Judges: WILLIAM E. WILLIAMS
Agency: Department of Revenue
Latest Update: Dec. 07, 1979
Summary: Operating losses cannot be carried forward for Florida Income Tax Code purposes, but must be taken in the year of loss. Uphold Revenue's assessment.
79-0105.PDFSTATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
QUESTOR CORPORATION, )
)
Petitioner, )
)
vs. ) CASE NO. 79-0105
) DEPARTMENT OF REVENUE, STATE ) OF FLORIDA, )
)
Respondent, )
)
vs. )
) GENERAL DEVELOPMENT CORPORATION, )
)
Amicus curiae. )
)
RECOMMENDED ORDER
This cause came on for consideration before the Division of Administrative Hearings, by its duly designated Hearing Officer, William E. Williams, on a Stipulation of Facts entered into between Petitioner, Questor Corporation ("Petitioner") and State of Florida, Department of Revenue ("Respondent"). By Order date July 12, 1979, General Development Corporation ("General Development") was allowed to participate in this proceeding as amicus curiae.
APPEARANCES
For Petitioner: J. W. Neithercut, Vice President
Questor Corporation Post Office Box 317 Toledo, Ohio 43691
For Respondent: William D. Townsend, Esquire
Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32301
For General Shepard King, Esquire Development: STEEL, HECTOR & DAVIS
1400 Southeast First National Bank Bldg. Miami, Florida 33131
Joseph Z. Fleming, Esquire
25 Southeast Second Avenue Ingraham Building, Suite 620 Miami, Florida 33131
By Petition for Hearing dated January 5, 1979, Petitioner objected to the corporation income tax audit changes levied against it for the year ending December 31, 1976. Thereafter, by letter dated January 11, 1979, Respondent
requested that a Hearing Officer from the Division of Administrative Hearings be assigned to conduct the final hearing in this cause in accordance with the provisions of Section 120.57(1), Florida Statutes.
By letter dated January 30, 1979, Respondent advised the undersigned Hearing Officer that a formal hearing would not be necessary in this proceeding, in that Petitioner and Respondent had agreed to stipulate to all material facts involved in this proceeding, and to submit legal memoranda for the Hearing Officer's consideration. Thereafter, a Stipulation of Facts was filed with the Division of Administrative Hearings, and legal memoranda on behalf of Petitioner, Respondent and General Development Corporation were filed.
FINDINGS OF FACT
The following facts were stipulated to by both Petitioner and Respondent:
The Petitioner is a Delaware corporation with its principal office at Toledo, Ohio.
The Petitioner qualified to do business in Florida December 31, 1970, and was assigned #825570.
The Petitioner did incur a net operating loss for the Fiscal Year ending December 31, 1974, which resulted in a carry forward to 1975 and 1976 for Florida purposes.
The 1974 net operating loss for federal income tax purposes amounted to
$5,432,905 (as adjusted).
For Florida return purposes, net 1974 "Schedule I" additions to federal income were $27,817.
Net 1974 "Schedule II" subtractions from federal income per the Florida return as filed were $1,451,951.
The apportionment factor for 1974 was 1.5645 percent for Florida tax purposes.
The 1975 federal taxable income was $1,295,459.
For Florida purposes, net 1975 "Schedule I" additions to federal income were $26,276.
Net 1975 "Schedule II" subtractions from federal income per the Florida return as filed were $2,313,813.
The apportionment factor for 1975 was 1.5197 percent for Florida tax purposes.
The assessment of additional income tax for Fiscal Year ending December 31, 1976, by the Department of Revenue, which is the subject of Petitioner's protest, totals $1,889 resulting from the interpretation of the Florida statutes concerning the amounts mentioned in items 4 through 10 preceding.
Total disallowed operation loss carry forward to the year 1976 after apportionment was $37,792.
The issue of law involved herein is the interpretation of Section 220.13, Florida Statutes, which section is deemed to control the assessment for Fiscal Year ending December 31, 1976.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action. Section 120.57(1), Florida Statutes.
The Florida Income Tax Code, Chapter 220, Florida Statutes, imposes upon corporations for the privilege of conducting business, earning income or receiving income in this state, a tax equal in amount to five percent (5%) of a taxpayer's net income for the taxable year. Section 220.11, Florida Statutes.
Section 220.12, Florida Statutes, defines "net income" as ". . . that share of [the taxpayer's] taxable income . . . for the taxable . . ." adjusted by certain additions, not pertinent here, contained in Section 220.13(1)(a), Florida Statutes, and certain subtractions contained in Section 220.13(1)(b), Florida Statutes.
Section 220.13(1)(b), Florida Statutes, provides, in pertinent part, as follows:
In computing the net operating loss deduction allowable for federal income tax purposes under s. 172 of the Internal Revenue Code for the taxable year . . . there shall be subtracted from taxable income, in order to arrive at adjusted federal income, such amounts as reflect the following limitations:
* * *
c. A net operating loss . . . shall never be carried back as a deduction to a prior taxable year, but all deductions attributable to such losses shall be deemed net operating
loss carry overs . . . and treated in the same manner, to the same extent, and for the same time periods as are prescribed for such carryovers in ss. 172 and 1212, respectively, of the Internal Revenue Code.
Section 220.13(2), Florida Statutes, provides that there shall be subtracted from taxable income any amount included therein "[w]hich was derived from sales outside the United States, and from sources outside the United States
. . ."
26 USC Section 172 contains no provision allowing for subtraction or exclusion from federal income of revenues derived from sources outside the United States. Net operating losses, other than those attributable to foreign sources, may be carried forward for Florida income tax purposes in the same manner provided in 26 USC Section 172. However, since the Florida Legislature specifically exempted from taxation income derived from sources outside the United States, it must be presumed by failing to specifically allow carryovers of net operating losses from those same sources that it was not intended that they be allowed as a carryover under the provisions of Section 220.13, Florida
Statutes. It is concluded, therefore, as a matter of law, that since there is no provision in the federal Internal Revenue Code allowing a carry forward of net operating losses from foreign source income, and since the Florida Legislature did not expressly allow such a carryforward in enacting Section 220.13(1)(b), Florida Statutes, that such losses cannot be carried forward for Florida Income Tax Code purposes, but must be taken in the year in which the loss occurs.
RECOMMENDATION
Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by the State of Florida, Department of Revenue, upholding the assessment made by the Department of Revenue, and denying the relief requested herein by Petitioner.
DONE AND ENTERED this 14th day of September 1979 in Tallahassee, Florida.
WILLIAM E. WILLIAMS
Hearing Officer
Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32399-1550
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 14th day of September 1979.
COPIES FURNISHED:
J. W. Neithercut, Vice President Questor Corporation
Post Office Box 317 Toledo, Ohio 43691
William D. Townsend, Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32301
Shepard King, Esquire Steel, Hector & Davis
1400 S.E. First National Bank Building Miami, Florida 33131
Joseph Z. Fleming, Esquire
25 Southeast Second Avenue Ingraham Building, Suite 620 Miami, Florida 33131
Docket for Case No: 79-000105
Orders for Case No: 79-000105
| Issue Date |
Document |
Summary |
|
Dec. 06, 1979 |
Agency Final Order
|
|
|
Sep. 14, 1979 |
Recommended Order
|
Operating losses cannot be carried forward for Florida Income Tax Code purposes, but must be taken in the year of loss. Uphold Revenue's assessment.
|
