vs. ) CASE NO. 80-017
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, R. L. Caleen, Jr., held a formal hearing in this case on March 18, 1980, in Orlando, Florida.
For Petitioner: William L. Eagan, Esquire
For Respondent: E. Wilson Crump, II, Esquire
Whether Section 159.31, Florida Statutes (1979), exempts an Agreement of Sale (containing a private entity's obligation to pay) executed in connection with the issuance of industrial revenue bonds pursuant to Chapter 159, supra, from payment of state documentary stamp and intangible personal property taxes.
The Agreement of Sale evidences a private entity's obligation to repay borrowed money and secures repayment of such money solely from the sale and
construction of the proposed industrial project, and is exempt, by virtue of Section 159.31, supra, from state docu- mentary and intangible personal property taxes.
That the Petitioner's application for refund be APPROVED.
Upon the February 1, 1979, recordation of an Agreement of Sale executed in connection with the issuance of industrial revenue bonds, Petitioner, Applied Devices Corporation (hereinafter "CORPORATION"), paid, under protest, state documentary stamp and intangible personal property taxes. Thereafter, the CORPORATION filed with the Comptroller of the State of Florida a claim for refund of such taxes.
On December 7, 1979, the Comptroller issued a Notice of Intent to Deny [the requested] Refund. On December 27, 1979, the CORPORATION filed its Petition and Request for Hearing on the Comptroller's intended denial.
On January 2, 1980, the Office of the Comptroller forwarded the CORPORATION'S petition to the Division of Administrative Hearings for the conducting of the requested hearing. By Notice of Hearing, dated February 5, 1980, final hearing was scheduled for March 18, 1980.
At hearing the parties agreed on the essential facts of this case, and executed a Prehearing Stipulation (Joint Exhibit No. 5) to that effect. The Petitioner offered Exhibit Nos. 1, 2, 3 (composite) and 4, each of which was received into evidence.
The parties requested and were granted the opportunity to submit memoranda of law, and proposed findings of fact and conclusions of law by April 3, 1980. Each party filed memoranda of law; the CORPORATION filed proposed findings of fact and conclusions of law, which were received on April 7, 1980.
The CORPORATION is a private electronics research, development, and production firm invited by the Osceola County Industrial Development Authority (hereinafter "AUTHORITY") to locate an expanded industrial facility (hereinafter "Project") in Osceola County (Petitioner's Exhibit No. 3).
On February 10, 1978, the AUTHORITY, pursuant to official resolution, issued to the CORPORATION an inducement letter which was accepted by the CORPORATION. The letter contained, inter alia, the following proposal by the AUTHORITY:
The AUTHORITY would issue industrial revenue bonds in an amount not to exceed
$3,300,000.00 to pay the costs of acquisition and construction of the Project;
The AUTHORITY would acquire fee simple title to the Project site;
Prior to delivery of the bonds, the AUTHORITY and the CORPORATION would enter into an Agreement of Sale under the terms of which the Project would be sold by the AUTHORITY to the CORPORATION "on a basis which . . . [would] provide for the payment in full of the
bonds and interest thereon" and would reim- burse the AUTHORITY for all expenditures by it in connection with the acquisition and construction of the Project:
The AUTHORITY would enter into a Mortgage and Indenture of Trust which would pledge the Agreement of Sale and the amounts due there- under to the trustee for the benefit of the bond holders (Petitioner's Exhibit No. 3).
Pursuant to the provisions of the inducement letter, the AUTHORITY entered into an Agreement for Sale with the CORPORATION on January 1, 1979. The Agreement for Sale (the tax of which is at issue here) imposed, inter alia, the following obligations upon the parties:
The AUTHORITY would deliver the deed to the Project site into escrow, for ultimate delivery to the CORPORATION;
In payment of the purchase price of the Project, the CORPORATION would execute and deliver a Promissory Note, in the amount and form specified, to the trustee as the
assignee of the AUTHORITY under the Mortgage and Indenture of Trust. The CORPORATION agreed to unconditionally "make prompt payment of all amounts payable on the note when due" (Page iv-2, Petitioner's Exhibit No. 3). The
Promissory Note, as prescribed in detail by the Agreement of Sale, was to be issued "in evidence of the company's payment obligation contained in Section 4.2 of the Agreement of Sale . . . ." (Page A-5, Petitioner's
Exhibit No. 3)
The AUTHORITY would issue $3,000,000.00, in aggregate principal amount, of industrial development revenue bonds to finance the cost of acquiring and constructing the Project. (Petitioner's Exhibit No. 3)
The Agreement of Sale further provided, in pertinent part, as follows: "[That] the Bonds are to be issued under
and secured by the Indenture pursuant to which the AUTHORITY'S interest in this Agree- ment and the Note will be assigned to the Trustee and all revenues received by the AUTHORITY in connection with the ownership and sale of the Project will be assigned to the Trustee and the Project will be mortgaged to the Trustee all as security for the pay- ment of the principal of and interest on
the Bonds." (Emphasis supplied) (Page II-2, Petitioner's Exhibit No. 3)
The AUTHORITY repeatedly disclaimed any assumption by it of a general obligation to pay in connection with the execution of the Sales Agreement and issuance of the bonds;
"Notwithstanding anything herein contained
to the contrary, any obligation the AUTHORITY may hereby incur for the payment of money shall not be a general debt on its part
but shall be payable solely from proceeds derived from this Agreement and the Note, the sale of the Bonds, the condemnation awards as herein described and any other revenues derived from its ownership of the Project and Other Improvements." Id. (Emphasis supplied)
Contemporaneously with, and pursuant to the execution of the Agreement of Sale, the CORPORATION executed a Promissory Note, dated January 1, 1979, in the principal amount of $3,000,000.00, together with interest, payable to the order of the AUTHORITY. The Note indicated payment of principal and interest had been irrevocably assigned by the AUTHORITY to the Trustee pursuant to a Mortgage and Indenture of Trust, dated January 1, 1979, which was also executed in connection with the issuance of the Bonds. (Petitioner's Exhibit No. 3)
Pursuant to the inducement letter and the Agreement of Sale, the AUTHORITY acquired the Project site property on January 31, 1979. (Petitioner's Exhibit No. 2)
On February 1, 1979, the various instruments involved with the issuance of the Bonds were recorded with the Clerk of the Circuit Court, Osceola County, Florida. The CORPORATION paid, under protest, documentary stamp tax in the amount of $4,500.00 and intangible personal property tax in the amount of
$6,000.00 on the Agreement of Sale. No state tax was imposed upon or paid on the Promissory Note executed by the CORPORATION to the AUTHORITY. (Petitioner's Exhibit No. 3, Stipulation of Counsel)
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding. Section 120.57, supra.
Florida documentary stamp and intangible personal property taxes are imposed, inter alia, upon written obligations for the payment of money which are secured by mortgages. Sections 201.08, 199.052(7)(a), 199.032(2), supra.
The threshold question in this case, whether the Agreement for Sale satisfies the above requirement, must be answered by examination of the document without reference to extrinsic facts. Choctawhatchee Electrical Cooperative, Inc. v. Green, 132 So.2d 556 (Fla. 1961). Here, the provisions of the Agreement of Sale unequivocally require the CORPORATION to contemporaneously execute a Note in the amount specified and in the precise form which is attached to the Agreement. The Agreement imposes an absolute and unconditional obligation upon the CORPORATION to make the payments required to be made under the Note. (Page IV-3, Petitioner's Exhibit No. 3) The CORPORATION'S obligation to pay the AUTHORITY (an amount necessary to retire the Bonds) is neither contingent nor executory. The obligation to pay as contained in the Agreement of Sale, is sufficiently outright and unconditional to fall within the category of instruments and property subject to the documentary stamp and intangible personal property taxes.
The question, then, in dispute is whether the Agreement of Sale falls within the exemption from state taxation provided by Part II, Chapter 159, Florida Statutes, the "Florida Industrial Development Financing Act." Section 159.31, Florida Statutes, provides, in pertinent part:
"[T]he bonds [industrial revenue bonds] issued under the provisions of this part, their transfer, and the income therefrom
. . . shall at all times be free from taxation by the state . . . ." (Emphasis supplied)
The term, "bonds," as used in Section 159.31, supra, is defined as follows:
"[B]onds . . . shall also include . . . other debt obligations evidencing an obli- gation to repay borrowed money together with any security instruments or agreements securing repayment of said borrowed money and payable solely from the revenue
derived from the sale, operation, or leas- ing of the project." [Emphasis supplied, Section 159.27(1)]
The "Florida Industrial Development Financing Act" declares that it "is necessary and in the public interest to facilitate the financing of capital projects" for industrial plants, and that the exercise of the powers granted in the Act "will be for the benefit of the people, for the increase of their industry and prosperity and for the improvement of their health and living conditions, and for the provision of gainful employment and will constitute the performance of essential public functions . . . ." Sections 159.26, 159.31, supra. In construing the provisions of the Act, the Legislature has given specific guidance:
"Part [I of chapter 159, deemed necessary for the prosperity and welfare of the state and its inhabitants, shall be liberally construed to effect the purposes thereof." (Emphasis supplied, Section 159.43, supra.)
The CORPORATION contends that the Agreement of Sale is exempt from state tax because it is a "debt obligation evidencing an obligation to repay borrowed money" and a "security instrument or agreement securing repayment of such borrowed money, and payable solely from the revenue derived [by the AUTHORITY] from the sale, operation, or leasing of any project." Sections 159.27(1), 159.31, supra.
The Respondent replies that the Agreement of Sale is not exempt since Section 159.31, supra, does not explicitly exempt from taxation a promise to pay of a private entity doing business with the bond-issuing agency, and that any statutory ambiguity involving an exemption must be resolved against granting the exemption.
It is true that, although taxing statutes are strictly construed against the taxing authority, exemptions are normally strictly construed against the claimant. Wanda Marine Corps v. State Department of Revenue, 305 So.2d 65
(Fla. 1st DCA 1975). However, this rule of strict construction does not require that the narrowest possible meaning be given to words descriptive of the exemption. Johnson v. Presbyterian Homes of Synod, Inc., 239 So.2d 256 (Fla.
1978). The primary guide to interpreting statutes is to determine the legislative intent and carry it into effect. Dickinson v. Bradley, 298 So.2d
352 (Fla. 1974). Tax statutes should be interpreted in a manner which accomplishes their purpose, and which avoids an absurd conclusion or leaves without effect any part of a statute. Snively Groves, Inc. v. Mayo, 184 So. 839 (Fla. 1938), State v. Zimmerman, 370 So.2d 1179 (Fla. 4th DCA 1979), Lewis v. Mosley, 204 So.2d 1997 (Fla. 1967), Mills v. Korash, 249 So.2d 765 (Fla. 1st DCA 1971).
Here, the Agreement of Sale evidences an obligation to repay borrowed money and is an agreement which secures the repayment of money borrowed by the AUTHORITY from the bond- holders--monies which are payable solely from the revenue derived from the sale of a Project.
Respondent's construction of the tax exemption contained in Section 159.31, supra, is unduly restrictive, and would not give full effect to its statutory language. The exemption extends not only to taxes otherwise payable by the agency--but also declares that the "bonds," themselves, "shall at all times be free from taxation by the state." Id. The Agreement of Sale falls within the statutory definition of "bonds" and the exemption of Section 159.31, supra, inures to benefit of both its signatories.
To construe "bonds," as used in the exemption, to include only the agency's obligation to repay borrowed money would render the statutory language ineffectual. As noted several times in the Agreement of Sale, the obligation to repay the bondholders is not a general obligation of the AUTHORITY (or agency). A caveat to this effect must also be included on the face of each issued bond. Section 159.33(1) supra. Indeed, Section 159.33, supra, expressly prohibits the issued bonds from being deemed a debt or obligation of the agency. The only meaningful debt obligation which could be contemplated by the definition of "bonds," contained in Section 158.27, supra, is the debt obligation of the private company. The only real debt obligation generated in the issuance of industrial revenue bonds is that of the induced private company. Here, there is but one obligation to repay the borrowed money, and it flows from the CORPORATION to the AUTHORITY to the bondholders. The Agreement of Sale and Mortgage secure the repayment of same.
The Respondent cites Attorney General's Opinion 070-171, as supportive of its position. The agreement which was the subject of that Opinion was a lease-purchase agreement--the specific provisions of which were not recited. Since the provisions of the particular agreement, and the obligations of the parties arising thereunder, are central to determining whether it falls within the scope of Section 159.31, supra, AGO 070-171 is not dispositive of the issue in this case.
In State v. Putnam County Development Authority, 249 So.2d 6 (Fla. 1971), the Florida Supreme Court recognized the fundamental change effected by the "Florida Industrial Development Financing Act" and the 1968 amendment to the Florida Constitution authorizing it. Fla. Const. Art. VII, S10(c). No longer could constitutional provisions be used to defeat revenue bond projects where the benefit to private interest, as opposed to the public interest, was the dominant purpose. State v. Putnam County Development Authority, supra, at 12:
"[I]t is apparent from the Act [Part II, Chapter 159, Florida Statutes], and from the purpose of the Act, that the direct bene- ficiary of any project financed under this Act is a private institution or individual.
* * *
"Here, by contract, the purpose is admittedly private--the benefit to the public being an indirect one." Id.
Here, Respondent urges a narrow interpretation of the Act which would bestow favorable tax benefits, in part, upon the public agency (AUTHORITY), to the exclusion of the private company (CORPORATION). The legislative intent expressed by the Act, including Section 159.32, Florida Statutes, would indicate a broader construction of Section 159.31, Florida Statutes, is warranted.
To the extent that the proposed findings of fact and conclusions of law submitted by the parties are not adopted herein, the same are expressly rejected as immaterial, not supported by the evidence, or not supported by law.
Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED:
That the CORPORATION'S application for refund be APPROVED.
DONE and ENTERED this 7th day of May, 1980, in Tallahassee, Florida.
R. L. CALEEN, JR., Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301
William L. Eagan, Esquire E. Wilson Crump, II, Esquire Post Office Box 2967 Assistant Attorney General Orlando, Florida 32802 Department of Legal Affairs
Honorable Gerald A. Lewis Tallahassee, Florida 32301 Comptroller, State of Florida
