   
   

   vs. CASE NO. 77-912

   
   

   STATE OF FLORIDA, DEPARTMENT OF REVENUE,

   
   

   Respondent.

   /

   
   

   FINAL ORDER

   
   

   Pursuant to Notice, a hearing was scheduled in this matter for August 26, 1977 at 1:30 p.m. at the Conference Room, Suite 205, 6501 Arlington Expressway, Building B, Jacksonville, Florida. At the commencement of hearing the parties indicated that they could arrive at a Stipulation of Facts in this case, to be submitted at a later date, thereby avoiding the necessity to produce testimony. The parties have arrived at such a factual stipulation in writing. At the hearing on this matter the parties were represented by the following persons:

   
   

   Attorney for Petitioner: Paul M. Harden, Esquire

   Smith, Davenport, Peek and Bloom 2601 Gulf Life Tower Jacksonville, Florida 32207

   For Respondent: Daniel C. Brown, Esquire

   Assistant Attorney General Department of Revenue

   The Capitol

   Tallahassee, Florida 32304 ISSUE

   1. Whether or not the Petitioner is required to pay documentary stamp taxes, interest and penalty as alleged in the assessment, A-54, stated by the Respondent under the terms of Chapter 201, F.S.

      
      

   2. Whether or not the Petitioner is required to pay documentary surtax, interest and penalty as alleged in the assessment, A-54, stated by the Respondent under the terms of Chapter 201, F.S.

FINDINGS OF FACT

1. This case comes on for consideration based upon the request of the Petitioner, Fanpac Corporation, for an administrative hearing on the question of the propriety of the December 8, 1976 assessment, A-54, of the Respondent, State of Florida, Department of Revenue. The claimed assessment pertains to an assignment of lease, recorded at Book 4182, Page 562, Public Records, Duval County, Florida. The assessment states that documentary stamp tax is owed in the amount of $5,404.50, together with accrued interest and a penalty. The assessment also states that a documentary surtax is owed in the amount of

   $370.15, together with accrued interest and a penalty.

   
   

2. In furtherance of the consideration of the case, the parties have submitted a factual stipulation to be examined. These stipulations states as follows:

STIPULATION

The parties hereto, by and through their undersigned counsel, hereby stipulate that the following facts are not in dispute and shall be deemed established at hearing without further proof.

1. On February 1, 1974, the date of recordation of the assignment of lease between Prince Manor Apartments, Inc. and Imre J. Rosenthal, the department's policy was that documentary taxes were not due upon such transactions.

   
   

2. The law firm of Smith, Davenport, Peek & Bloom prepared the assignment of lease between Prince Manor Apartments, Inc. and Imre J. Rosenthal. Prior to recordation inquiry was made of representatives of the department who advised that no tax was due on the assignment of lease.

   
   

3. On November 13, 1974, Attorney General's Opinion number 74-350 was issued. Based on this opinion, the department changed its policy regarding documentary taxes on assignments of leases for real property.

"4. The law firm of Smith, Davenport, Peek & Bloom also prepared the reassignment of lease between Imre J. Rosenthal and Fanpac Corporation which was recorded on June 6, 1976. As a result of discussions with the Department of Revenue on February 1, 1974, and due to the fact that change in the policy of the Department of Revenue in regard to taxing of assignments of lease was unpublished and not publicly stated, the firm and petitioner were unaware of the

change in the Department's policy at the time of the recording of the reassignment of the lease to Imre J. Rosenthal.

1. Fanpac agrees to compromise and pay the allegedly outstanding tax and interest in the sum of $6,519.06.

   
   

2. The parties agree to withdraw all outstanding discovery.

   
   

3. The parties agree that the Hearing Officer will enter a recommended order to include a recommendation on the penalty issue."

By an examination of the facts, it is shown that the Petitioner has agreed with the Respondent to compromise and pay the outstanding documentary stamp tax and documentary surtax, together with interest on those items for a total of

$6,519.06. Therefore, the propriety of those assessments and the attendant interest, is established. The remaining question, which is unresolved by the stipulation pertains to the assessment of a penalty on the amount of documentary stamp tax and documentary surtax.

The initial question which must be resolved in addressing the implementation of penalties concerns the law which must be applied to this transaction. The section of Chapter 201, F.S. which sets out the conditions for claiming a penalty may be found in Section 201.17, F.S. Prior to July 1, 1977, that section read as follows:

"201.17 Penalties for failure to pay tax required.-

* * *

(2) Any document, instrument, or paper upon which the tax under this chapter is imposed and which, upon audit or at time of recordation, does not bear the proper value of stamps shall subject the person or persons liable for the tax upon the document, instrument or paper to:

1. Purchase of stamps not affixed; and

   
   

2. Payment of penalty to the Department of Revenue equal to the purchase price of the stamps not affixed. This penalty is to be in addition to and not in lieu of any other penalty imposed by law."

On July 1, 1977, the law was amended to read:

"201.17 Penalties for failure to pay tax required.--

* * *

1. Any document, instrument, or paper upon which the tax under this chapter is imposed and which, upon audit or at time of recordation, does not bear the proper value of stamps shall subject the person or persons liable for the tax upon the document, instrument, or paper to:

   
   

   1. Purchase of the stamps not affixed.

      
      

   2. Payment of a penalty to the Department of Revenue equal to 25 percent of the purchase price of the stamps not affixed. If it is determined by clear and convincing evidence that any part of a deficiency is due to fraud, there shall be added to the tax as a civil penalty, in lieu of the aforementioned

      penalty under this paragraph, an amount equal to 100 percent of the deficiency. These penalties are to be in addition to, and not in lieu of, any other penalties imposed by law.

      
      

   3. Payment of interest to the Department of Revenue, accruing from the date of recordation until paid, at the rate of 1 percent per month or fraction thereof, based on the purchase price of the stamps not affixed.

   
   

2. The department may compromise any penalty or any proposed assessment which has not become final on the effective date of this act if its investigation reveals that the penalty would be too severe or unjust.

Section 2. This act shall take effect July 1, 1977."

It can be seen by reading Section 201.17, Florida Statutes, as effective July 1, 1977, that the intention of the Legislature was to have the amended law applied to all cases that had not been finally resolved on the effective date of the amendment. Consequently, the Petitioner, is not required to pay the 100 percent penalty exacted by Chapter 201, F.S., prior to amendment. The question remains whether petitioner must pay the 25 percent penalty under Chapter 201, as amended.

The recommended order from the hearing examiner in this matter originally recommended imposition of the 25 percent penalty. Upon motion by the petitioner for clarification of that recommended order, the hearing examiner entered his order of clarification, stating his agreement with the right of respondent to waive the 25 percent penalty, under appropriate circumstances. The facts, as set forth in the Stipulation of Facts between the parties, indicate that agents of petitioner, relying in good faith upon representations of the Department of Revenue, did not affix documentary stamps to the reassignment of lease in question. The stipulated facts set forth a situation in which it would be unjust and inequitable for the respondent to exact the 25 percent penalty allowed by amended chapter 201, F.S.

Based upon the foregoing Findings of Fact and Conclusions of Law it is: ORDERED:

That Petitioner pay the documentary stamp taxes and surtaxes upon the reassignment of lease, together with interest thereon, but that petitioner pay no penalty in this case.

DONE AND ORDERED this 7th day of November, 1977, in Tallahassee, Florida.

CERTIFICATION

I HEREBY CERTIFY that the foregoing if the Final Order of the Department of Revenue in this cause, adopted by the Governor and Cabinet on day of

, 1978.*

* Harry K., Coe, Jr.

Executive Director State of Florida, Department of Revenue Room 102, Carlton Bldg.

Tallahassee, Florida 32304 Date this day of , 1978.*

* NOTE: Agency Final Order was filed with DOAH on March 1, 1978 undated and unsigned.

Docket for Case No: 77-000912

Orders for Case No: 77-000912