STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

J. ROBERT POWELL, )

)

Petitioner, )

)

vs. ) CASE NO. 94-4672

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly- designated Hearing Officer, Stephen F. Dean, held a formal hearing in the above- styled case on February 21, 1995, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Gabriel Mazzeo, Esquire

Post Office Box 12907 Tallahassee, Florida 32317-2907

For Respondent: Thomas L. Earnhart, Esquire

Brian F. McGrail, Esquire Department of Revenue Post Office Box 6668

Tallahassee, Florida 32314-6668 STATEMENT OF THE ISSUES

Whether Petitioner's awards suggestion is measurable and whether the suggestion resulted in actual savings or additional revenues for the State of Florida.

Whether, to the extent actual savings or generated revenues can be established by the claimant, the decision to make an award and determination of the type and amount of an award is discretionary with the agency head.

PRELIMINARY STATEMENT

A formal hearing was held and conducted before the undersigned Hearing Officer on February 21, 1995 on J. Robert Powell's petition. Petitioner presented the testimony of two witnesses, J. Robert Powell and Charles Martin. Respondent presented testimony from three witnesses, Marsha Lammert, Rayfae Swart and James Evers. Sixteen exhibits were received in evidence into evidence from Respondent without objection. Two exhibits were received in evidence into evidence from Petitioner without objection. A transcript of the hearing proceedings was not prepared. On March 3, 1995, each party filed proposed findings which were read and considered. The Appendix to this Recommended Order states which of those findings were adopted and which were rejected and why.

FINDINGS OF FACT

1. The Agency Awards Program of the Department of Revenue (DOR) was established to recognize and reward employees who make exceptional contributions which lead to improved effectiveness and efficiency within the Department; increased revenue to the state; enhanced employee morale and teamwork; or greater ease of voluntary compliance for the taxpayer. (Ex. R-14). The Suggestion Award is a component of the Agency Awards Program. Suggestions are written proposals for procedures or ideas aimed at eliminating or reducing state expenditures, improving state government operations, or generating additional revenues to the state. (Ex. R-14). The back of the suggestion form states that "all awards are at the discretion of the agency head."

   
   

2. The Petitioner is an employee of the Department of Revenue.

   
   

3. On July 15, 1991, Petitioner submitted a suggestion to the Agency Awards Coordinator for the DOR. (Ex. R-1). Petitioner proposed that corporate taxpayers, who notified DOR that their corporate tax returns had been amended, be required to file amended state returns; and that, pending the aforementioned change, notifications by corporate taxpayers to DOR of changes in the taxpayer's federal returns be forwarded to the Tax Audit Section which would prepare a dummy return indicating the tax and interest due. This, in turn, would cause a bill for the taxes and interest to be generated and sent to the taxpayer.

   
   

4. The Petitioner's suggestion was rejected by the suggestion awards committee because the committee felt that a change in the law was necessary to require taxpayers to prepare amended returns.

   
   

5. The Petitioner requested re-evaluation of his suggestion on the basis that it was a two-part suggestion, and a portion of the suggestion did not require a legislative change.

   
   

6. One of the evaluators, Louis Panebianco, re-evaluated Petitioner's suggestion in December 1991, and recommended non-adoption because he thought the department has both a procedure and a work flow set up to handle amended returns and collection of the taxes due. (Ex. R-3).

   
   

7. Another of the evaluators, Rayfae Swart, re-evaluated Petitioner's suggestion in January 1992, and recommended adoption of the suggestion and a

   $100.00 cash award for the Petitioner. (Ex. R-4). Swart was unaware of any claims about the amount of money this suggestion would generate.

   
   

8. Jay Friedman asked Charles Martin, Petitioner's supervisor, to implement the portion of the suggestion requiring the notifications to be sent to Martin's section where dummy returns would be generated and Petitioner's suggestion would be evaluated. Martin did as he was requested and began tracking corporate taxpayer accounts requiring adjustments because of Revenue Agent Reports (RAR's) generated by the Internal Revenue Service. (Ex. P-1). Martin identified procedures and problems in the existing system and set forth proposed procedures for handling notifications of "amended" returns with and without payments from corporate taxpayers. (Ex. P-2). Martin believed that Petitioner's suggestion had merit based upon the amount of the taxes and interests which the dummy returns recorded and billed in files which were closed. Records maintained by Martin and Petitioner indicated $881,000 of taxes and interest were billed under the system put forth by Petitioner.

9. The committee turned over the technical evaluation of the proposal to the affected Division Directors, Glenn Bedonie and Jim Evers. On April 4, 1994, Directors Bedonie and Evers issued a memorandum discussing Petitioner's suggestion and recommending that Petitioner be awarded the sum of $100.00 for identifying a systemic weakness. (Ex. R-5).

   
   

10. On April 11, 1994, Jim Zingale, Assistant Executive Director, signed the Evaluation Form for Adopted Suggestions. (Ex. R-6). Petitioner was offered a non-measurable award of $100.00 net, plus $55.40 for payment of taxes. The Executive Director notified Petitioner of his award (Ex. R-7), but Petitioner refused the award. (Ex. R-8). Petitioner asserted that his suggestion was responsible for the collection of $881,000, the amount of taxes tracked by Petitioner from the notices of amended federal returns, and that he was entitled to 10 percent of that amount.

    
    

11. DOR controverts Petitioner's claim on four grounds: (1) that its procedures would have ultimately resulted in collection of the amounts due from the taxpayers; (2) that the amount of Petitioner's claim is excessive and includes one unusually large transaction which makes up a significant portion of the total; (3) that the procedures suggested by Petitioner were a reinstitution of procedures which had existed prior to institution of DOR's computerized system; and (4) the agency has absolute discretion in determining the nature and the amount of the award under the rules.

    
    

12. In 1989, the Respondent began changing from a manual or ledger tax processing system to one that was fully automated. As a result, the procedure of setting up tax returns (dummy returns) by the audit group was discontinued. (Ex. R-12).

    
    

13. Prior to Petitioner's suggestion, the Review & Math Audit Section corresponded with taxpayers to ensure that taxpayers notifying the Respondent of necessary changes and taxpayers affected by RAR adjustments filed amended corporate income tax returns. (Ex. R-13). Prior to July 1991, the procedures outlined in the RMA Corporate Tax Quality Check List (Ex. R-15) also ensured that the taxpayer accounts tracked by Petitioner would be flagged for the factors summarized by Marsha Lammert's research. (Ex. R-10, "Comments" column).

    
    

14. Marsha Lammert researched the accounts tracked by Petitioner to determine the validity of his claims. (Ex. R-10, 11). For the past two years, Lammert has been the Senior Revenue Examiner in the Corporate Income Tax Section of Revenue & Math Audit, a bureau of the Division of Tax Processing. Prior to this position, Lammert served over six years as Revenue Examiner Supervisor of the Corporate Income Tax Section.

    
    

15. At the time the suggestion was made, DOR had various tax processes in effect that were triggered by certain audit selection criteria which resulted in establishing an audit trail for collection of taxes due by the corporate taxpayers.

    
    

16. Each of the thirty-six accounts tracked by Petitioner would have triggered between two and six individual audit selection criteria by the automated tax processing system. (Ex. R-10). This information is collected by the Review & Math Audit Section and transmitted to Audit Selection, Division of Audits through the automated tax data processing system. The purpose of the data is to accord an audit priority to be used by Audit Selection in scheduling tax auditor assignments.

17. Rayfae Swart performed a post audit to determine if Petitioner's suggestion had resulted in additional revenues. Her audit revealed that the amounts claimed by the Petitioner were gross amounts and did not reflect any amounts due the taxpayer as refunds. Further, DOR's audit procedures would have eventually picked up the returns through audits which review even "closed" files. Her testimony indicated that these audits would have revealed the taxes due in these accounts within sufficient time for the Department to collect the taxes before the statute of limitations ran.

    
    

18. Marsha Lammert identified in the $881,000 claimed by the Petitioner one taxpayer who received refunds of $332,566.00 and $6,619.00. (Taxpayer P, Respondent's Ex. R-11). Further, Taxpayer "O" received a refund of $73,930.00. (Ex. R-11, "O"). These amounts would have been an offset to the amounts identified by the Petitioner; however, identifying the amounts the taxpayers owed in taxes reduced the refunds which the state had to pay the taxpayers in refunds.

    
    

    CONCLUSIONS OF LAW

    
    

19. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter presented herein, pursuant to Section 120.57(1), Florida Statutes.

    
    

20. At the time Petitioner submitted his suggestion, July 15, 1991, the Agency Awards Program of the Department of Revenue was authorized pursuant to Chapter 110, Florida Statutes (1991), as implemented by Chapter 22A-12., Florida Administrative Code (1991).

    
    

21. Section 110.1245, Florida Statutes, requires the Department of Administration to "adopt, promote, and implement a program of meritorious service awards to employees who,

    
    

    1. Propose procedures or ideas which are adopted and which will result in eliminating or reducing state expenditures or improving operations, or in generating additional revenues provided such proposals are placed

       in effect and can be implemented under current statutory authority; or

    2. By their superior accomplishments, make exceptional contributions to the efficiency, economy, or other improvement in the operations of the state government. Every state agency,

       unless otherwise provided by law, shall participate in the program. The component of the program specified in paragraph (a) shall apply to all employees within the Career Service System. The component of the program specified in paragraph

       (b) shall apply to all employees of the state.

       No award granted under the component of the program described in paragraph (a) shall exceed the greater of $2,000 or 10 percent of the first year's actual savings or actual revenue increase, unless a larger award is made by the Legislature, and shall be paid

       from the appropriation available to the state agency affected by the award or from any specific appropriation therefor. . . ." (Emphasis supplied.)

       
       

22. The limitation on cash awards is the greater of $2,000 or 10 percent of the first year's actual savings or actual revenue increase. The use of the disjunctive "or" indicates that alternatives were intended. Pompano Horse Club, Inc. v. State, 111 So.2d 801 (Fla. 2d DCA 1966); Sparkman v. McClure, 498 So.2d 892 (Fla. 1986). The Florida Supreme Court has consistently upheld the plain meaning doctrine. "To determine the legislative intent we look to the plain meaning of the statute". Thayer v. State, 335 So.2d 815 (Fla. 1976). The law clearly requires that the legislative intent be determined from the language of the statute because a statute is to be taken in the form enacted. Van Pelt v. Hilliard, 78 So. 693 (1918). It was the legislative intent to limit awards to a maximum of $2,000 unless a larger award is made by the legislature.

    
    

23. Assuming for the moment that the benefits to the state of Petitioner's suggestion are measurable and a specific amount was proven, Rule 22A-12.24(4) & (5), Florida Administrative Code, states in pertinent part as follows:

    
    

    1. Measurable benefits. Awards may be bestowed for contributions by employees in the form of written suggestions which are implemented by an agency and result in measurable savings or additional revenue to the State, and may be either or both of the following:

       1. Cash awards shall not exceed the greater of $2,000 or 10 percent of the first year's actual savings or revenue increase, unless a larger award is made by the Legislature. Savings bonds, or other items in lieu of cash may be awarded provided the cost of such items does not exceed the limits specified in this subsection.

       2. Honor awards shall be an appropriate acknowledgment provided the value shall not exceed $50.

    2. Nonmeasurable benefits. Awards may also be bestowed for contributions by employees in the form of suggestions which are implemented by an agency and result in improved state operations which cannot be measured by savings or generated revenue, and may be either or both of the following:

    1. Cash awards shall be $100.

    2. Honor awards shall be an appropriate acknowledgment provided the value shall not exceed $50. (Emphasis supplied.)

    
    

24. The emphasized language indicates that the award may be money (or a savings bond or cash equivalent), and/or some acknowledgment not exceeding $50 in the discretion of the agency head. Again, see Pompano Horse Club, Inc. v. State, supra; Pinellas County v. Wooley, 189 So.2d 217 (Fla. 2d DCA 1966); and Dotty v. State, 197 So.2d 315 (Fla. 4th DCA 1967). The agency head was authorized to determine if the suggestion warranted recognition by the Awards Program, and to decide the type and amount of award to make, subject to a

    maximum award of $2,000. The form for making state awards states under the section entitled "Program Guidelines, Awards Section" that "[A]ll awards are at the discretion of the agency head".

    
    

25. Although the department showed that a portion of the amount claimed by the Petitioner would have not been collected because of refunds due the taxpayer, the amounts identified by Petitioner were offset against those refunds and were, therefore, a benefit to the state. However, the amount claimed by the Petitioner is only additional revenue if the monies would not have been collected eventually by the department. While the evidence indicated that the notifications of amendment were placed in files which were closed, the department presented unrefuted evidence that its audit procedures would have audited the files and collected the taxes and interest due before the statute of limitations ran. The result of the suggestion was that the state got its money sooner. However, there is no financial benefit to early collection because there was interest charged on the tax due.

    
    

26. The agency head's determination that Petitioner's suggestion, albeit helpful, would be rewarded by a $100 meritorious award was within his discretion.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is,

RECOMMENDED:

That the Department of Revenue enter a Final Order finding that the $100 cash award to Petitioner was within the agency head's discretion under the State Awards Program.

DONE and ENTERED this 23rd day of March, 1995, in Tallahassee, Florida.

STEPHEN F. DEAN

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 23rd day of March, 1995.

APPENDIX TO RECOMMENDED ORDER

The parties submitted proposed findings which were read and considered.

The following states which of their findings were adopted, and which were rejected, and why:

Petitioner's Recommended Order Findings

Paragraphs 1-5 Paragraphs 2-6

Paragraphs 6,7 Subsumed in paragraphs 7-10

Paragraphs 8-11 Petitioner tracked $881,000 in taxes reported on amended returns; however, there was no evidence that this would have been uncollected in the absence of the suggested changes.

Paragraph 12 Rejected as being contrary to unrefuted

evidence that these taxes would have been collected anyhow.

Paragraph 13 Subsumed in Paragraph 3. Paragraph 14 True, but unnecessary.

Paragraph 15 See comments to Paragraph 11 and 12. Paragraph 16 Conclusion of Law.

Respondent's Proposed Order Findings

Paragraph 1 Paragraph 1

Paragraph 2 Paragraph 3

Paragraphs 3-5 Subsumed in Paragraph 4

Paragraph 6 Subsumed in Paragraph 5

Paragraphs 6-8 The fact Martin participated in keeping track of the taxes is unnecessary to the decision. The other findings are subsumed in Paragraph 8.

Paragraphs 9,10 Paragraph 9,10

Paragraph 11 Paragraph 12

Paragraph 12 Paragraph 13

Paragraph 13 Paragraph 14

Paragraph 14 Paragraph 16

Paragraph 15 Subsumed in Paragraph 17

Paragraph 16 Subsumed in Paragraph 18

COPIES FURNISHED:

Gabriel Mazzeo, Esquire Post Office Box 12907 Tallahassee, FL 32317-2907

Tom Barnhart, Esquire Department of Revenue Post Office Box 6668

Tallahassee, FL 32314-6668

Linda Lettera, General Counsel Department of Revenue

204 Carlton Building Tallahassee, FL 32399-0100

Larry Fuchs, Executive Director Department of Revenue

104 Carlton Building Tallahassee, FL 32399-0100

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit to the agency written exceptions to this Recommended Order. All agencies allow each party at least ten 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.

================================================================= AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA DEPARTMENT OF REVENUE

1. ROBERT POWELL, Petitioner,

   CASE NO. 94-4672

   vs. DOR 95-5-FOF

   
   

   DEPARTMENT OF REVENUE,

   
   

   Respondent.

   /

   
   

   FINAL ORDER

   
   

   This cause came on before me for the purpose of issuing a final order. The Hearing Officer assigned by the Division of Administrative Hearings in the above styled case submitted a Recommended Order to the Department of Revenue. A copy of the Recommended Order is attached to this order and is incorporated as if fully set forth herein.

   
   

   For the reasons expressed herein, the Department adopts the Hearing Officer's recommendation that the $100 cash award to Petitioner was within the agency head's discretion under the State Awards Program.

   
   

   Pursuant to Chapter 120, Florida Statutes, the Department has jurisdiction of this cause.

   
   

   FINDINGS OF FACT

   
   

   1. through 18. The Department hereby adopts and incorporates by reference the Findings of Fact set forth in paragraphs 1 through 18 as set forth in the Recommended Order.

CONCLUSIONS OF LAW

19. through 26. The Department hereby adopts and incorporates by reference Conclusions of Law set forth in paragraphs 19 through 26 as set forth in the Recommended Order.

CONCLUSION

Therefore, based on the Findings of Fact and the Conclusions of Law as set forth in the Recommended Order, it is hereby ORDERED that the $100 cash award to Petitioner was within the agency head's discretion under the State Awards Program.

Any party to this Final Order has the right to seek judicial review of the Final Order as provided in Section 120.68, Florida Statutes, by the filing of a Notice of Appeal as provided in Rule 9.110, Florida Rules of Appellate Procedure, with the Clerk of the Department in the Office of General Counsel, Post Office Box 6668, Tallahassee, Florida 32314-6668 and by filing a copy of the Notice of Appeal, accompanied by the applicable filing fees, with the appropriate District Court of Appeal. The Notice of Appeal must be filed within

30 days from the date this Final Order is filed with the Clerk of the Department.

DONE AND ENTERED in Tallahassee, Leon County, Florida this 3rd day of May, 1995.

STATE OF FLORIDA DEPARTMENT OF REVENUE

L. H. Fuchs Executive Director

I HEREBY CERTIFY that the foregoing FINAL ORDER has been filed in the official records of the Department of Revenue this 3rd day of May, 1995.

COPIES FURNISHED:

L. H. 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

Gabriel Mazzeo, Esquire Post Office Box 12907 Tallahassee, Florida

Tom Barnhart, Esquire Brian F. McGrail, Esquire Post Office Box 6668

Tallahassee, Florida 32314-6668

Docket for Case No: 94-004672

Orders for Case No: 94-004672