STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

UNTO OTHERS, INC., )

)

Petitioner, )

)

vs. ) Case No. 98-1261

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case by video teleconference on June 12, 1998, at Fort Lauderdale, Florida, before Errol H. Powell, a duly designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: E. Patrick Heeney, Secretary

Unto Others, Inc.

500 Northeast 8th Street Pompano Beach, Florida 33060

For Respondent: William B. Nickell

Assistant General Counsel Department of Revenue

501 South Calhoun Street, Suite 304 Tallahassee, Florida 32399-1050

STATEMENT OF THE ISSUE

The issue for determination is whether Petitioner should be granted a consumer’s certificate of exemption pursuant to Subsection 212.08(7)(o), Florida Statutes.

PRELIMINARY STATEMENT

Unto Others, Inc. (Petitioner) applied for a consumer’s

certificate of exemption pursuant to Subsection 212.08(7), Florida Statutes. By Notice of Intent to Deny (Notice) dated January 30, 1998, the Department of Revenue (Respondent) notified Petitioner that its application was being denied. The grounds stated in the Notice for the denial were the following:

1. "Your organization does not provide, nor does it raise funds for charitable institutions which provide one or more of the charitable services listed in the statute"; and (2) "Your organization fails to meet the qualification for exemption from sales and use taxation, as set forth in Section 212.08(7), Florida Statutes." By letter dated February 25, 1998, Petitioner’s President challenged the denial and requested a formal hearing. On March 12, 1998, this matter was referred to the Division of Administrative Hearings.

   Prior to hearing, the parties entered into and filed a pre- hearing stipulation in which, among other things, they stipulated to certain facts. At hearing, Petitioner presented the testimony of one witness and Respondent called no witnesses to testify.

   The parties entered one joint composite exhibit into evidence.1 No transcript of the hearing was ordered. At the request of

   the parties, the time for filing post-hearing submissions was set for more than ten days following the conclusion of the hearing.

   Only Respondent filed a post-hearing submission which has duly considered in the preparation of this recommended order.

   FINDINGS OF FACT

   
   

   1. The Department of Revenue (Respondent) is the state

      agency charged with enforcement of Chapter 212, Florida Statues, and the issuance of certificates of exemption.

   2. Unto Others, Inc. (Petitioner) is an organization incorporated in the State of Florida as a non-profit corporation. Petitioner’s Articles of Incorporation, Article II, states Petitioner’s purpose as follows:

      The purposes for which the Corporation [Petitioner] is organized are exclusively religious, charitable, scientific, literary, and educational within the meaning of section 501(c)(3) of the Internal Revenue Code of 1986 or the corresponding provision of any future United States Internal Revenue law.

      
      

   3. Petitioner made application to the Respondent for a certificate of exemption as a charitable institution pursuant to Subsection 212.08(7)(o)2.b, Florida Statutes. Petitioner did not make application for an exemption as a scientific, religious, or educational institution, but it may in the future apply under these criteria.

   4. By Notice of Intent to Deny (Notice) dated January 30, 1998, the Respondent notified Petitioner that its application was being denied. The grounds stated in the Notice for the denial were the following: (1) "Your organization does not provide, nor does it raise funds for charitable institutions which provide one or more of the charitable services listed in the statute [Subsection 212.08(7)(o)2.b, Florida Statutes]."; and (2) "Your organization fails to meet the qualification for exemption from sales and use taxation, as set forth in Section 212.08(7), Florida Statutes."

   5. Currently, Petitioner’s sole function is the raising of funds to enable Petitioner to rehabilitate people and dwellings.

      All of Petitioner’s activities are conducted by non-paid volunteers.

   6. No evidence was presented to show that Petitioner rehabilitates any person or dwelling, or holds religious services.

   7. No evidence was presented to show that Petitioner governs or administers any office within any hierarchy of a larger organization.

   8. No evidence was presented to show that Petitioner participates with or controls another organization.

   9. No evidence was presented to show that Petitioner expends more than 50 percent of its expenditures toward any charitable service.

   10. No evidence was presented to show that Petitioner disburses more than 50 percent of its expenditures directly for a charitable service or to any entity that directly provides or performs any charitable service.

   11. No evidence was presented to show that Petitioner directly provides or performs any charitable service for any entity or person; or that Petitioner provides any goods or services as a charitable service.

   12. No evidence was presented to show that Petitioner directly provides a reasonable percentage of any charitable service free or at a substantially reduced cost to persons, animals, or organizations that are unable to pay for such services.

   13. No evidence was presented to show that any charitable service was provided free or at a substantially reduced cost.

   14. No evidence was presented to show that persons, animals, or organizations actually received any charitable service and that those persons, animals, or organizations were unable to pay for such service(s).

   15. Petitioner does not currently provide any of the services listed in Subsection 212.08(7)(o).

       CONCLUSIONS OF LAW

       
       

   16. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding and the parties thereto pursuant to Section 120.569 and Subsection 120.57(1), Florida Statutes.

   17. A tax exemption is to be strictly construed against the claimer of the exemption. State ex re. Szabo Food Services, Inc. v. Dickinson, 286 So. 2d 529 (Fla. 1973); Capital City Country Club, Inc. v. Tucker, 613 So. 2d 448 (Fla. 1993); Asphalt Pavers, Inc. v. Department of Revenue, 584 So. 2d 55 (Fla. 1st DCA 1991). Moreover, doubtful language in exemption statutes is construed against the taxpayer. United States Gypsum Co. v. Green, 110

       So. 2d 409 (Fla. 1959).

       
       

   18. Petitioner has the burden of showing its entitlement to the exemption. Green v. Pederson, 99 So. 2d 292 (Fla. 1957).

   19. Section 212.08, Florida Statutes, provides in pertinent part:

       The sale at retail, the rental, the use, the

       consumption, the distribution, and the storage to be used or consumed in this state

       of the following are hereby specifically exempt from the tax imposed by this chapter.

       
       

       * * *

       
       

       (7) MISCELLANEOUS EXEMPTIONS.-

       
       

       * * *

       
       

       (o) Religious, charitable, scientific, educational, and veterans' institutions and organizations.-

       1. There are exempt from the tax imposed by this chapter transactions involving:

          
          

          * * *

          
          

          b. 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; and

          . . . .

          
          

          * * *

          
          

       2. The provisions of this section authorizing exemptions from tax shall be strictly defined, limited, and applied in each category as follows:

       
       

       * * *

       
       

       b. "Charitable institutions" means only nonprofit corporations qualified as nonprofit pursuant to s. 501(c)(3), Internal Revenue Code of 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 staff to organizations designated as charitable institutions under this sub- subparagraph; nonprofit organizations the sole or primary purpose of which is to coordinate, network, or link other institutions designated as charitable institutions under this sub-subparagraph with those persons, animals, or organizations in need of their services; and nonprofit national, state, district, or other governing, coordinating, or administrative organizations the sole or primary purpose of which is to represent or regulate the customary activities of other institutions designated as charitable institutions under this sub-subparagraph. . . .

   20. Rule 12A-1.001, Florida Administrative Code, provides in pertinent part:

       1. RELIGIOUS, EDUCATIONAL, CHARITABLE, VETERANS' AND SCIENTIFIC ORGANIZATIONS, HOMES FOR THE AGED, NURSING HOMES OR HOSPICES, FEDERAL AND STATE CHARTERED CREDIT UNIONS, FLORIDA RETIRED EDUCATORS ASSOCIATION AND LOCAL CHAPTERS, ORGANIZATIONS PROVIDING SPECIAL EDUCATIONAL AND SOCIAL BENEFITS TO MINORS, STATE THEATER CONTRACT ORGANIZATIONS, MILITARY MUSEUM FUNDRAISERS (sic), COAST

          GUARD AUXILIARIES, AND CEMETERY ASSOCIATIONS.

          
          

          1. A sale or lease directly to or sales or leases of tangible personal property by churches, or a sale or lease directly to nonprofit religious, nonprofit educational, nonprofit charitable institutions, and veterans' organizations, for use in the course of their customary nonprofit religious, nonprofit educational, nonprofit charitable activities, and for use by veterans' organizations, including church cemeteries, are exempt from the tax imposed by Chapter 212, F.S. . . . However, such institutions or organizations desiring to qualify for the exemption must obtain from the Department of Revenue a consumer's certificate of exemption, and payment must be made directly to the dealer by the exempt entity. . . .

       
       

       * * *

       
       

       (g)1. "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 that meet the following requirements:

       1. the sole or primary function is providing a "qualified charitable service" as defined in this subsection; and

       2. 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.

       2. "Qualified charitable service" means:

       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; services include public education or awareness programs intended to relieve or prevent any disease, injury, or disability;

       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;

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

       8. Providing volunteer manpower to charitable institutions as defined in this subsection; or

       9. Raising funds for "charitable institutions" as defined in this subsection.

       
       

       3.a. For the purpose of this subsection the following terms and phrases shall have the meaning ascribed to them except when the context clearly indicates a different meaning:

       I. "Persons unable to pay" means persons whose annual income is 150 percent or less of the current Federal Poverty Guidelines or whose uncompensated hospital charges exceed

       25 percent of their annual family income for the preceding 12 months. A charity day shall be computed from the amount of uncompensated services to persons unable to pay. . . .

       1. For providers of low-income housing, "persons unable to pay" means persons who qualify as "low-income persons" pursuant to Florida's "State Housing Strategy Act."

       2. "Substantially reduced cost" means the normal charge, market price, or fair market value to a purchaser or recipient, diminished in an amount of considerable quantity.

       3. "Sole or primary function" means that a charitable institution, 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 institution's operational expenditures towards "qualified charitable services", as defined in subparagraph 2.a. --

       g. within the charitable institution's most recent fiscal year.

       4.a. For charitable institutions other than hospitals, a "reasonable percentage" of the charitable services provided free or at a substantially reduced cost to those unable to pay will be determined by the particular circumstances of each institution. The following factors shall be considered in determining whether a nonprofit entity is providing a reasonable percentage of its charitable services free of charge or at a substantially reduced cost to persons, animals, or institutions unable to pay for such services:

       1. services are provided free of charge;

       2. services are provided at a substantially reduced cost to the recipient;

       3. available services are provided to anyone who requests the service without regard to ability to pay;

       4. the ratio of services offered without cost or at a substantially reduced cost to the cost of all services provided;

       5. the fair market value of the provided services offered free or at a substantially reduced cost compared to the amount of sales tax savings to the institution resulting from exemption;

       6. the likelihood that due to the nature of the services provided and the geographic area in which the services are provided, the services will be delivered to those unable to pay;

       7. medical research services and public education and awareness programs are intended to benefit the public in that they are directed toward or involve diseases, injuries, or disabilities which can affect members of the public.

       b. If a charitable institution, other than a hospital, does not screen to determine whether its clientele are unable to pay, the institution may submit to the Department a statement signed by an officer or director of the institution which specifies the institution's best good faith estimate of the percentage of its services provided without charge or at a substantially reduced cost to persons unable to pay and the basis for the estimate.

   21. Subsection 212.08(7)(o) provides an exemption for charitable institutions from Florida's sales, storage, and use tax and provides that the exemption shall be strictly defined, limited, and applied.

   22. Strictly construing Subsection 212.08(7)(o), Petitioner has failed to demonstrate that it satisfies all the requirements for the exemption. Petitioner has demonstrated only that it is a non-profit organization.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that the Department of Revenue enter a final order denying a consumer's certificate of exemption to Unto Others, Inc.

DONE AND ENTERED this 31st day of August, 1998, in Tallahassee, Leon County, Florida.

ERROL H. POWELL

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 31st day of August, 1998.

ENDNOTE

1/ The joint composite exhibit consists of Petitioner's Articles

of Incorporation and By-Laws filed with the Secretary of State of the State of Florida.

COPIES FURNISHED:

E. Patrick Heeney, Secretary Unto Others, Inc.

500 Northeast 8th Street Pompano Beach, Florida 33060

William B. Nickell Assistant General Counsel Department of Revenue

501 South Calhoun Street, Suite 304 Tallahassee, Florida 32399-1050

Linda Lettera, General Counsel Department of Revenue

204 Carlton Building Tallahassee, Florida 32399-0100

Larry Fuchs, Executive Director Department of Revenue

104 Carlton Building Tallahassee, Florida 32399-0100

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of 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: 98-001261

Orders for Case No: 98-001261