STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

INDUSTRIAL CONCRETE INDUSTRIES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 78-1445

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

This matter came on for hearing in Winter Park, Florida, before the Division of Administrative Hearings, by its duly designated Hearing Officer, Robert T. Benton, II, on November 22, 1978. Petitioner appeared through Mr. Joseph Philip Rouadi, C.P.A. Respondent was represented by counsel:

APPEARANCES

For Respondent: E. Wilson Crump, Esquire

Post Office Box 5557 Tallahassee, Florida

By letter dated August 8, 1978, petitioner challenged the audit assessment respondent proposed on page 4 of its income tax audit changes dated March 23, 1978. The issue raised is whether petitioner overstated depreciation, thereby understating its income, for the calendar year 1973, for purposes of Chapter 220, Florida Statutes (1977).

FINDINGS OF FACT

1. On a date prior to November 2, 1971, petitioner exchanged property it then held for property it now holds. This transaction resulted in a capital gain for petitioner, although recognition of the gain has been deferred for federal tax purposes. For such purposes, petitioner's basis in the property it presently holds is deemed to be the same as its basis in the property it formerly held.

   
   

2. On its own books, however, petitioner has stated its basis in the property it now holds as the market value of the property at the time it was acquired. This figure is higher than the figure used for federal tax purposes. Working from this higher figure, petitioner states larger depreciation allowances on its own books than it claims for federal tax purposes. On its 1973 Florida corporation income tax return, petitioner claimed these depreciation allowances instead of the smaller depreciation allowances it claimed on its federal income tax return for the same period.

   
   

   CONCLUSIONS OF LAW

3. With exceptions not pertinent here, Section 220.42(1), Florida Statutes (1977), requires that, for purposes of Florida's corporation income tax, the corporate "taxpayer's method of accounting shall be the same as such taxpayer's method of accounting for federal income tax purposes. . ." See also Section 220.42(1), Florida Statutes (1977). Notwithstanding this clear statutory language, petitioner asserts a constitutional right to calculate depreciation differently for Florida purposes than for federal purposes, citing S.R.G. Corporation v. Department of Revenue, No. 52,491 (Fla. June 30, 1978) (reh. den. Dec. 14, 1978) and Florida Power Corp. v. Department of Revenue, No. 78-1227 (DOAH; rec. order dated Dec. 12, 1978). This contention is a challenge to the constitutionality of state statutes and should be addressed to the judiciary, rather than to the Division of Administrative Hearings, which is part of the executive branch of government.

RECOMMENDATION

Upon consideration of the foregoing, it is RECOMMENDED:

That respondent assess a deficiency against petitioner based on the income not stated in its 1973 return because of its unauthorized depreciation claim, together with interest and applicable penalties.

DONE and ENTERED this 2nd day of February, 1979, in Tallahassee, Florida.

ROBERT T. BENTON, II

Hearing Officer

Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

Joseph Philip Rouadi, C.P.A. 781 Wymore Road

Maitland, Florida 32751

E. Wilson Crump, Esquire Post Office Box 5557 Tallahassee, Florida

Docket for Case No: 78-001445

Orders for Case No: 78-001445