Judges: R. T. CARPENTER
Agency: Department of Revenue
Latest Update: May 16, 1991
Summary: Non-profit consumer credit service providing financial counseling to people in financial crisis not eligible for exemption. This is not charitable organization.
84-4114\
STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
CONSUMER CREDIT COUNSELING ) SERVICE OF CENTRAL FLORIDA, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 84-4114
)
DEPARTMENT OF REVENUE, )
)
Respondent. )
)
RECOMMENDED ORDER
This matter came on for hearing on April 25, 1985, in Orlando, Florida, before the Division of Administrative Hearings and its duly appointed Hearing Officer, R. T. Carpenter. The parties were represented by:
For Petitioner: Thomas F. Lang, Esquire
SWANN and HADDOCK, P.A.
Post Office Box 640 Orlando, Florida 32802-0640
For Respondent: Edwin A. Bayo, Esquire
Department of Legal Affairs The Capitol
Tallahassee, Florida 32301
This matter arose on Respondents intent to revoke Petitioner's certificate of tax exemption. The parties submitted proposed findings of fact pursuant to Subsection 120.57(1)(b)4, Florida Statutes. A ruling on each proposed finding of fact has been made either directly or indirectly herein, except where such proposed findings have been rejected as subordinate, cumulative, immaterial, or unnecessary.
FINDINGS OF FACT
Petitioner is a not for profit corporation, with physical facilities in Florida, holding tax exemption certificate 06-01290-00-58, issued November 16, 1977. By letter dated October 22, 1984, Respondent announced its intent to revoke the certificate.
Petitioner is qualified as a non-profit entity under Section 501(c)(3) of the Federal Internal Revenue Code. The certificate at issue has been held continuously by Petitioner since 1977.
Petitioner provides credit counseling assistance free of charge to any individual 1/ who is encountering difficulty paying his debts. Petitioner typically assists such individuals by contacting creditors, obtaining their agreement to accept smaller payments, and by taking temporary control of the client's income and making periodic payments on the client's behalf.
Petitioner also gives educational presentations on personal financial management in the communities where it operates (Orange, Seminole, and Volusia Counties). Additionally, it provides counseling for the U.S. Department of Housing and Urban Development to persons facing foreclosure of home mortgages. It does not charge a fee for this service.
Petitioner relies primarily on the United Way for its operating revenues. It also receives major support from the creditors it deals with, asking them to contribute 15 per cent of the amount sent to them on behalf of its clients. Additionally, Petitioner receives interest incomes on client trust funds.
CONCLUSIONS OF LAW
Section 212.08, Florida Statutes (1983) provides in 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 part I of this chapter.
* * *
(7) MISCELLANEOUS EXEMPTIONS.--
(a) Religious, charitable, scientific, educational, and veterans' institutions and organizations.--
1. There are exempt from the tax imposed by part I of this chapter transactions involving:
* * *
Charitable institutions means only nonprofit corporations qualified as non profit 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 or organizations who are unable to pay for such service:
Medical aid for the relief of disease, injury, or disability;
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;
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;
Medical research for the relief of disease, injury, or disability; or
Legal services; . . .
Petitioner meets the above statutory definition of a "charitable institution" insofar as it provides free services and is exempt under the Internal Revenue Code. Petitioner contends that it also meets the definition of "social welfare services" since its counseling and financial assistance to debtors substantially benefits a client population suffering a recognized hardship. Respondent argues that Petitioner is a civic organization (discussed below), and therefore not eligible for the charitable exemption.
Rule 12A-1.01(4)(g), Florida Administrative Code, provides in part:
Charitable institutions shall mean only nonprofit corporations operating physical facilities in Florida at which are provided charitable services, a reasonable percent- age of which shall be without cost to
those unable to pay.
These factors may be considered in deter- mining whether a nonprofit corporation with physical facilities in Florida is providing the kind of charitable services in a per- centage that qualifies it for a sales tax exemption under Section 212.08(7)(c)3, F.S.; however, no one factor shall be conclusive:
It has qualified as a charitable organi- zation under IRC Section 501(C)(3) 1954.
It provides physical necessities such as food, clothing, or shelter, a reasonable percentage of which is without cost to those unable to pay.
It provides medical aid for the relief of disease, injuries, or disabilities, a reasonable percentage of which is without cost to those unable to pay.
Its services are not primarily limited to members of or subscribers to the nonprofit corporation but are provided to the public, regardless of race, religion, age, sex, or natural origin.
Its primary function is charitable, not business, social, educational, civic, religious, historical, fraternal, soloral, cooperative, recreational, or political.
If its charitable services consist primarily of referral services to the poor, it may be considered to be an "institution" if it has provided those services continuously for at least 3 years immediately preceding its application.
* * *
(j) Civic, commercial, cooperative, fraternal, social, labor, and veterans organizations (except sales to state headquarters of nation-
ally chartered veterans organizations) are not exempt organizations under Chapter 212, F.S., Sales and rentals made to or by them are taxable in the same manner as those made to or by other "dealers."
Credit counseling is not specifically identified as an exempt activity in either the above rule or statutory provisions. However, Petitioner's service is closely akin to the statutorily exempt legal services provided free of charge to indigent and poor persons. The credit clients may be individuals who have lost their jobs, become disabled or are simply unable to pay their debts through ignorance or lack of financial planning. There is no question that such clients are suffering distress and are in need of assistance.
The above statutory Social Welfare Services are described as those which "substantially benefit a client population which . . . suffers a hardship." Virtually all individuals utilizing Petitioner's services are facing genuine hardship. While their problems may lack the immediacy of those outlined in the above rule (medical aid and physical necessities such as food, clothing, or shelter), they are nonetheless serious and pressing to individuals who are overwhelmed by their debts.
In an ad valorem tax exemption case, the 2nd DCA stated: 2/
`Charity' is sometimes used interchangeably with `benevolence' or `beneficence' in describing good-will, or a helpful attitude or kindly acts, but `charity' is commonly understood more objectively as denoting gifts to the poor or positive steps taken to relieve distress and suffering of those
unable to help themselves. It is the latter concept, and not the former, that is consis- tent with the constitutional and statutory terminology relative to the present case.
. . .
Petitioner is indeed taking "positive steps . . . to relieve distress and suffering of those unable to help themselves." Respondent argues that credit clients are not legitimate objects of charity, having unwisely borrowed more than they can afford to repay. This contention is rejected. The test to be applied is one of need and not of prudence. For example, victims of alcohol and drug abuse may well be responsible for their condition, but are not denied counseling or medical treatment because of this.
Petitioner challenges Respondent's proposed revocation of its tax exemption as arbitrary, and not authorized by either rule or statute. Respondent argues that the review wherein the re-determination of Petitioner's status was made is required by Section 212.084, Florida Statutes (1983), which provides in part:
(1)(a) Every sales tax exemption certificate issued before July 1, 1983, shall be reviewed by the department before July 1, 1988. In reviewing each certificate, the
department shall ensure that the institution, organization, or individual possessing the
certificate is actively engaged in an exempt endeavor as stipulated in the statutory provisions of this chapter.
(b) Whenever feasible, the department shall choose entities for review based on an alphabetical selection procedure.
* * *
3. After review is completed and it has been determined that an institution, organization, or individual is actively engaged in a bona fide exempt endeavor, the department shall reissue an exemption certificate to the entity. However, each certificate so reissued shall be valid for 5 consecutive years, at which time the review and reissuance procedure provided by this section shall apply again. If the department determines that an entity no longer qualifies for an exemption, it shall revoke the tax exemption certificate of the entity.
Petitioner has not changed its character or activities since award of the exempt status in 1977, and argues that Respondent has therefore changed its policy or interpretation of exemption provisions. Petitioner points to the above statutory language that revocation shall take place "If the department determines that an entity no longer qualifies for an exemption. . . ." Here, it is not a question of petitioner changing its nature so as to become unqualified, but of Respondent revisiting its earlier decision.
Petitioner's argument that Respondent lacks authority to revoke its certificate of tax exemption must be rejected. The obvious legislative intent of the review is that only exempt activities be accorded exempt status. There is no basis to conclude that an incorrectly awarded certificate of exemption has continuing validity so long as the organization itself makes no substantial changes. Such reasoning could indefinitely bind the State to any error it makes and provide unwarranted benefits to unqualified recipients.
RECOMMENDATION
Based on the foregoing, it is RECOMMENDED:
That the Department of Revenue enter a Final Order reissuing Certificate of Exemption Number 06-01290-00-58 to Petitioner.
DONE and ENTERED this 24th day of May, 1985, in Tallahassee, Florida.
R. T. CARPENTER Hearing Officer
Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32301
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 24th day of May, 1985.
ENDNOTES
1/ Without regard to race, nationality or religion. There is no means or ability to pay test of eligibility for these free financial services.
2/ Haines v. St. Petersburg Methodist Hone, Inc., 173 So. 2d 176, 181 (Fla. 2nd DCA 1965).
COPIES FURNISHED:
Thomas F. Lang, Esquire SWANN & HADDOCK, P.A.
Post Office Box 640 Orlando, Florida 32802-0640
Edwin A. Bayo, Esquire Department of Legal Affairs The Capitol
Tallahassee, Florida 32301
William D. Townsend, Esquire General Counsel
Department of Revenue
104 Carlton Building Tallahassee, Florida 32301
Randy Miller, Executive Director Department of Revenue
102 Carlton Building Tallahassee, Florida 32301
=================================================================
AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA, DEPARTMENT OF REVENUE TALLAHASSEE, FLORIDA
CONSUMER CREDIT COUNSELING SERVICE OF CENTRAL FLORIDA, INC.,
Petitioner,
v. CASE NO. 84-4114
DEPARTMENT OF REVENUE,
Respondent.
/
FINAL ORDER OF THE DEPARTMENT OF REVENUE
This Cause came on to be heard before Randy Miller, acting on behalf of the Governor and Cabinet, on the 19th day of September, 1985, at 10:00 A. M. in Room 103, Carlton Building, Tallahassee, Florida.
Pursuant to notice, a formal administrative hearing was conducted in the instant matter by R. T. Carpenter, Hearing Officer, on April 25, 1985, in Orlando, Florida. The following appearances were entered: Thomas F. Lang, Orlando, Florida, appeared on behalf of Petitioner, Consumer Credit Counseling; Edwin A. Bayo, Assistant Attorney General, Tallahassee, Florida, appeared on behalf of the Respondent, Department of Revenue.
By letter dated October 22, 1984, from Mark Zych, Administrator, Application Acceptance Section, Department of Revenue, Petitioner was notified that effective November 22, 1985, the Petitioner's Certificate of Exemption, No. 06-01290-00-58 would be revoked. On or about November 13, 1984, Petitioner through counsel filed a Petition for Administrative Hearing with the Department of Revenue. At the hearing held on April 25, 1985, Petitioner presented testimony on its behalf through Mr. George Reed, its Executive Director. The following facts were established at the hearing.
FINDINGS OF FACT
Consumer Credit counseling is a not for profit corporation whose only purpose is to provide financial counseling to people facing financial problems. The typical person seeking assistance from Petitioner is someone who has amassed a large number of installment debts to department stores, credit card companies, finance companies and other types of creditors (see, Petitioner's Exhibit 3).
Consumer Credit Counseling acts as a mediator between these debtors and their creditors, obtaining forbearance agreements and payment plans call inn for smaller monthly payments to the creditors than originally set. C.C.C. sets up a
budget for these individuals and sets a realistic figure that these individuals can pay all their creditors on a monthly basis. These individuals then pay directly to C.C.C. the said amount, and C.C.C. in turn from that fund pays creditors directly.
Consumer Credit Counseling does not charge a fee to the individual seeking help. Petitioners raise their operating revenue from a combination of sources. They receive grants from the United Way, as well as from the City of Orlando.
They collect interest from the trust funds they hold on behalf of their clients. Their major source of income comes from voluntary contributions which they solicit from their clients' creditors. According to Mr. Reed's testimony, they ask for a tax deductible contribution of 15 % of the amount they send the creditors, and approximately 54 % of the creditors contribute money to Petitioner.
Petitioner conducts credit education workshops at schools, churches and civic clubs, educating the public as to the proper use of credit. Petitioner does not provide food, or clothing, or shelter, or medical services or legal advice to its clients. According to Mr. Reed's testimony, petitioner would lose approximately $1,800 a year without its Certificate of Exemption.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the parties to the cause and the subject matter of this proceeding.
Section 212.08, F.S., exempts certain groups from the payment of sales tax on goods purchased by them which would otherwise be subject to sales tax. Among those exempted are nonprofit charitable institutions and organizations. Section 212.08(7)(a)2, F.S., states the exemptions authorized under this section shall be strictly defined, and applied in such category as follows:
"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 who are unable to pay for such service:
Medical aid for the relief of disease, injury, or disability.
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.
Social welfare services including adop- tion placement, child care, community care for the elderly, and other social welfare services which clearly and substantially be-
nefit a client population which is disadvan- taged or suffers a hardship.
Medical research for the relief of disease, injury, or disability.
Legal services.
Rule 12A-1.01(4)(g), Florida Administrative Code, provides inter alia: Charitable institutions shall mean only non-
profit corporations operating physical faci-
lities in Florida at which are provided charitable services, a reasonable percentage of which shall be without cost to those unable to pay.
These factors may be considered in determining whether a non-profit corporation with physical facilities in Florida is providing the kind
of charitable services in a percentage that qualifies it for a sales tax exemption under Section 212.08(7)(c)3, F.S.; however, no
one factor shall be conclusive:
It has qualified as a charitable organ- ization under IRC Section 501(c)(3), 1954.
It provides physical necessities such as food, clothing, or shelter, a reasonable percentage of which is without cost to those unable to pay.
It provides medical aid for the relief of disease, injuries, or disabilities, a reasonable percentage of which is without cost to those unable to pay.
Its services are not primarily limited to members of or subscribers to the nonprofit corporation but are provided to the public, regardless of race, religion, age, sex, or natural origin.
Its primary function is charitable, not business, social, educational, civic, religious, historical, fraternal, soloral, cooperative, recreational, or political.
If its charitable services consist primarily of referral services to the poor, it may be considered to be an "institution"
if it has provided those services continuously for at least 3 years immediately preceding its application.
* * *
(j) Civic, commercial, cooperative, frater- nal, social, labor, and veterans organizations (except sales to state headquarters of nationally chartered veterans organizations) are not exempt organizations under Chapter 212, F.S., sales and rentals made to or by them are taxable in the same manner as those made to or by other "dealers."
From an examination of the facts adduced at the hearing, and the exhibits introduced, it appears that Petitioner is not a charitable organization as a matter of law. Petitioner does not provide any medical aid, food, clothing or shelter. Of the services listed in the statute, the only category which Petitioner could arguably fit under is social welfare services, however, it is only those services which "substantially benefit a client population which is disadvantaged or suffers a hardship" which will qualify as charitable under the statute. People who can qualify for credit cannot be deemed "disadvantaged." The credit problems the Petitioner's clients experience, while serious in nature, cannot be deemed a "hardship" in the strict sense of the word. While Petitioner's activities are very laudable in nature, they are more in the nature of civic or commercial activities than charitable.
One of the seminal cases in Florida dealing with the definition of the word "charity" is applied in the context of an exemption from ad valorem taxes in Haines v. St. Petersburg Methodist Home, Inc., 173 So. 2d 176 (Fla. 2 DCA 1965) where the court stated:
"Charity" is sometimes used interchangeably with "benevolence" or "beneficence" in de- scribing good-will, or a helpful attitude or kindly acts, but "charity" is commonly under- stood more objectively as denoting gifts to the poor or positive steps taken to relieve distress and suffering of those unable to help themselves. It is the latter concept, and not the former, that is consistent with the constitutional and statutory terminology relative to the present case. Id. at 181.
Petitioner's clients are not legitimate objects of charity. They are individuals who have borrowed on credit more than they can afford to repay. Furthermore, there is no indication that these individuals would be unable to pay for the services rendered by Petitioner. As a matter of fact, Petitioner's clients pay indirectly for the services, through the interest earned on their money as well as the tax deductible contributions creditors send Petitioner out of the client's funds.
In conclusion, the question of whether Petitioner is entitled to a Consumer Certificate of Exemption is controlled by the statutory definition of the term "charitable institution" as set forth in s. 212.08 (7)(2)(b), F.S., as well as Rule 12A-1.01, F.A.C. Petitioner does not undertake any of the activities listed in the statute or rule and therefore, as a matter of law, is not a charitable institution.
Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby
ORDERED that this Final Order be entered revoking Consumer Credit Counseling's Consumer certificate of Exemption.
RANDY MILLER EXECUTIVE DIRECTOR DEPARTMENT OF REVENUE STATE OF FLORIDA
I HEREBY CERTIFY that a true and correct copy of the above Final Order was entered in the
official record of the Department
of Revenue this 19th day of September, 1985.
Mary L. Ford Agency Clerk
Docket for Case No: 84-004114
Orders for Case No: 84-004114
| Issue Date |
Document |
Summary |
|
Sep. 19, 1985 |
Agency Final Order
|
|
|
May 24, 1985 |
Recommended Order
|
Non-profit consumer credit service providing financial counseling to people in financial crisis not eligible for exemption. This is not charitable organization.
|
