vs. ) CASE NO. 94-4075
Respondent. )
Pursuant to notice, final hearing in the above-styled case was held in Naples, Florida, on September 21, 1994, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings.
The parties were represented at the hearing as follows: For Petitioner: Rev. Robert Rinaldi
For Respondent: Attorney Lisa M. Raleigh
Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050
The issue in this case is whether Petitioner is entitled to an exemption from sales and use tax as a religious or charitable organization.
On March 17, 1992, Petitioner filed an application for a certificate of exemption from the sales tax. Subsequent applications were dated November 18, 1992, February 10, 1993, and November 7, 1993.
By letter dated June 17, 1994, Respondent denied the requests on the grounds that Petitioner did not maintain a regularly established location and its primary purpose did not meet the requirements for a sales tax exemption.
Petitioner requested a formal hearing.
At the beginning of the hearing, Reverend Robert M. Rinaldi was determined to be a qualified representative exclusively for the present case.
At the hearing, Petitioner called one witness and offered into evidence three exhibits. Respondent called two witnesses and offered into evidence 17 exhibits. All exhibits were admitted.
The transcript was filed December 9, 1994. Respondent filed a proposed recommended order, and all of its proposed findings are adopted or adopted in substance.
By Application for Consumer Certificate of Exemption dated March 17, 1992, Petitioner requested a sales tax exemption as a religious organization. The application indicates that Petitioner was incorporated on February 18, 1992. At all times, the president of Petitioner has been Reverend Robert M. Rinaldi.
By letter dated April 16, 1992, Respondent requested that Petitioner supply information concerning its primary purpose, including a list of all activities or services and to whom they are generally offered. The letter also requested, among other things, statements of receipts and expenditures and a copy of the letter determining that Petitioner is exempt from federal income tax.
Petitioner submitted to Respondent evidence of 12 expenditures during the quarter ending March 31, 1992. The expenditures and their descriptions are as follows: Morrisons-- dinner business; Holiday Inn in Tampa--lodging for quarterly convention; Maas Brother in Naples--attire; Marshalls-- personal; Martha's Health Food Shop--personal; Things Remembered--card case/business cards; RJ Cafe Tropical--lunch interview; Beach Works Marco Island--attire; annual membership fee for vice president's American Express card; Las Vegas Discount golf and tennis in Naples--personal; Eckerd's Vision Works--medical eyeglasses; Quality Inn Golf Country Club in Naples--lodging during business travel; Avon Fashions/Hampton-- personal; Del Wright in Sarasota--automobile expenses and travel; JC Penney--personal; Amador's Restaurant in Naples-- dinner/lunch; Avon Fashions/Hampton--personal; annual membership fee for treasurer's American Express card; and Mobil Oil--business travel.
Petitioner produced other evidence of similar types of expenditures, such as for fitness center fees, car insurance, car service, car payments, utilities, and rent. Nothing in the record links these expenditures to religious or charitable activities.
There were expenditures for printing religious tracts and self- improvement educational materials, but they do not appear to be a substantial part of the total expenditures of Petitioner during the time in question.
After receiving these materials, a representative of Respondent telephoned Reverend Rinaldi and stated that Petitioner would have to submit additional documentation of its income and expenses and formal affiliation with prison chapels where Petitioner reportedly conducted outreach programs. Respondent's representative also asked for evidence of Reverend Rinaldi's counselling credentials.
Petitioner next submitted a copy of a letter from the Department of Treasury determining that Petitioner was exempt from federal income tax. Petitioner also submitted a budget for the year ending 1992 and a proposed budget for the year ending 1993. However, the budgets did not document a charitable purpose.
The budget reveals that the largest disbursement was $4200, which was rent for an office and living quarters. The largest single receipt was
$1764.27, which was a contribution from the incorporator, who was Rev. Rinaldi. There were no charitable receipts, such as from contributions from members, the public, or anonymous sources.
On November 10, 1992, Respondent sent a letter to Petitioner requesting additional information, including statements of the primary purpose of the organization and of receipts and expenditures. The request asked for a description or explanation for each charity-related program expenditure.
On November 18, 1992, Petitioner submitted a second Application for Consumer's Certificate of Exemption. The information was essentially unchanged from the first application. Rev. Rinaldi also sent Respondent a religious flyer.
On February 10, 1993, Petitioner submitted a third Application for Consumer's Certificate of Exemption. The material was essentially unchanged from the preceding two applications.
On March 30, 1993, one of Respondent's representatives sent a letter to Petitioner stating that Petitioner does not meet the criteria for exemption from sales tax.
In response, Petitioner sent a letter to Respondent received April 8, 1993, requesting reconsideration of the denial.
On May 4, 1993, Respondent sent Petitioner a letter stating that, as indicated during an earlier telephone conversation, Respondent had not yet received sufficient documentation to justify a sales tax exemption. Following up on Rev. Rinaldi's opinion that Petitioner qualified as a charitable organization, the letter suggests that he submit materials describing each charitable service or activity, the types of persons receiving such services, the frequency that the services are offered, the demonstrated benefit provided by Petitioner to disadvantaged persons, the fees charged by Petitioner, and the availability of Petitioner's services at the same or less cost elsewhere. The letter also asks for a statement of income and expenses.
In response, Petitioner filed a fourth Application for Consumer's Certificate of Exemption on November 10, 1993. Rev. Rinaldi explained Petitioner's activities as informing people of the truth and the second coming of Jesus Christ and stopping addictions to drugs and alcohol. The enclosed materials included a church telephone number. The materials state that services are available 24 hours a day for no fees and are provided solely for the spiritual preparation of humanity. The materials also indicate several addresses at which religious activities are conducted.
Upon investigation, Respondent learned that Petitioner's telephone number had been disconnected, the street address is Rev. Rinaldi's apartment, and the addresses at which religious activities are conducted are locations of Alcoholic Anonymous, from which Rev. Rinaldi and his church had been barred as public disturbances. Checking with the post office, the investigator learned that all mail for Rev. Rinaldi and Petitioner is being forwarded to an address in New York.
Respondent asked for more information, and Petitioner supplied information no different than that previously supplied.
By letter dated April 26, 1994, Respondent informed Petitioner that its application was denied. Following another exchange of correspondence, Respondent sent Petitioner a Notice of Intent to Deny dated June 17, 1994. The Notice of Intent to Deny states that Respondent determined that:
[Petitioner] travels from church to church and does not assemble regularly at a particular established location. [Petitioner] conducts services for short periods of time at numerous temporary locations.
[Respondent] has reviewed your application and supporting documents and has determined that the primary purpose of your organization fails to meet the qualifications for sales tax exemption authorized by Section 212.08(7), Florida Statutes.
By letter dated June 24, 1994, Petitioner requested a formal hearing on its application for sales tax exemption.
Petitioner does not regularly conduct services. Petitioner does not engage in other religious activities nor does Petitioner provide services typically associated with a church. Petitioner has no established physical place for worship. Petitioner has generalized plans to construct one or more places for worship. However, these plans are post-apocalyptic in nature and thus do not assure the commencement of construction in the immediate future.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties. Section 120.57(1), Florida Statutes. (All references to Sections are to Florida Statutes. All references to Rules are to the Florida Administrative Code.)
Section 212.08(7)(o)1 provides:
There are exempt from the tax imposed by this part transactions involving:
Sales or leases directly to churches
or sales or leases of tangible personal property by churches;
Sales or leases to nonprofit religious, nonprofit charitable, nonprofit scientific,
or nonprofit educational institutions when used
in carrying on their customary nonprofit religious, nonprofit charitable, nonprofit scientific, or nonprofit educational activities, including
church cemeteries[.]
* * *
Section 212.08(7)(o)2.a and b states:
The provisions of this section authorizing exemptions from tax shall be strictly defined, limited, and applied in each category as follows:
"Religious institutions" means churches, synagogues, and established physical places for
worship at which nonprofit religious services
and activities are regularly conducted and carried on. The term "religious institutions" includes nonprofit corporations the sole purpose of which is to provide free transportation services to church members, their families, and other church attendees. The term "religious institutions"
also includes state, district, or other governing or administrative offices the function of which is to assist or regulate the customary activities of religious organizations or members. The term
"religious institutions: also includes any nonprofit corporation which is qualified as nonprofit pursuant to s. 501(c)(3), United States Internal Revenue Code, 1986, as amended, which owns and operates a Florida television station, at least 90 percent of the programming of which station consists of programs
of a religious nature . . ..
"Charitable institutions" means only 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:
* * *
Regular provision of physical necessities such as food, clothing, or shelter;
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; [or]
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[.]
* * *
Petitioner has the burden of proving its entitlement to the exemption that it seeks. Section 212.08(7)(o)2 requires that exemptions be construed strictly.
This case presents two sales or use tax exemption issues. Section 212.08(7)(o)1.b exempts sales or leases to certain nonprofit institutions, when the sales or leases pertain to the customary nonprofit activities of the institution. Section 212.08(7)(o)1.a exempts sales or leases directly to churches and sales or leases of tangible personal property by churches. Thus, to obtain an exemption, Petitioner must qualify either as a nonprofit institution, such as a religious or charitable nonprofit institution, or as one type of nonprofit institution--namely, a church.
Two issues arise under the exemption extended by Section 212.08(7)(o)(1)b to nonprofit institutions for sales or leases pertaining to the customary nonprofit activities of the institutions. The first issue concerns the definition of "religious institutions," as used in Section 212.08(7)(o)2.a. The issue is whether the phrase, "at which nonprofit religious services and activities are regularly conducted and carried on" modifies only "established physical places for worship" or the entire phrase, "churches, synagogues, and established physical places for worship."
The second issue concerns the definition of "charitable institutions," as used in Section 212.08(7)(o)2.b. The issue is whether the phrase, "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" modifies only "other nonprofit entities" or the entire phrase "only nonprofit corporations qualified as nonprofit pursuant to s. 501(c)(3), United States Internal Revenue Code, 1954, as amended, and other nonprofit entities."
Respondent argues that the restricting clauses apply to all forms of religious and charitable entities. In other words, religious institutions-- whether churches, synagogues, or other established physical places for worship-- must be the site of nonprofit religious services and activities that are regularly conducted and carried on. And charitable institutions--whether 501(c)(3) organizations or other nonprofit corporations--must provide, as their sole or primary functions, listed services, or raise funds for organizations providing the listed services.
Respondent's interpretation of Section 212.08(7)(o)2.a and b is reasonable. In fact, a contrary interpretation of Section 212.08(7)(o)2.b would lead to an illogical result. Other statutes allow an exemption for 501(c)(3) organizations, if they meet certain additional criteria. See, e.g., Sections 212.08(6)(m) and 212.08(7)(r). If Section 212.08(7)(o)1 granted an exemption to each 501(c)(3) organization, the requirements of the other statutes would be meaningless.
Therefore, to qualify as a religious institution, an entity must be a church at which nonprofit religious services and activities are regularly conducted and carried on, a synagogue at which nonprofit religious services and activities are regularly conducted and carried on, or an established physical place for worship at which nonprofit religious services and activities are regularly conducted and carried on. Although claiming to be a church, Petitioner has failed to show that it regularly conducts nonprofit religious services.
And to qualify as a charitable institution, an entity must be a 501(c)(3) organization whose sole or primary purpose is to provide, or fundraise for an organization providing, certain listed services or another nonprofit entity whose sole or primary purpose is to provide, or fundraise for an organization providing, certain listed services. Although a 501(c)(3) organization, Petitioner has failed to show that its primary purpose is to provide, or fundraise for an organization providing, any of the listed services.
However, determining that Petitioner has failed to show that it is a religious or charitable institution does not end the inquiry. Section 212.08(7)(o)1.a exempts sales or leases directly to churches or sales or leases of tangible personal property by churches. This exemption is considerably different from that contained in Section 212.08(7)(o)1.b. Unavailable to any nonprofit institution, Section 212.08(7)(o)1.a offers a broad exemption to
churches without regard to whether the transaction involved the conduct of the customary nonprofit activity of the entity.
"Church" is not defined in the statutes. However, Rule 12A- 1.001(3)(c) defines "church" as:
a religious institution having an established physical place of worship where persons regularly assemble for worship and instruction for religious purposes. Religious organizations whose functions are radio or television broadcasting or those organizations conducting services for short periods of time at temporary locations, and religious associations that provide administrative functions only, are not considered to be churches.
Respondent's interpretation of the "church" exemption of Section 212.08(7)(o)1.a borrows restrictive language from the definition of "religious institution" that is contained in the "nonprofit institution" exemption of Section 212.08(7)(o)1.b. Specifically, Rule 12A-1.001(3)(c) applies the restrictive clause, "established physical places for worship" to the definition of "church." This is not entirely consistent with the statutory scheme of Section 212.08(7)(o)1. In this statute, the Legislature distinguished between "churches" and "religious institutions" and explicitly required only that the latter must be "established physical places of worship." Rule 12A-1.001(3)(c) obscures this distinction.
However, Petitioner has not challenged the rule, so it must be applied in its present form. Because Petitioner has not proved that it maintains an established physical place for worship, Petitioner is not entitled to the "church" exemption set forth in Section 212.08(7)(o)1.a.
RECOMMENDED that the Department of Revenue enter a final order denying Petitioner's application for an exemption certificate from sales and use tax.
ENTERED on December 20, 1994, in Tallahassee, Florida.
ROBERT E. MEALE
Filed with the Clerk of the Division of Administrative Hearings on December 20, 1994.
Rev. Robert Rinaldi
P.O. Box 1081
167 N. Collier Blvd. J-3 Marco Island, FL 33937-1081
Attorney Lisa M. Raleigh Office of the Attorney General The Capitol--Tax Section Tallahassee, FL 32399-1050
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.
