STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CONSUMER CREDIT CONSULTANTS, INC. )

)

Petitioner, )

)

vs. ) CASE NO. 94-4076

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

A formal hearing was conducted in this proceeding before Daniel Manry, a duly designated Hearing Officer of the Division of Administrative Hearings, on July 11, 1995, in Orlando, Florida. The parties, witnesses, and court reporter attended the formal hearing in Orlando. The undersigned participated by video conference from Tallahassee, Florida.

APPEARANCES

For Petitioner: Steven Hoffman, Director

Consumer Credit Consultants, Inc. 1850 Lee Road, Suite 304

Winter Park, Florida 32789

For Respondent: Olivia P. Klein and Nancy Francillon

Assistant Attorneys General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050

STATEMENT OF THE ISSUE

The issue for determination in this proceeding is whether Petitioner qualifies for a certificate of exemption as a charitable organization within the meaning of Section 212.08(7)(o)2.b., Florida Statutes. 1/

PRELIMINARY STATEMENT

On June 15, 1994, Respondent denied Petitioner's application for a sales tax exemption certificate as a charitable organization. Petitioner timely requested a formal hearing.

At the formal hearing, the parties presented the testimony of one witness each and submitted 11 joint exhibits for admission in evidence. The identity of the witnesses and exhibits and the evidentiary rulings regarding each are set forth in the transcript of the formal hearing filed with the undersigned on August 3, 1995.

The parties timely filed proposed recommended orders ("PROs") on August 23, 1995. Proposed findings of fact in Respondent's PRO are accepted in this Recommended Order. Proposed findings of fact in Petitioner's PRO are not addressed in the Appendix to this Recommended Order because Petitioner failed to comply with the requirements of the order entered on the record at the conclusion of the formal hearing.

FINDINGS OF FACT

1. Petitioner is a Florida corporation with its principal place of business located in Winter Park, Florida. Petitioner operates 10 additional offices throughout Florida.

   
   

2. Petitioner is a non-profit corporation for purposes of the federal income tax. Petitioner obtained an exemption from federal income tax in accordance with Section 501(c)(3) of the Internal Revenue Code.

   
   

3. Petitioner is engaged in the business of providing financial counseling services to the general public. Financial counseling services include debt consolidation, debt management, financial counseling, and budgeting.

   
   

4. Debt consolidation services are those in which Petitioner negotiates a payment plan between its clients and the clients' creditors. Debt management services are those in which a client makes one payment to Petitioner and Petitioner disburses the client's money in multiple payments to the client's various creditors. Financial counseling involves assistance in the management of client cash flow and the avoidance of default on client debts. Budgeting services are incidents of the other services.

   
   

5. Petitioner does not provide its services free of charge. Petitioner derives its revenue from client fees and payments from creditors for collection and remittance on debts owed by clients.

   
   

6. Client fees make up approximately 25 to 35 percent of Petitioner's revenues. Creditor payments make up approximately 65 to 75 percent of Petitioner's revenues.

   
   

7. Client fees consist of a $20 registration fee and a monthly fee of up to $15 per month for disbursing payments to creditors. The amount of the monthly fee is determined at the discretion of Petitioner's counselors based on such factors as the total debt, number of creditors, nature of the bills, and the ability of the client to pay.

   
   

8. Petitioner's counselors are instructed to offer services to anyone who requests it without charge. Counselors have the authority to waive the $20 registration fee in particular cases.

   
   

9. Clients are required to sign a service agreement in which they employ Petitioner to represent them in negotiating with creditors and making payments required under the terms of a negotiated plan. A client who does not pay monthly payments required under a negotiated plan for three months is dropped as a client.

   
   

10. Client funds are deposited into a regular checking account maintained by Petitioner. The client checking account is separate from Petitioner's checking account but does not pay interest on client funds.

11. Petitioner has approximately 3,000 clients in Florida. The annual income of Petitioner's clients ranges from $6,000 to $120,000. 2/

    
    

12. Approximately 73 percent of client creditors are credit card companies, finance companies, and medical groups. The remaining 27 percent are other creditors.

    
    

13. Approximately half of the clients' creditors pay Petitioner for collecting money from their debtors and remitting payments to them. The majority of creditors who pay Petitioner a fee for debt collection pay approximately 10 to 12 percent of the debt amount collected and remitted. Approximately 10 percent of the creditors pay Petitioner 15 percent of the debt amounts collected and remitted.

    
    

14. Petitioner does not raise funds for any other charitable organization. Petitioner does not provide volunteers for other charitable organizations. Petitioner is not a member of the National Foundation for Consumer Credit Counseling. Petitioner does not receive any contributions from any charitable or civic organizations, including United Way.

    
    

15. Petitioner does not provide any of the services prescribed under applicable state statutes or rules for qualification as a charitable organization. Petitioner does not provide social welfare services and does not provide the services it renders free of charge or at a substantially reduced rate. A reasonable percentage of Petitioner's clients are not persons who are unable to pay, disadvantaged, or who suffer a hardship.

    
    

    CONCLUSIONS OF LAW

    
    

16. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and the parties thereto. The parties were duly noticed for the formal hearing.

    
    

17. The burden of proof in this proceeding is on Petitioner. Petitioner must show by a preponderance of the evidence that it is entitled to a sales tax exemption as a charitable organization. Florida Department of Transportation v.

    J.W.C. Company, Inc., 396 So.2d 778 (Fla. 1st DCA 1981); Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977).

    
    

18. Petitioner failed to satisfy its burden of proof. Petitioner is not a charitable organization within the meaning of Section 212.08(7)(o)2b.

    
    

19. Section 212.08(7)(o)2b. provides, in relevant part, that a charitable organization means only:

    
    

    . . . nonprofit corporations qualified as nonprofit pursuant to s. 501(c)(3) . . . 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 . . . that are unable to pay for such services:

    
    

    (IV) 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. . . .

    
    

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

    
    

20. Section 212.08(7)(o)2 provides, in relevant part, that Section 212.08(7)(o)2b. is to be "strictly defined, limited, and applied in each category." Tax exemptions are matters of legislative grace. Tax exemptions are strictly construed against taxpayers and in favor of the state. State, Department of Revenue v. Anderson, 403 So.2d 397, 399 (Fla. 1981); Green v. Pederson, 99 So.2d 292, 296 (Fla. 1957); Asphalt Pavers, Inc. v. Department of Revenue, 584 So.2d 55, 57 (Fla. 1st DCA 1991).

    
    

21. Petitioner does not provide social welfare services. The services provided by Petitioner are not social welfare services as a matter of law. Consumer Credit Counseling Service of Central Florida v. DOR, 7 FALR 5433, 5436- 5437. See also, Gessler v. Department of Business and Professional Regulation, 627 So.2d 501, 503 (Fla. 4th DCA 1993) (holding that the doctrine of stare decisis applies to administrative proceedings).

    
    

22. Even if the issue of whether Petitioner's services qualify as social welfare services were not controlled by the doctrine of stare decisis, Petitioner failed to show by a preponderance of evidence that the services provided by Petitioner are in fact social welfare services. 3/ Petitioner failed to show that it in fact provides services free of charge or at a substantially reduced rate, to persons who are unable to pay, or to clients who are disadvantaged or who suffer a hardship.

    
    

23. Even if the services provided by Petitioner were the type of services that otherwise qualified as social welfare services, Petitioner does not provide such services as its sole or primary function. A reasonable percentage of the services provided by Petitioner are not provided free of charge or at a substantially reduced cost. Rather, Petitioner charges either its clients, the creditors of its clients, or both for the services Petitioner provides.

1. A reasonable percentage of Petitioner's clients are not persons who are unable to pay for such services. Petitioner's clients have annual incomes up to $120,000.

   
   

2. As a matter of law, the services provided by Petitioner do not clearly and substantially benefit a client population which is disadvantaged or suffers a hardship. Consumer Credit Counseling, 7 FALR at 5433, 5436-5437. See also, Gessler, 627 So.2d at 503 (holding that the doctrine of stare decisis applies to administrative proceedings). Moreover, Petitioner failed to show by a preponderance of the evidence that it provides services to clients who, in fact, are either disadvantaged or who suffer a hardship.

   
   

3. It is uncontroverted that Petitioner provides no volunteer manpower to entities qualified as charitable organizations within the meaning of Section 212.08(7)(o)2b. It is also uncontroverted that Petitioner does not raise funds for organizations which provide social welfare services.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order denying Petitioner's

application for exemption from sales tax as a charitable organization.

RECOMMENDED this 22d day of September, 1995, in Tallahassee, Florida.

DANIEL MANRY

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 22d day of September, 1995.

ENDNOTES

1/ All chapter and section references are to Florida Statutes (1993) unless otherwise stated.

2/ Mr. Steve Hoffman testified that the average income of Petitioner's clients is $14,500. That average was determined from Petitioner's list of approximately 3,080 clients. However, approximately 656, or 21 percent, of those clients were listed as having an annual income of 0. Mr. Hoffman testified that 90 percent of the clients listed as having an annual income of 0 were new clients for whom the necessary data had not been collected. Thus, an accurate average income for Petitioner's clients is unavailable.

3/ The services provided by Petitioner are not those enumerated in Sec. 212.08(7)(o)2b.(IV). Exemptions are to be strictly construed against the taxpayer.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-4076

Petitioner's Proposed Findings Of Fact.

Petitioner's proposed findings of fact are not addressed in this Recommended Order because Petitioner failed to comply with the requirements of the order entered on the record during the formal hearing.

Respondents' Proposed Findings Of Fact.

Respondent's proposed findings of fact are accepted in this Recommended Order.

COPIES FURNISHED:

Larry Fuchs, Executive Director Department of Revenue

104 Carlton Building Tallahassee, Florida 32399-0100

Linda Lettera, General Counsel Department of Revenue

204 Carlton Building Tallahassee, Florida 32399-0100

Steven Hoffman, Director

Consumer Credit Consultants, Inc. 1850 Lee Road, Suite 304

Winter Park, Florida 32789

Olivia P. Klein and Nancy Francillon Assistant Attorneys General

Office of the Attorney General The Capitol - Tax Section Tallahassee, Florida 32399-1050

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: 94-004076

Orders for Case No: 94-004076