STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CENTRAL DADE MALPRACTICE ) TRUST FUND, )

)

Petitioner, )

)

vs. ) CASE NO. 94-5133

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to Notice, this cause was heard by Linda M. Rigot, the assigned Hearing Officer of the Division of Administrative Hearings, on March 13, 1995, in Miami, Florida.

APPEARANCES

For Petitioner: Curtis H. Sitterson, Esquire

Stearns, Weaver, Miller, et al. Museum Tower

150 West Flagler Street Miami, Florida 33130

For Respondent: Lisa M. Raleigh

Assistant Attorney General Office of the Attorney General Tax Section, Capitol Building Tallahassee, Florida 32399-1050

STATEMENT OF THE ISSUE

The issue presented is whether the Department's audit assessment against Petitioner for additional insurance premium tax for the tax years 1989 and 1990 is proper.

PRELIMINARY STATEMENT

The Department issued its Notice of Reconsideration sustaining its assessment against Petitioner for additional insurance premium tax, and Petitioner timely filed two Petitions: one challenging the validity of Rule 12B- 8.001(5), Florida Administrative Code, which is the subject of DOAH Case No. 94- 5180RX, and one protesting the Department's assessment, which is the subject of this proceeding. Those causes were consolidated for final hearing but are hereby severed since the former results in a final order issued by the Division of Administrative Hearings, and the latter results in a recommended order.

The Department presented the testimony of Joy B. Eldred. Additionally, Petitioner's Exhibit numbered 1 and Joint Exhibits numbered 1-4 were admitted in evidence.

Both parties submitted post-hearing proposed findings of fact. A specific ruling on each proposed finding of fact can be found in the Appendix to this Recommended Order.

AGREED FACTS

1. At all times material hereto, Petitioner Central Dade Malpractice Trust Fund has been a medical malpractice self-insurance fund as defined in Section 627.357, Florida Statutes. Petitioner has been in existence and operation since 1979. Its sole purpose is to provide medical malpractice insurance to its members, approximately 100 doctors in Dade County.

   
   

2. Petitioner has no capital and is not operated for profit. It cannot, without permission from the Department of Insurance, pay dividends to its members. Rather, Petitioner is required by law to hold 100 percent of its premium and investment income to fund medical malpractice claims and pay its operating expenses, including taxes. Petitioner's members are individually liable or assessable for any shortfall in its trust funds.

   
   

3. The Department conducted an audit of Petitioner for insurance premium tax for the audit period of 12/31/89 through 12/31/90. After the conclusion of the audit and after administrative protest by Petitioner of the proposed assessment, the Department issued its assessment on July 20, 1994. Petitioner subsequently paid the entire assessment and is seeking a refund in this proceeding.

   
   

4. Although Petitioner is a trust and not a corporation, as an insurer Petitioner is subject to corporate income tax and intangible tax. Beginning July 1, 1989, medical malpractice self-insurance funds also became subject to the insurance premium tax provided for in Section 624.509, Florida Statutes. That section further establishes a system of credits for taxes such as corporate income, intangible, and other specified taxes against the insurance premium tax assessed thereunder.

   
   

5. In computing the amount of tax due to the Department, Petitioner applied credit for a portion of the corporate income tax and intangible tax paid by it against its liability for the insurance premium tax for 1989 and 1990. In performing its audit, the Department determined that Petitioner was not entitled to credit against its insurance premium tax for the corporate income tax and intangible tax paid by Petitioner. The Department determined, therefore, that Petitioner owed additional tax to the Department.

   
   

6. The assessment issued against Petitioner was in the amount of $8,996.31 for additional tax, $899.63 for penalty, and $2,346.58 for interest through March 10, 1993.

   
   

7. Petitioner was entitled to take credit for a portion of its corporate income tax and intangible tax payments against its insurance premium tax liability, and the Department's audit adjustments and subsequent assessment were improper. Accordingly, Petitioner is entitled to a refund of $23,774.76 for tax years 1989 and 1990.

8. Petitioner is not an entity subject to workers' compensation assessments under Section 440.51, Florida Statutes.

   
   

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction over the parties hereto and the subject matter hereof. Section 120.57(1), Florida Statutes.

   
   

10. Section 627.357, Florida Statutes, regulates the establishment of medical malpractice self-insurance funds, regulates the terms of their existence, and provides as follows:

    
    

    (9) Premiums, contributions, and assess- ments received by a fund are subject to s. 624.509(1) and (2) and s. 624.5092, except that the tax rate shall be 1.6 percent of the gross amount of such premiums, contri- butions, or assessments; provided, however,

    for the period July 1, 1989, through December 31, 1989, the tax rate shall be 0.8 percent and for calendar year 1990, the tax rate shall be 1.3 percent.

    
    

    By that subsection, originating in Chapter 88-206, Laws of Florida, medical malpractice self-insurance funds such as Petitioner became subject to the insurance premium tax effective July 1, 1989.

    
    

11. The premium tax had been previously established and given definition in Section 624.509, Florida Statutes. Portions of that statute pertinent to this proceeding are as follows:

    
    

    1. In addition to the license taxes provided for in this chapter, each insurer shall also annually, and on or before March 1 in each year,

       . . . pay to the Department of Revenue a tax on insurance premiums, risk premiums for title insurance, or assessments, including membership fees and policy fees and gross deposits received from subscribers to reciprocal or interinsurance agreements, and on annuity premiums or consider- ations, received during the preceding calendar year, the amounts thereof to be determined as set forth in this section, to wit:

       1. An amount equal to 1.75 percent of the gross amount of such receipts on account of life and health insurance policies covering persons resident in this state and on account of all other types of policies and contracts (except annuity policies or contracts taxable under paragraph (b)) covering property, subjects, or risks located, resident, or to be performed in this state . . .

       2. An amount equal to 1 percent of the gross receipts on annuity policies or contracts paid by holders thereof in this state.

    2. Payment by the insurer of the license taxes

       and premium receipts taxes provided for in this part of this chapter is a condition precedent to doing business within this state.

       * * *

       (4) The intangible tax imposed under chapter 199, the income tax imposed under chapter 220, and the emergency excise tax imposed under chapter 221 which are paid by any insurer shall be credited against, and to the extent thereof shall discharge, the liability for tax imposed by this section for the annual period in which such tax payments are made.

       * * *

       (9) As used in this section "insurer" includes

       any entity subject to the tax imposed by this section.

       
       

12. Effective March 25, 1990, the Department amended its Rule 12B-8.001, Florida Administrative Code, which substantially tracks Section 624.509, Florida Statutes, requiring the payment of a premium tax, and reciting the rate of taxation and the methodology for computing the amount of tax owed. One of the amendments to the Department's rule was the addition of Subsection (5), which provides as follows:

    
    

    (5) Any insurer paying assessments made under

    s. 440.51, F.S., shall be allowed as a deduction against the amount of any other tax levied by the state upon the premiums, assessments, or deposits for workers' compensation insurance on contracts or policies of said insurance carrier, self-insurer, or commercial self-insurance fund. Self-insurance funds are not eligible for the aforementioned credits described in Rule

    12B-8.001(3), F.A.C., with the exception of assessments made under s. 440.51, F.S. Wet Marine and Transportation Insurers under s. 624.510, F.S., are eligible for a credit for the total income tax paid under Chapter 220, F.S., and the community contribution credit, if applicable.

    
    

13. The Department relied on that subsection in issuing its assessment against Petitioner. In DOAH Case No. 94-5180RX Petitioner challenged the validity of that subsection, particularly the first complete sentence, which reads as follows: "Self-insurance funds are not eligible for the aforementioned credits described in Rule 12B-8.001(3), F.A.C., with the exception of assessments made under s. 440.51, F.S." Petitioner argued that Subsection (5) is an invalid exercise of delegated legislative authority because the subsection is contrary to Section 624.509(4) and (9) and/or because it is arbitrary or capricious. Section 120.52(8)(c) and (e), Florida Statutes.

    
    

14. Section 627.357(9), Florida Statutes, unambiguously requires medical malpractice self-insurance funds to pay the insurance premium tax as a condition precedent to doing business in Florida, as required in Section 624.509 (1) and (2), Florida Statutes. The Legislature provided in Section 624.509(4) and (9) that any insurer subject to payment of the insurance premium tax imposed in Subsection (1) shall be entitled to credit against that tax a portion of the payments made by it for intangible tax and corporate income tax. The

    Department, on the other hand, has recited in Subsection (3) of Rule 12B-8.001 the availability of credit against the insurance premium tax for corporate income tax and intangible tax payments, as provided in Section 624.509(4), Florida Statutes, and has then provided in Subsection (5) of that rule that medical malpractice self-insurance funds are not entitled to those credits. In the Final Order entered in DOAH Case No. 94-5180RX on this date, subsection (5) of Rule 12B-8.001, Florida Administrative Code, has been determined to be an invalid exercise of delegated legislative authority. Thus, Petitioner was entitled to credit against its insurance premium tax a portion of its payments for intangible tax and corporate income tax in accordance with Section 624.509(4) and (9), Florida Statutes, and the Department's audit assessment was improper.

    
    

15. Even had Rule 12B-8.001(5) not been determined to be an invalid exercise of delegated legislative authority, the Department's reliance on the language of that subsection to conclude that Petitioner was not entitled to tax credit is erroneous. The first sentence in Subsection (5) is incomplete and lacks meaning. It does, however, appear to relate to insurers paying assessments pursuant to Section 440.51, Florida Statutes, and the parties hereto agree that Petitioner is not such an insurer. It must be concluded, then, that the self-insurance funds specified in the second sentence of Subsection (5) relate to insurers paying assessments under Section 440.51, and the subsection's declaration that such insurers are not eligible for the credit made available by Section 624.509, Florida Statutes, is not applicable to Petitioner.

    
    

16. Further, even if Subsection (5) does apply to Petitioner, a conclusion prevented by the poor construction of that subsection, the language that does have meaning declares that self-insurance funds are not eligible for the "aforementioned credits described in Rule 12B-8.001(3)." The Department's prohibition against Petitioner taking advantage of any credits described in its rule would have no effect on Petitioner taking advantage of credits authorized by the Legislature in Section 624.509, Florida Statutes.

    
    

17. The Department having concluded that Petitioner was not entitled to credit against its premium tax a portion of the corporate income and intangible taxes paid by it, the Department's audit adjustments were in error. Petitioner is entitled to a refund from the Department in the amount of $23,774.76 for the tax years 1989 and 1990.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding that the Department's

assessment issued July 20, 1994, was improper and finding Petitioner entitled to

a refund in the amount of $23,774.76.

DONE and ORDERED this 19th day of May, 1995, at Tallahassee, Florida.

LINDA M. RIGOT, 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 19th day of May, 1995.

APPENDIX TO RECOMMENDED ORDER

1. Petitioner's proposed findings of fact numbered 4, 5 and 7 have been adopted either verbatim or in substance in this Recommended Order.

2. Petitioner's proposed findings of fact numbered 1, 3, 6, and 8 have been rejected as not constituting findings of fact.

3. Petitioner's proposed findings of fact numbered 2, and 9-11 have been rejected as being subordinate to the issues involved herein.

4. Respondent's proposed findings of fact numbered 1, 4, 5 and 12 have been adopted either verbatim or in substance in this Recommended Order.

5. Respondent's proposed findings of fact numbered 3, 6-10, 13, and 15-19 have been rejected as not constituting findings of fact.

6. Respondent's proposed finding of fact numbered 2 has been rejected as being subordinate to the issues herein.

7. Respondent's proposed findings of fact numbered 14, 20, and 21 have been rejected as being irrelevant to the issues in this cause.

8. Respondent's proposed findings of fact numbered 11 and 22 have been rejected as not being supported by the weight of the competent evidence in this cause.

COPIES FURNISHED:

Curtis H. Sitterson, Esquire Stearns, Weaver, Miller, et al. Museum Tower

150 West Flagler Street Miami, Florida 33130

Linda Lettera, General Counsel Department of Revenue

Post Office Box 6668 Tallahassee, Florida 32314-6668

Lisa M. Raleigh, Esquire Office of the Attorney General Tax Section, The Capitol

Tallahassee, Florida 32399-1050

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 to this Recommended Order. All agencies allow each party at least 10 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

CENTRAL DADE MALPRACTICE TRUST FUND,

Petitioner,

CASE NO. 94-5133

vs. DOR 95-8-FOF

DEPARTMENT OF REVENUE

Respondent.

/

FINAL ORDER

This cause came on before the Department of Revenue for the purpose of issuing a final order. The hearing officer assigned by the Division of Administrative Hearings heard this cause and issued a Recommended Order on May 19, 1995. The Department filed Exceptions to the Recommended Order and a Proposed Substitute Order on June 13, 1995. The Department's exceptions are incorporated into this Final Order. Copies of the Recommended Order, the exceptions thereto, the Joint Prehearing Stipulation, Joint Exhibit Two, and the Department's Proposed Substitute Order are attached to this Final Order.

STATEMENT OF THE ISSUE

The Department adopts and incorporates in this Final Order the Statement of the Issue in the Recommended Order.

PRELIMINARY STATEMENT

The Department adopts and incorporates in this Final Order the Preliminary Statement in the Recommended Order and adds the following to such Preliminary Statement: Testimony, exhibits, and rulings are reported in the transcript of the formal hearing filed on March 27, 1995.

On May 19, 1995, Hearing Officer Rigot issued a Final Order holding invalid Fla. Admin. Code R. 12B-8.001(5). The Department filed a Notice of Appeal of that ruling and the case is currently pending before the First District Court of Appeal. Also on May 19, 1995, Hearing Officer Rigot also issued a Recommended Order which adjudged that:

1. Final Order be entered finding that the Department's assessment issued July 20, 1994, was improper and finding Petitioner entitled to a refund in the amount of $23,774.76.

On June 13, 1995, the Department timely filed Exceptions to the Recommended Order.

FINDINGS OF FACT

Prior to the Final Hearing, the parties agreed to numerous facts and entered into a Joint Prehearing Statement. The Hearing Officer entitles the Findings of Fact section of the Recommended Order "Agreed Facts"; however, instead of reciting the actual stipulation facts submitted by the parties, the Hearing Officer paraphrases and adds facts that were not agreed to by the parties. The "Agreed Facts" section should only recite the facts that were actually agreed to by the parties. Accordingly, the Department substitutes the Joint Prehearing Statement for the Hearing Officer's "Agreed Facts" numbers 1 through 6 as follows:

1. Central Dade is, and at all material times was, a Medical Malpractice Self Insurance Fund as defined in Sec. 627.357, Fla. Stat. Central Dade is a trust, not a corporation. It has been in existence and operation since 1979. Its sole purpose is to provide medical malpractice insurance for its members, i.e., approximately 100 doctors in Dade County. Central Dade has no capital and is not operated for profit. It does not and cannot, absent permission from the Department of Insurance, legally pay dividends to its members; rather it is required by law to hold one hundred percent of its premium and investment income to fund medical malpractice claims and pay its operating expenses (including taxes). Central Dade's members are individually liable or assessable for any shortfall in its trust funds.

   
   

2. Central Dade has standing to challenge Fla. Admin. Code Rule 12B- 8.001(5) because it is substantially affected by the Rule.

   
   

3. The Department, as an agency within the Executive Branch of the government of the State of Florida, is authorized by Chapters 213 and 624, Fla. Stat., to conduct audits and make assessments of tax pursuant to Chapter 624, Fla. Stat., (Insurance Premium Tax).

   
   

4. The Department conducted an audit of Central Dade for the audit period of 12/31/89 through 12/31/90 for Insurance Premium Tax. After the conclusion of the audit and after administrative protest of the proposed assessment by Central Dade, an assessment was issued on July 20, 1994.

   
   

5. The assessment became a Final Assessment on July 20, 1994. Central Dade was assessed $8,996.31 tax; $899.63 penalty; and $2,346.58 interest through March 10, 1993. Central Dade paid the entire assessment and is seeking a refund of the payment through this action.

   
   

6. Central Dade timely filed a Petition seeking to have the tax assessment declared invalid. Additionally, Central Dade filed a Petition pursuant to Sec. 120.56, Fla. Stat. challenging Fla. Admin. Code Rule 12B-8.001(5) as invalid.

   
   

7. Upon Motion by the Parties, the cases were consolidated for Final Hearing.

8. Medical Malpractice Self-insurance Funds became subject to the Insurance Premium Tax beginning July 1, 1989. Ch. 88-206, ss. 6, Laws of Fla.

   
   

9. Fla. Admin. Code Rule 12B-8.001(5) became effective March 25, 1990.

   The parties agree the Rule was correctly promulgated and the Petitioner is only challenging the applicability of the Rule to Petitioner and the substance of the Rule.

   
   

10. The dispute between the parties concerns whether Petitioner is entitled to the credits contained in Sec. 624.509.(4), Fla. Stat.

    
    

    The parties additionally stipulated to the following:

    
    

11. If the Department prevails in this action, the Petitioner will not be entitled to any refund for the tax years 1989 and 1990. [Joint Exhibit Two] Any overpayment made by the Petitioner will be applied to subsequent tax years. 1/

    
    

12. If the Petitioner prevails in this action, it will be entitled to a refund of $23,774.76 for the tax years 1989 and 1990. [Joint Exhibit Two]

    
    

13. The Department rejects the Hearing Officer's "Agreed Fact" number 7 because it is a conclusion of law and not a finding of fact.

    
    

14. The Department rejects the Hearing Officer's "Agreed Fact" number 8 as irrelevant to this proceeding.

    
    

    The Department makes the following additional findings of fact based on competent and substantial testimony and evidence presented at the Final Hearing:

    
    

15. A premium tax on "medical malpractice self-insurance [funds]" was first imposed in 1989. Effective July 1, 1989, Chapter 88-206, ss. 6, Laws of Fla., amended Sec. 627.357, Fla. Stat. to provide:

    
    

    627.357 Medical malpractice self-insurance --

    
    

    (9) Premiums, contributions, and assessments received by a fund are subject to s. 624.509 (1), (2), and (3), except that the tax rate shall be 1.6 percent of the gross amount of such premiums, contributions and assessments. E.S.

    
    

    The premium tax imposed on medical malpractice self-insurers was, pursuant to the above-quoted statute, 1.6 percent of the gross amount of the premiums, contributions and assessments.

    
    

16. A premium tax on "dental service plan corporations" self-insurance funds was first imposed in 1989. Effective July 1, 1989, Chapter 88-206, ss. 6, Laws of Fla., amended Sec. 627.357, Fla. Stat. to provide:

    
    

    637.406 Tax on premiums, contributions, and assessments. Premiums, contributions, and assessments received by a dental service plan corporation are subject to the tax imposed by s. 624.509.

    The premium tax imposed on dental service plan corporations in 1988 was 2 percent of the gross amount of the premiums, contributions, and assessments pursuant to Sec. 624.509(1)(a), Fla. Stat. (1989).

    
    

17. The Legislature in the same Bill that added the amendments to Sec.

627.357 Fla. Stat., which subjected medical malpractice self-insurers to subsections (1), (2) and (3) 2/ of Sec. 624.509, Fla. Stat., 3/ and made dental service plan self-insurers subject to "s. 624.509" in its entirety also made multiple employer welfare arrangements, 4/ Commercial self-insurance funds, 5/ professional liability self-insurance, 6/ and group self-insurer funds subject to subsections (1), (2), and (3) of Sec. 624.509, Fla. Stat.; but made other insurers, such as the continuing care contracts, 7/ subject to Sec. 624.509, Fla. Stat., in its entirety. Further, all those entities which the Legislature specifically made subject to noncredit paragraphs (1), (2) and (3) of Sec. 624.509, Fla. Stat. (Supp. 1988) were given a lower 1.6 percent tax rate by the Legislature. In contrast, those entities made subject to Sec. 624.509, Fla. Stat., in its entirety, such as the dental service plan self-insurers, without a listing of the specific paragraphs, and which are clearly entitled to the credits therein, were made subject to the higher 2 percent tax rate provided in Sec. 624.509(1), Fla. Stat. (Supp. 1988).

18. Sec. 624.509(1), (2), (3), (4), and (9), Fla. Stat. (Supp. 1988),

states in pertinent part:

624.509 Premium tax; rate and computation.

1. In addition to the license taxes provided for in this chapter, each insurer shall also annually, and on or before March 1 in each year, except as to wet marine and transportation insurance taxed under s. 624.510, pay to the Department of Revenue a tax on insurance premiums, risk premiums for title insurance, or assessments, including membership fees and policy fees and gross deposits received from subscribers to reciprocal or interinsurance agreements, and on annuity premiums or considerations, received during the preceding calendar year, the amounts thereof to be determined as set forth in this section, to wit:

   1. An amount equal to 2 percent of the gross amount of such receipts on account of life and health insurance policies covering persons resident in this state and on account of all other types of policies and contracts (except annuity policies or contracts taxable under paragraph (b)) covering property, subjects, or risks located, resident, or to be performed in this state, omitting premiums on reinsurance accepted, and less return premiums or assessments, but without deductions:

      
      

      1. For reinsurance ceded to other insurers;

         
         

      2. For moneys paid upon surrender of policies or certificates for cash surrender value;

         
         

      3. For discounts or refunds for direct or prompt payment of premiums or assessments; and

         
         

      4. On account of dividends of any nature or amount paid and credited or allowed to holders of insurance policies; certificates; or surety, indemnity, reciprocal, or interinsurance contracts or agreements; and

         
         

   2. An amount equal to 1 percent of the gross receipts on annuity policies or contracts paid by holders thereof in this state.

2. Payment by the insurer of the license taxes and premium receipts taxes provided for in this part of this chapter is a condition precedent to doing business within this state.

   
   

3. Notwithstanding other provisions of law, the distribution of the premium tax and any penalties or interest collected thereunder shall be made to the General Revenue Fund in accordance with rules adopted by the Department of Revenue and approved by the Administration Commission.

   
   

4. The intangible tax imposed under chapter 199, the income tax imposed under chapter 220, and the emergency excise tax imposed under chapter

221 which are paid by any insurer shall be credited against, and to the extent thereof shall discharge, the liability for tax imposed by this section for the annual period in which such tax payments are made. As to any insurer issuing policies insuring against loss or damage from the risks of fire, tornado, and certain casualty lines, the tax imposed by this section, as intended and contemplated by this subsection, shall be construed to mean the net amount of such tax remaining after there has been credited thereon such gross premium receipts tax as may be payable by such insurer in pursuance of the imposition of such tax by any incorporated cities or towns in the state for firemen's relief and pension funds and policemen's retirement funds maintained in such cities or towns, as provided in and by relevant provisions of the Florida Statutes. For purposes of this subsection, payments of estimated income tax under chapter 220 and of estimated emergency excise tax under chapter 221 shall be deemed paid either at the time the insurer actually files its annual returns under chapter

220 or at the time such returns are required to be filed, whichever first occurs, and not at such earlier time as such payments of estimated tax are actually made.

(9) As used in this section "insurer" includes any entity subject to the tax imposed by this section.

CONCLUSIONS OF LAW

The Department of Revenue adopts and incorporates in this Final Order paragraphs 9 and 11 of the Conclusions of Law in the Recommended Order. The remaining Conclusions of Law in the Recommended Order are rejected because they misapprehend the law. This Final Order will expand and elaborate on the Conclusions of Law in the Exceptions and Proposed Substitute Order filed by the Department with the following:

1. Petitioner has standing to challenge the insurance premium tax assessment at issue. Sec. 120.57, Fla. Stat. and Sec. 72.011, Fla. Stat.

   
   

2. The Department's burden of proof in a challenge to an insurance premium tax assessment is limited to a prima facie showing:

   
   

   . . . that an assessment has been made against the taxpayer and the factual and legal grounds upon which the . . . [D]epartment made the assessment.

   
   

   Sec. 120.575(2), Fla. Stat.

   
   

   The Department has met this burden.

3. The Florida Supreme Court has long held that the courts should not assume the Legislature acted pointlessly. Neu v. Miami Herald Publishing Co.,

   462 So.2d 821 (Fla. 1985); City of North Miami v. Miami Herald Publishing Company, 468 So.2d 218 (Fla. 1985). It has also long been settled that a statute must be construed in such a manner as to give meaning to each word and that the words of the statute are to be given their plain meaning unless another meaning is clearly indicated. Citizens of State v. Public Service Commission,

   425 So.2d 534, 541-542 (Fla. 1982) St. Petersburg Bank & Trust v. Hamm, 414 So.2d 1071 (Fla. 1982); Terrinoni v. Westward Ho!, 418 So.2d 1143, 1146 (Fla. 1st DCA 1982). The Legislature clearly stated in Sec. 627.357, Fla. Stat. (Supp. 1988) that only subsections (1), (2) and (3) of Sec. 624.509. Fla. Stat., were applicable to medical malpractice self-insurers.

   
   

4. Specific statutes control over general statutes. Adams v. Culver, 111 So.2d. 665 (Fla. 1959); Hamilton Co. Board of County Commissioners v. State of Florida Department of Environmental Regulations, 587 So.2d 1378 (Fla. 1st DCA 1991). Subsection (9) of Sec. 624.509, Fla. Stat. was added to the statute by Ch. 88-206, ss. 1, Laws of Fla., the same chapter that made medical malpractice self insurers subject to insurance premium tax. Subsection (9) generally states that an "insurer" is entitled to certain credits against its premium tax. Sec. 627.357(9), Fla. Stat. specifically states that medical malpractice self insurers are subject to subsection (1), (2) and (3) of Sec. 624.509, Fla. Stat.

5. In 1988, paragraphs (1), (2) 8/ and (3) 9/ of Sec. 624.509, Fla.

Stat. (Supp. 1988), imposed the premium tax, set the rate, required payment as a condition to do business, provided the timing of such payments, provided for penalties and interest if such payments were not properly made and specified that the payments were to be deposited in the General Revenue fund. No credits were contained in these three paragraphs in 1988 and none are in these paragraphs today 10/ .

1. The Legislature's selective incorporation in Sec. 627.357, Fla. Stat. (Supp. 1988) of the noncredit provisions contained within Sec. 624.509 (1), (2), and (3), Fla. Stat. (Supp. 1988) may not be ignored so as to incorporate the credit provision separately set forth in Sec. 624.509 (4), Fla. Stat. (Supp. 1988). This selective incorporation was present from the beginning, when, in 1988, Sec. 627.357(9), Fla. Stat. (Supp. 1988) was enacted so as to subject all "medical malpractice, etc. funds[s]" to premium taxation; it remained constant throughout various legislative revisions to that Section. Ch. 89-167, ss. 16, Laws of Fla., amended the above-quoted statute to delete the cross-reference to Sec. 624.5092 (3), Fla. Stat. (1989) concerning "installment payments" 11/ without addition of a new cross-reference to Sec. 624.509 (4), Fla. Stat. (1989), concerning the credits. The legislature's actions in surgically deleting a reference to Sec. 624.5092(3), Fla. Stat. (installment payments) without adding a cross-reference to Sec. 624.509(4), Fla. Stat. (the tax credits), indicates that the Legislature did not intend to grant credits to medical malpractice self-insurers.

   
   

2. Plaintiff's argument that Sec. 624.509(4), Fla. Stat., provides a credit for an "insurer" and that plaintiff is an "insurer" ignores the fundamental principle that statutes containing cross references must be read in pari-materia. The Department was correct in construing that medical malpractice insurers are subject to only subsections (1), (2) and (3) of Sec. 624.509, Fla. Stat. The Recommended Order simply ignores the selective incorporation in Sec. 440.57(6), Fla. Stat. (Supp. 1988) and also ignores the principle that specific statutes control over general statutes.

3. The Legislature's action in applying a reduced rate of tax, 1.6 percent as opposed to the 2 percent 12/ rate, to those entities specifically made subject to paragraphs (1), (2), and (3) of Sec. 624.509, Fla. Stat. (Supp. 1988), indicates the Legislature's intent to treat these self-insurers differently than those self-insurers made subject to Sec. 624.509, Fla. Stat. (Supp. 1988), in its entirety.

   
   

4. Tax credit statutes, unlike taxing statutes, are strictly construed against the taxpayer and in favor of the taxing authority. Department of Revenue v. Anderson, 403 So.2d 397 (Fla. 1981); National Brands Tire Co. v. Department of Revenue, 383 So.2d 257, 259 (Fla. 3rd DCA 1980).

   
   

5. The legislative history affirmatively supports the Department of Revenue's view that the tax credit was not intended by the Legislature to apply to "medical malpractice self-insurers funds."

   
   

6. The Legislative intent to deny the credits in paragraph (4) of Sec. 624.509, Fla. Stat. (Supp. 1988), medical malpractice self-insurance funds to group self-insurance funds, commercial self-insurance funds, and professional liability self-insurance funds is further supported when notice is taken that the pertinent 1988 bill made a lower insurance premium tax rate of 1.6 percent applicable to those groups denied the credit and a higher rate of 2 percent applicable to the groups getting the benefit of the credit. These differing rates show the Legislative intent to tax different insurers in different manners.

   
   

7. Central Dade argues that taxing self-insurers at a lower rate, but denying the self-insurers the credits, results in "illogical and fundamental unfairness." While it is true that Central Dade's effective tax rate is higher under the taxing scheme selected by the Legislature for self-insurers than the taxing scheme selected by the Legislature for other types of insurers, this fact does not prove any unfairness or legislative intent. It is well within the Legislative prerogative to tax similar transactions and entities at differing rates. People Against Sec. 561.501, Inc. v. Dept. of Business Regulation, 587 So.2d 644 (Fla. 1st DCA 1991). Taxation is a legislative function and the Courts should not "engage in conjecture as to whether means exist by which the legislature might have better, or even more fairly, accomplished its end of raising revenue." Id. at 646.

   
   

8. The Department reasonably interprets the statute. The insurance premium tax is statutorily applied in one of two ways: for insurers generally, premiums are taxed at a rate of 2 percent for 1988 and 1.75 percent for 1989 to the present, but various credits are allowed (see, generally Sec. 624.509, Fla. Stat.); for specialized insurers, such as the petitioner, premiums are taxed at a lower rate of 1.6 percent, but no credits are granted. See, Sec. 627.357(9), Fla. Stat. See, also, Sec. 628.6015, Fla. Stat. (using the 1.6 percent rate with no credits for assessable mutual insurers).

   
   

9. Credits against a tax cannot be allowed without explicit statutory authority. The Department cannot imply a credit or exemption into a statute as credits and exemptions must be construed narrowly, against the taxpayer.

Asphalt Pavers, Inc. v. Department of Revenue, 584 So.2d 55 (Fla. 1st DCA 1991). The Department's adjustments to the Petitioner's returns are upheld.

CONCLUSION

Based on the foregoing, Petitioner is not entitled to the credits in subsection (4) of Sec. 624.509, Fla. Stat. Therefore, on review of the record in this matter, it is

ORDERED:

That the determination of the Recommended Order, that the Department's assessment issued July 20, 1994, was improper and that Petitioner is entitled to a refund in the amount of $23,774.76 should be, and hereby is rejected. The assessment is thus sustained in full and Petitioner's refund request is denied.

Any party to this Final Order has the right to seek judicial review of this Final Order as provided in Sec. 120.68, Fla. Stat., 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 of Revenue in the Office of General Counsel, P.O. 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, this 17th day of August, 1995, in Leon County, Tallahassee, Florida.

STATE OF FLORIDA DEPARTMENT OF REVENUE

L. H. FUCHS EXECUTIVE DIRECTOR

ENDNOTES

1/ After the Final Hearing, Petitioner sent a letter to the Hearing Officer clarifying that even if the Department prevailed in this action Petitioner had overpaid its insurance premium tax for 1989 and 1990. The parties had agreed that overpayment would be applied to subsequent tax years.

2/ In 1988, Section (3) concerned installment payments. This subsection was deleted from Sec. 624.509, Fla. Stat., in 1989. Ch. 89-167, ss. 1, at 582, Laws of Fla.

3/ CS/CS/CS//SB 1054 as reported in Ch. 88-206, ss. 17, at 1190, Laws of Fla.

4/ Sec. 624.4425, Fla. Stat. (Supp. 1988); Ch. 88-206, ss. 3, at 1187, Laws of Fla.

5/ Sec. 624.475, Fla. Stat. (Supp. 1988); Chapter 88-206, ss. 4 at 1187, Laws of Fla.

6/ Sec. 627.356, Fla. Stat. (Supp. 1988); Ch. 88-206, ss. 5, Laws of Fla.

7/ Sec. 651.027, Fla. Stat. (Supp. 1988); Ch. 88-206, ss. 13, at 1189, Laws of Fla.

8/ In 1988 and currently, the insurance premium tax is imposed and the rate is set in the first paragraph of section 624.509, Florida Statutes, and paragraph

(2) provides that payment of the premium is a "condition precedent to doing business within this state." See Sec. 624.509, Fla. Stat. (1988 Supp.) and Sec. 624.509, Fla. Stat. (1993).

9/ In 1988, paragraphs (3)(a) through (3)(e) of Sec. 624.509, Fla. Stat. (Supp. 1988) addressed the timing of the payments, penalties, interest, and compromise. These sections are now found in Sec. 624.5092, Fla. Stat. (1993). Paragraph (3)(f) of Sec. 624.509, Fla. Stat. (Supp. 1988), addressed the distribution of the monies collected to the General Revenue Fund. This provision is now found in Sec. 624.509(3), Fla. Stat.

10/ Paragraphs (4) and (5) of section 624.509, Florida Statutes, (Supp. 1988), provided for certain credits. These credits are currently found in paragraphs

1. and (5) of section 624.509, Florida Statutes, (1993).

   
   

   11/ The installment payment provision, which is not in dispute, can also be found in Sec. 624.509(3), Fla. Stat. (Supp. 1988).

   
   

   12/ The 2 percent rate was amended to 1.75 in Chapter 89-167, L.O.F.

   
   

   CERTIFICATE OF FILING

   
   

   I HEREBY CERTIFY that the foregoing FINAL ORDER has been filed in the official records of the Department of Revenue this 17th day of August, 1995.

   
   

   COPIES FURNISHED TO:

   
   

   LINDA M. RIGOT, HEARING OFFICER STATE OF FLORIDA

   DIVISION OF ADMINISTRATIVE HEARINGS

   THE DESOTO BUILDING, 1230 APALACHEE PARKWAY TALLAHASSEE, FLORIDA 32399-1550

   
   

   CURTIS H. SITTERSON, ESQUIRE STEARNS, WEAVER, MILLER, WEISSLER, ALHADEFF & SITTERSON, P.A.

   MUSEUM TOWER

   150 WEST FLAGLER STREET MIAMI, FLORIDA 33130

   
   

   LYNNE OVERTON, ESQUIRE

   OFFICE OF THE ATTORNEY GENERAL TAX SECTION, THE CAPITOL TALLAHASSEE, FLORIDA 32399-1050

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

   DISTRICT COURT OPINION

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

   
   

   IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA

   
   

   STATE OF FLORIDA, NOT FINAL UNTIL TIME EXPIRES TO DEPARTMENT OF REVENUE, FILE MOTION FOR REHEARING AND

   DISPOSITION THEREOF IF FILED

   Appellant,

   V. CASE NOS. 95-2159/3142

   DOAH CASE NOS. 94-5133, 94-5180RX

   CENTRAL DADE MALPRACTICE TRUST FUND,

   
   

   Appellee.

   / Opinion filed May 7, 1996.

   An appeal from an order of the Division of Administrative Hearings. Cross Appeal from an order of the Department of Revenue.

   
   

   Robert A. Butterworth, Attorney General; Jeffrey M. Dikman and C. Lynne Overton, Assistant Attorneys General, Tallahassee, for Appellant.

   
   

   Bradford Swing and Curtis H. Sitterson of Stearns, Weaver, Miller, Weissler, Miami, for Appellee.

   
   

   DAVIS, J.

   
   

   In the first of these consolidated cases, the State of Florida appeals the final order of the Hearing Officer, invalidating Rule 12B-8.001(5), Florida Administrative Code, as an invalid exercise of delegated legislative authority. In the second, Central Dade Malpractice Trust Fund appeals 1/ the final order of the Department of Revenue, upholding an audit assessing additional insurance premium tax, a penalty and interest, and rejecting a separate recommended order by the same hearing officer. The Hearing Officer's recommended order concluded that Central Dade Malpractice Trust Fund was entitled to a tax refund because the Department of Revenue had erroneously computed its tax obligation without applying certain credits permitted by section 624.509 Florida Statutes (Supp.

   1990). The sole issue in both cases is whether Central Dade is entitled to the credits enumerated in section 624.509 against its liability for insurance premium tax. We conclude that under a plain reading of the unambiguous language of this statute, read in conjunction with section 627.357(9), Florida Statutes (Supp. 1990), the statute allows such credits; therefore, we affirm the final order of the Hearing Officer in case no. 95- 2159, and reverse the final order of the Department of Revenue in case no. 95-3142.

   
   

   In computing its premium tax liability for 1989 and 1990, Central Dade applied against its liability a credit for a portion of the corporate income tax

   and intangible tax it had paid. The Department of Revenue conducted an audit, disallowed any credits, and issued an assessment against Central Dade Malpractice Trust Fund for additional insurance premium tax, a penalty and interest. Central Dade paid the assessment, and then filed two petitions with the Division of Administrative Hearings. In one petition, Central Dade protested the Department of Revenue's assessment and sought a refund. In the other, Central Dade challenged the validity of Rule 12B-8.001(5), Florida Administrative Code, and in particular the first complete sentence thereof, which states: "Self-insurance funds are not eligible for the aforementioned credits described in Rule 12B-8.0()i(3), F.A.C., with the exception of assessments made under s. 440.51, F.S." Central Dade contended that subsection

2. was an invalid exercise of delegated legislative authority because it was contrary to subsections 624.509(4) through (9) 2/

Chapter 88-206, Laws of Florida, made medical malpractice self-insurance funds such as Central Dade, as well as other enumerated insurers, / 3 subject to the premium tax. In promulgating except that the tax rate shall be 1.6 percent of the gross amount Rule 12B-8.001(5), Florida Administrative Code, the Department of Revenue erroneously interpreted section 627.357(9) to disallow any credits to Central Dade otherwise permitted by section 624.509, because of the belief that the specific enumeration of subsections (1) and y(2) in section 627.357(9) precluded the application of other subsections of the premium tax statute. We-reject that construction based upon the plain language of the statutes. "While legislative intent controls construction of statutes in Florida, that intent is determined primarily from the language of the statute.

The plain meaning of the statutory language is the first consideration." St. Petersburg Bank & Trust Co. v. Hamm, 414 So.2d 1071, 1073 (Fla. 1982)(citations omitted)

Section 627.357(9), Florida Statutes (Supp. 1990), provides that: "Premiums, contributions, and assessments received by a fund are subject to s. 624.509(1) and (2) and s. 624.5092, except that the tax rate shall be 1.6 percent of the gross amount of such premiums, contributions or assessments; provided, however, for the period July 1, 1989, through December 31, 1989, the tax rate shall be 0.8 percent and for calendar year 1990, the tax rate shall be

1.3 percent." Subsections (1) and (2) of section 624.509 set the amount of the tax. It is obvious from a plain reading of section 627.357(9), that the Legislature specifically cross-referenced those particular subsections because those subsections alone are being modified by the lower rate contained in the dependent clause "except that the tax rate shall be 1.6 percent..."

More importantly, the enumeration in section 627.357(9) of subsections (1) and (2) of section 624.509 does not preclude the applicability of the credits governed by subsections (4) through (8) because subsection (1) of section

624.509 itself expressly incorporates the disputed credits into the final computation of the premium tax. Subsection (1) provides that the amount of the tax is "to be determined as set forth in this section..." The words "this section" plainly refer to section 624.509 in its entirety, including the subsections which permit the credits which the Department disallowed in this case.

There can be no doubt that the Legislature, by using the term "this section," meant the whole of section 624.509. The Preface contained in The Florida Statutes, which explains the usage of the terms chapter, section and subsection, states that chapters are arranged by subject matter, and identified by a whole number; sections within a chapter are identified by a "whole decimal number consisting of the chapter number followed by digits appearing to the

right of the decimal point;" and subsections are identified "by whole Arabic numbers enclosed by parentheses." Reference to "this section" within subsection 624.509(1) mandates the Department of Revenue to permit medical malpractice self-insurance funds the credits for corporate and intangible taxes in subsection 624.509(4), when calculating the premium taxes due and owing under section 624.509.

Our conclusion is supported by the fact that legislative intent may be discerned from the Legislature's election to use different words to convey different meanings within a statute. [Dep't of Professional Regulation. Bd. of Medical Examiners v. Durrani], 455 So.2d 515, 518 (Fla. 1st DCA 1984).

Throughout section 624.509 the Legislature referred to the entire premium tax statute, including credits, by using the word "section," and made specific reference to particular subsections within section 624.509 by using the word "subsection." [See, e.g.], subsection 624.509(4), Florida Statutes (Supp. 1990) ("As to any insurer issuing policies insuring against loss or damage from the risks of fire, tornado, and certain casualty lines, the tax imposed by this section, as intended and contemplated by this [subsection], shall be construed to mean the net amount of such tax remaining after there has been, credited thereon such gross premium receipts tax as may be payable by such insurer in pursuance of the imposition of such tax by any incorporated cities or towns...") [Emphasis added]; subsection 624.509(5)("There shall be allowed a credit against the net tax imposed by' this section equal to 15 percent of the amount paid by the insurer in salaries to employees located or based within this state and who are covered by the provisions of chapter 443. For purposes of this subsection:... (c) The term "net tax" means the tax imposed by this [section] after applying the calculations and credits set forth in subsection (4).") [Emphasis added]; subsection 624.509(6)("The Total of the credit granted for the taxes paid by the insurer under chapters 220 and 221 and the credit granted by subsection (5) shall not exceed 65 percent of the tax due under subsection (1) after deducting therefrom the taxes paid by the insurer...") [Emphasis added]; subsection 624.509(7) ("Credits and deductions against the tax imposed by this section shall be taken in the following order:...") [Emphasis added].

Reading subsection 624.509(1) with reference to the entirety of section 624.509, in conjunction with section 627.357, based upon the plain meaning of the words contained within those sections, we conclude that the Legislature intended medical malpractice self insurers to pay the tax imposed in section 624.509, using the lower rate specified in section 627.357, and then applying the credits, as provided in subsections (4) through (8) of section 624.509.

Accordingly, we AFFIRM the Hearing Officer's final order in case no. 95- 2159 invalidating Fla. Admin. Code Rule 12B-8.001(5), as an invalid exercise of delegated legislative authority, because the rule improperly denied the applicability of the credits granted by the Legislature. We REVERSE the final order of the Department of Revenue in case no. 95-3142 which upheld the assessment of additional tax, a penalty and interest, and denied Central Dade Malpractice Trust Fund's application for a tax refund, because the additional tax was erroneously imposed by denying the credits to which Central Dade Malpractice Trust Fund was entitled.

ZEHMER, C.J., and BARFIELD, J., CONCUR.

ENDNOTES

1/ These appeals were consolidated and case no. 95-3142 became a cross-appeal.

2/ Subsections 624.509(4) through (8) govern credits against the insurance premium tax; subsection (9) provides that, "as used in this section insurer includes any entity subject to the tax imposed by this section."

3/ The Legislature did not use uniform language throughout the act, however. With respect to reciprocal insurers, for example, section 7 of chapter 88-206, Laws of Florida, provided for the creation of section 629.5011, Florida Statutes, stating that "[p]remiums and assessments received by reciprocal insurers are subject to any premium tax provided for in s. 624.509." See also 12, 13, chapter 88-206, Laws of Florida, (premiums, contributions, and assessments received by dental service plans, and entrance fees received by a provider in payment for a continuing care contract, are "subject to the tax imposed by s. 624.509"). In contrast, 6, chapter 88-206, Laws of Florida, amended section 627.357, Florida, Statutes, by adding subsection (9), providing: "[p]remiums, contributions, and assessments received by a fund are subject to s. 624.509(1), (2), and (3), of such premiums, contributions and assessments." See also 3, 4, 5, 17, Chapter 88-206, Laws of Florida (using similar language to impose lower premium tax rate on premiums, contributions and assessments received by an arrangement under section 624.4425, as well as those received by commercial self-insurance funds regulated by section 624.475, and those received by professional liability self-insurance funds under section 627.356, and the premiums, contributions and assessments received by worker's compensation group self-insurer's funds under section 440.57).

MANDATE

From

DISTRICT COURT OF APPEAL OF FLORIDA FIRST DISTRICT

To the Honorable L. H. Fuchs, Executive Director*

State of Florida, Department of Revenue WHEREAS, in that certain cause filed in this Court styled:

CENTRAL DADE MALPRACTICE TRUST FUND,

vs. Case No. 95-3142

Your Case No. 94-5133

DEPARTMENT OF REVENUE

The attached opinion was rendered on May 7, 1996.

YOU ARE HEREBY COMMANDED that further proceedings be had in accordance with said opinion, the rules of this Court and the laws of the State of Florida.

WITNESS the Honorable Richard W. Ervin, III, Acting

Chief Judge of the District Court of Appeal of Florida, First District and the Seal of said court at Tallahassee, the Capitol, on this 23rd day of May, 1996.

(Seal) Karen Robert

Deputy Clerk, District Court of Appeal of Florida, First District

Docket for Case No: 94-005133

Orders for Case No: 94-005133