STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DAVID BEN GURION CULTURE CLUB, )

INC., a Florida not-for-profit ) corporation, )

)

Petitioner, )

)

vs. ) CASE NO. 94-1741

) STATE OF FLORIDA, DEPARTMENT OF ) REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Susan B. Kirkland, held a formal hearing in this case on October 15, 1995, in Miami, Florida.

APPEARANCES

For Petitioner: Alan B. Cohn, Esquire

Abrams, Anton, Robbins, Resnick and Schneiden, P.A.

2021 Tyler Street

Hollywood, Florida 33022

For Respondent: Nancy Francillon, Esquire

Olivia P. Klein, Esquire Office of the Attorney General The Capitol - Tax Section

Tallahassee, Florida 32399-1050 STATEMENT OF THE ISSUES

Whether Petitioner qualifies for a consumer's certificate of exemption from sales and use tax as a "charitable institution."

PRELIMINARY STATEMENT

By letter dated January 20, 1994, the Respondent, State of Florida, Department of Revenue (Department) denied Petitioner, David Ben Gurion Culture Club's (Culture Club), application for a consumer's certificate of exemption from sales and use tax. The Culture Club claimed that it was exempt because it was a charitable institution. The Culture Club filed a petition for an administrative hearing. The case was referred to the Division of Administrative Hearings on April 1, 1994, for assignment to a Hearing Officer.

The case was scheduled for hearing on July 5, 1994. After numerous requests for continuances, the case was heard on October 13, 1995. At the final

hearing, the Culture Club presented Carl Rosenkopf as its witness. Petitioner's Exhibits B and F were admitted in evidence. David Sands testified as the witness for the Department. Respondent's Exhibits 1-9, and 12-14 were admitted in evidence. Joint Exhibit 1 was admitted in evidence.

At the final hearing the parties stipulated that the Jewish Federation of South Broward and the United Jewish Appeal qualified as charitable organizations.

At the final hearing the parties agreed to file their proposed recommended orders within twenty days of the date of the filing of the transcript. The transcript was filed on November 2, 1995. On November 27, 1995, an agreed motion for extension of time was filed. The motion was granted and the parties were given until December 12, 1995 to file proposed recommended orders. The Department filed its proposed recommended order on December 11, 1995. The Culture Club's proposed recommended order was received on December 15, 1995.

The parties' proposed findings of fact are addressed in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Petitioner, David Ben Gurion Culture Club, Inc. (Culture Club), is located at 3601 Northeast 17th Street, North Miami Beach, Florida 33160.

   
   

2. Respondent, Department of Revenue (Department), is the state agency which is authorized by the Florida Legislature to implement the collection and enforcement of Florida tax laws.

   
   

3. The Culture Club obtained a certificate of incorporation from the Office of the Secretary of State on October 8, 1975, Charter Number 734016.

   
   

4. In May, 1981, the Culture Club received a federal income tax exemption under I.R.C. 501(c)(3).

   
   

5. The Culture Club's Articles of Incorporation state that the Culture Club's general objectives are to sponsor lecture series and trips, discuss festivals, and to promote the culture and education of all the Culture Club's members.

   
   

6. On January 15, 1987, the Culture Club amended its Articles of Incorporation and changed its official title to "David Ben Gurion Culture Club Survivors of the Holocaust, Inc."

   
   

7. The Culture Club's Constitution and Bylaws filed with the Secretary of State on January 15, 1987, state that the purposes of the Culture Club are as follows:

   
   

   1. To memorialize and perpetuate the events of the Holocaust.

   2. To sponsor lectures, public discussion groups, forums, panels, and similar programs on the subject of the Holocaust.

   3. To promote culture and education among all of its members.

   4. To do all such things as are incidental or conducive to the attainment of the above objectives.

8. On December 23, 1992, the Culture Club submitted an initial application to the Department, seeking a consumer's certificate of exemption from payment of sales tax on the basis that it was a "charitable organization."

   
   

9. Accompanying the application for certificate of exemption was an Internal Revenue Service Form 990, a Return of Organization Exempt from Income Tax, for the 1991 tax year. This Form 990 for tax year 1991 reflected that the revenues for the Culture Club totaled $106,298 and the expenses amounted to

   $111,923.

   
   

10. The purposes of the Culture Club were outlined in part III of the 1991 Form 990, as follows:

    
    

    The organization is composed of survivors of the Holocaust. The organization holds events and functions to observe Jewish Holidays and to raise funds, to strengthen Jewish ties and to work for the benefit of Israel and Jews throughout the world.

    
    

11. The Culture Club's Total Expenses of $111,923.00 for 1991 were spent as follows:

    
    

    1. 49.58 percent or $55,497.00, was spent on parties, travel, entertainment and gifts:

       
       

       Meeting and Holiday	Parties	$36,958.00
       Travel		8,016.00
       Entertainment		7,650.00
       Gifts/Honorariums		2,873.00
       Total		$55,497.00

       
       

    2. 4.7 percent or $5,275.00 was spent on "occupancy." Mr. Carl Rosenkopf testified that this "occupancy expense" was the equivalent of

       rent paid to the Temple for the use of its premises.

       
       

    3. 5.7 percent or $6,451.00 was spent on the following administrative expenses:

       
       

       Florida Registration	$ 61.00
       Accounting Fees	600.00
       Legal Fees	100.00
       Supplies	330.00
       Postage/Shipping	2,065.00
       Insurance	591.00
       Printing	1,789.00
       Security	915.00
       Total	$6,451.00

    4. Approximately 40 percent or $44,700.00 was donated to other organizations as follows:

    
    

    Friends of the Israeli

    Defense Fund	$25,000.00
    Operation Exodus	5,000.00
    Holocaust Documentary	3,100.00
    Cordinier Community	100.00
    Jewish Federation TV	500.00
    OR Chadash Girls Town	5,000.00
    Jewish Federation of
    South Broward	5,000.00
    United Jewish Appeal	1,000.00
    Total	$44,700.00

    
    

12. By letter dated April 5, 1993, the Department denied the first application for a sales tax exemption certificate.

    
    

13. On December 1, 1993, the Department received a second application for a consumer's certificate of exemption from the Culture Club, requesting an exemption as a "charitable organization" and a "fraternal organization."

    
    

14. In a letter to the Department dated November 19, 1993, the Culture Club's president, Ms. Rose Rotmench, stated that the purpose of the organization was "to provide social and cultural programs of activities" and that their goal was "to aid our Brothers and Sisters in Israel and the United States, in every way possible." She stated that "every dollar that remains after expense, is distributed to charity."

    
    

15. In support of its application, the Culture Club submitted financial information for its fiscal year October 1, 1992 to September 30, 1993. The total expenditures were $101, 253, and were itemized as follows:

    
    

    Donations	$ 40,246.00
    Meetings and Parties	41,032.00
    Entertainment	8,095.00
    Gifts	850.00
    Administration Expenses	11,030.00
    Total Expenditures	$101,253.00

    
    

16. The Culture Club listed the following donations for fiscal year October 1, 1992 to September 30, 1993:

    
    

    Forward Jewish Newspaper		$ 110.00
    Girls Town OR Chadash		16,000.00
    Young Israel-Sunny Isles		36.00
    Jewish Family TV		500.00
    Holocaust Documentation		2,600.00
    Jewish Federation Broward		9,000.00
    Holocaust Museum		2,000.00
    Friends of Israel Defense	Fund	10,000.00
    Total Donations		$40,046.00

    
    

17. The parties stipulated that the Jewish Federation of South Broward and the United Jewish Appeal are charitable organizations as defined in Section 212.08(7)(o)2.b., Florida Statutes.

18. The Holocaust Museum, the Holocaust documentation, the Jewish Family T.V., the Cordinier Community, Operation Exodus, and Forward Jewish Newspaper are not charitable institutions which provide one of the seven services listed in Section 212.08(7)(o)2.b., Florida Statutes.

    
    

19. No evidence was presented to determine whether Young Israel-Sunny Isles would qualify as a charitable organization.

    
    

20. The Friends of Israel Defense Fund provides summer camps for widows and orphans whose spouses or parents died while serving in the Israeli Defense Forces. No evidence was presented to demonstrate that more than 50 percent of the organization's expenditures were used in the provision of these services.

    
    

21. Girls Town OR Cadash is essentially an orphanage for indigent girls in Israel. Girls Town provides food, clothing, shelter, and education for the girls. No evidence was presented to determine whether more than 50 percent of the expenditures of Girls Town is used to provide these services.

    
    

22. In a letter dated January 20, 1994, the Department denied, for a second time, the Culture Club's application for a sales tax exemption certificate.

    
    

    CONCLUSIONS OF LAW

    
    

23. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding. Section 120.57(1), Florida Statutes.

    
    

24. To demonstrate that it is entitled to a sales tax exemption certificate, the Culture Club must demonstrate that it meets all the criteria of one of the definitions under Section 212.08(7)(o), Florida Statutes. In the instant case, the Culture Club is claiming an exemption as a charitable institution; thus, it must show that it is a non-profit entity whose sole or primary purpose is either to provide one of the seven services listed in Section 212.08(7)(o)2.b., Florida Statutes or to provide funds to other organizations that provide one of the seven services.

    
    

25. Section 212.08(7)(o)2.b., Florida Statutes, defines "charitable institution" as

    
    

    1. nly nonprofit corporations qualified as nonprofit pursuant to s. 501(c)(3), United States Internal Revenue Code, 1954, as amended, and other nonprofit entities, the sole or primary function of which is to provide, or to raise funds for organizations which provide, one or more of the following services if a reasonable percentage of such service is provided free of charge, or at a substantially reduced cost, to persons, animals, or organizations that are unable to pay for such service:

       1. Medical aid for the relief of disease, injury, or disability;

       2. Regular provision of physical necessities such as food, clothing, or shelter;

       3. Services for the prevention of or

          rehabilitation of persons from alcoholism or drug abuse; the prevention of suicide; or the alleviation of mental, physical, or sensory health problems;

       4. Social welfare services including adoption placement, child care, community care

          for the elderly, and other social welfare services which clearly and substantially benefit a client population which is disadvantaged or suffers a hardship;

       5. Medical research for the relief of disease, injury, or disability;

       6. Legal services; or

       7. Food, shelter, or medical care for animals or adoption services, cruelty investigations, or education programs concerning animals;

    and the term includes groups providing volunteer manpower to organizations designated as charitable institutions hereunder.

    
    

26. Rule 12A-1.001(3)(g)3.d., Florida Administrative Code, defines the terms "sole or primary function" as follows:

    
    

    [A] charitable organization, excluding hospitals, must establish and support its function as providing or raising funds for services as outlined in subparagraphs 1. and

    2. above, by expending in excess of 50.0 percent of the charitable organization's expenditures towards referenced charitable concerns, within the charitable organization's most recent fiscal year.

    
    

    This rule was adopted in September, 1993. Prior to the adoption of the rule, the Department had interpreted the in excess of 50 percent requirement to mean that expenditures directly related to fundraising activities were deleted from the total amount of expenditures before calculating the percentage of charitable expenditures. With the promulgation of rule, the Department changed its interpretation to conform to the plain reading of rule. The Department no longer deletes fundraising expenditures from the total expenditures in determining the amount of charitable expenditures. Therefore the Culture Club must show that more than 50 percent of its total expenditures is used to directly provide one of the seven statutory services or donated to other charitable institutions that directly provide those services. These other institutions must also qualify as charitable organizations under Section 212.08(7)(o)2.b., Florida Statutes, and Rule 12a-1.001(3)(g), Florida Administrative Code.

    
    

27. The Culture Club does not provide any of the seven services listed in Section 212.08(7)(o)2.b., Florida Statutes. The Culture Club does make donations to other organizations. Not all the organizations to which the Culture Club donates money qualify as charitable organizations. The parties have stipulated that the Jewish Federation of South Broward and the United Jewish Appeal qualify as charitable organizations. The Culture Club has failed to demonstrate that any of the other organizations to which it donates qualifies as a charitable organization. For the fiscal year ended September 30, 1992, the total donations to qualified charitable organizations was $6,000. For the

    fiscal year ended September 30, 1993, the total donations to qualified charitable organizations was $9,000. Thus, the Culture Club has failed to establish that over 50 percent of its expenditures for either of the fiscal years was to charitable organizations.

    
    

28. Even if all the organizations to which the Culture Club donated money qualified as charitable organizations, the Culture Club still would have failed to establish that over 50 percent of its expenditures were made to qualified charitable organizations. For the year ended September 30, 1993, the total expenditures were $101,253 and the donations totaled $40,046, which was 39.5 percent of the total expenditures.

    
    

29. The Culture Club has not established that the sole or primary function of the organization is providing or raising funds for services outlined in Section 212.08(7)(o)2.b., Florida Statutes. The primary function of the organization is to maintain the Jewish Culture.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered denying David Ben Gurion Culture

Club, Inc.'s application for a consumer's certificate of exemption from sales and use tax be denied.

DONE AND ENTERED this 26th day of January, 1996, in Tallahassee, Leon County, Florida.

SUSAN B. KIRKLAND, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 26th day of January, 1996.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-1741

To comply with the requirements of Section 120.59(2), Florida Statutes, the following rulings are made on the parties' proposed findings of fact:

Petitioner's Proposed Findings of Fact.

1. Petitioner's proposed recommended order did not list proposed findings of fact.

Respondent's Proposed Findings of Fact.

1. Paragraphs 1-16: Accepted.

2. Paragraph 17: Rejected as repetitious.

3. Paragraphs 18-21: Accepted.

4. Paragraphs 22-24: Rejected as constituting conclusions of law.

5. Paragraph 25: Rejected as subordinate to the facts found.

6. Paragraph 26: Accepted in substance.

COPIES FURNISHED:

Alan B. Cohn, Esquire 2021 Tyler Street

Hollywood, Florida 33020

Tracy L. Allen

Assistant General Counsel Department of Revenue Post Office Box 6668

Tallahassee, Florida 32314-6668

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You Should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 94-001741

Orders for Case No: 94-001741