STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FAMILY EDUCATION & )

HEALTH MINISTRY INC., )

)

Petitioner, )

)

vs. ) CASE NO. 95-2114

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

The final hearing in the above-styled matter was heard pursuant to notice by Stephen F. Dean assigned Hearing Officer of the Division of Administrative Hearings on July 19, 1995, in Daytona Beach, Florida.

APPEARANCES

For Petitioner: George B. Cooper, Pastor

2172 McQuade Street

Jacksonville, Florida 32209

and

610 Winchester Street

Daytona Beach, Florida 32114

For Respondent: Nancy Francillon, Esquire

Lisa M Raleigh, Esquire Assistant Attorneys General Office of the Attorney General The Capital-Tax Section Tallahassee, Florida 32399-1050

STATEMENT OF ISSUE

Whether the Petitioner qualifies for a consumer's certificate of exemption as a "Religious Institution" or "Church" or as a "Charitable Institution" as defined in Chapter 212, Florida Statutes.

PRELIMINARY STATEMENT

On February 21, 1995, the Petitioner Family Education and Health Ministry filed an application for a consumer's certificate of exemption with the Respondent the Department of Revenue (Department). Petitioner applied for an exemption as a "Charitable Institution". The Department in accordance with its regular procedures considered the application in terms of both a "Charitable Institution" and as a "Religious Institution". On April 7, 1995, the Department notified the Petitioner that it was denying the application because it did not meet the qualifications of either a charitable institution or religious institution as defined in Section 212.08(7)(o)2.a. and b., Florida Statutes, and

of its right to protest the Department's determination. The Petitioner filed a Petition challenging the Department's determination and the matter was forwarded to the Division of Administrative Hearings on April 28, 1995.

The case was noticed for hearing on July 19, 1995, and heard as noticed. At the hearing George B Cooper, Pastor and organizer of Petitioner appeared in behalf of the Petitioner. Mr. Cooper testified and introduced five exhibits into evidence in support of the application. The Respondent presented the testimony of Mr. Daniel Wagner and introduced three exhibits.

Both parties filed post hearing briefs which were read and considered. Petitioner's brief did not contain proposed findings. The Appendix to this order states which of the Respondent's proposed findings were adopted and which were rejected and why.

FINDINGS OF FACT

1. Petitioner was incorporated in the State of Florida as a nonprofit corporation on May 11, 1995. On February 21, 1995, Petitioner filed an application for a consumer's certificate of exemption as a charitable institution. The Department under its statutory powers denied the application and advised the Petitioner of his right to a hearing on his application.

   
   

2. George B. Cooper is the incorporator president and treasurer of Petitioner. Mr. Cooper serves as the pastor of the Petitioner. Mr. Cooper is a Seventh Day Adventist and attended religious training with that denomination.

   He is not an ordained minister.

   
   

3. The business office and business address of Petitioner is in Jacksonville, at the home of a friend of Mr. Cooper. Mr. Cooper resided in Jacksonville initially, and started his missionary activities there. He subsequently moved the mission to Daytona Beach, and resides in Jacksonville and overnights in Daytona Beach when engaged in mission work.

   
   

4. Mr. Cooper leases one-third of a private residence located at 610 Winchester Street, Daytona Beach, Florida. Mr. Cooper provided receipts for

   $1075 for leasing this space from February, 1995, until July, 1995, and a letter from the landlord which indicates that she is aware that Mr. Cooper conducts religious services there. The leasehold includes a large meeting room with chairs for persons attending services and a podium from which Mr. Cooper leads religious services which include prayer, song and preaching. A small room is available with a cot and sleeping bag to provide a place for homeless to overnight. Mr. Cooper sleeps at the mission when in Daytona Beach. In addition the leasehold includes access to bath and kitchen facilities.

   
   

5. Clothes and food are also stored at the mission which Petitioner provides to persons in need. These clothes and food items are gifts in kind obtained from individuals and organizations. Mr. Cooper does not maintain complete records of the items given to him or of the items which he gives away. Mr. Cooper testified that he received $4667 between May and December, 1994 which included $4000 which he received from distribution of religious tracts and pamphlets. Mr. Cooper testified that his expenditures between May and December, 1994 were $5150. This included expenses of $2100 for travel, rent and utilities, $383 for office materials, $100 for literature and gifts of food, clothes and money in the amount of $2567. None of the gifts of money were to other religious or charitable organizations.

6. The Petitioner's mission in Daytona Beach provides clothes, food and minimal temporary shelter to homeless persons and others in need, together with preaching the gospel. To this end, Mr. Cooper conducts church services at regular times during the week and is available to provide care to those who come by his mission 24 hours a day when he is in Daytona Beach.

   
   

   CONCLUSIONS OF LAW

   
   

7. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action in accordance with Section 120.57(1), Florida Statutes.

   
   

8. Although the Petitioner's application was for exemption based upon status as a charitable institution it is the Department's policy to consider applications from potential religious organizations under that category as well. Therefore, the Petitioner's application is considered under both Section 212.08(7)(o)1. and Section 212.08(7)(o)2.a. and b., Florida Statutes.

   
   

9. Section 212.08(7)(o)1., Florida Statutes, provides as follows in pertinent part as follows:

   
   

   1. There are exempt from the tax imposed by this part transactions involving:

      1. Sales or leases directly to churches or sales or leases of tangible personal property by churches;

      2. Sales or lease to nonprofit religious, nonprofit charitable, nonprofit scientific or nonprofit education institutions when used in carrying on their customary nonprofit religious, nonprofit charitable, nonprofit scientific or nonprofit educational activities including church cemeteries[.]

         
         

10. Section 212.08(7)(o)2.a. and b., Florida Statutes, provide as follows:

    
    

    1. The provisions of this section authorizing exemptions from tax shall be strictly defined limited and applied in each category as follows:

       1. "Religious institutions" means churches synagogues and established physical places for worship at which nonprofit religious services

          and activities are regularly conducted and carried on . . . [.]

       2. "Charitable institutions" means only nonprofit corporations qualified as nonprofit pursuant to s. 501,(c),(3), United States Internal Revenue Service 1954 as amended and other nonprofit entities

    . . . if a reasonable percentage of such service is provided free of charge or at a substantially reduced cost to persons

    . . . [.]

    
    

11. The Petitioner has the burden of proving its entitlement to the exemption for which it has applied. The statute quoted above requires

    exemptions be construed strictly. In this case, Petitioner must show its qualifications as a church, or as a religious institution or as a charitable institution.

    
    

12. Arguably, many of the services provided by Petitioner are acceptable expenses for a charitable organization; however, the Petitioner's lack of records precludes its consideration as a charitable institution.

    Notwithstanding the gifts Mr. Cooper made, neither his records nor his testimony are detailed enough to establish the Petitioner's qualifications as a charitable institution because it cannot be determined whether a reasonable percentage of the provided services were free or at a reduced cost. Mr. Cooper testified that the services provided were free and that they were provided to persons unable to pay for the services; however, without substantiation for the income to the Petitioner and substantiation of the amount of the gifts, it cannot be determined if the percentage of giving was a reasonable percentage of the Petitioner's income. In making this determination the strict standard required by the statute is applied.

    
    

13. The standard for qualification as a religious institution is dependent upon whether the Petitioner is a church at which nonprofit religious services and activities are regularly conducted and carried on. The Department has defined a church by Rule 12A-1001(3)(c), Florida Administrative Code, to be a religious institution having an established physical place of worship and instruction for religious purposes. The Petitioner's uncontroverted testimony is that he regularly conducts religious services at 610 Winchester Street, Daytona Beach, Florida.

    
    

14. The Department argues that there is a requirement for public access to religious services and activities. There is no requirement in law for "public access" to the services or even public notice of services. The rule's requirement is solely for a physical location where persons regularly assemble for nonprofit religious worship and activities. The Department recognizes that the Statute does not define "church" and "established place of worship", but the Department has refused to accept one's personal residence as qualifying. An agency's interpretation of the law is entitled to great weight and the Petitioner has not challenged the rule upon which the Department's interpretation is based; however, the record does not indicate that 610 Winchester is Mr. Cooper's residence. Residence is a concept of "living" in a place as opposed to "staying" there. The record indicates Mr. Cooper stays in Daytona Beach, but resides in Jacksonville.

    
    

15. The Department's expansion of its interpretation of the rule to require "public access" is without authority in statute or in the rule. The exclusion of religious institutions from taxation is not based upon a concept of "public access". The Department argues that a federal holding in which the federal tax exemption for the founder's living expenses, travel expenses and the utilities of the founder's home was not granted creates a "public interest" test. This argument is not applicable to this case. The federal case stands for the proposition that expenses will be rejected which inure to the benefit of the founder more than to the benefit of the persons being ministered to. While the federal holding may buttress the Department's position regarding charitable institutions, it is misapplied regarding the "religious institution" exemption and does not support the Department's "public access" concept. The exemption for religious institutions is statutory, and must be interpreted strictly in accordance with the statute.

16. The uncontroverted facts are that Petitioner maintains a physical place where nonprofit religious services and activities are conducted regularly. This is the sole requirement of Section 212.08(7)(o)1., Florida Statutes, and of the Department's rule defining churches and religious institutions. Although there is evidence that Mr. Cooper spends the night at the mission when he is in Daytona Beach, there is no evidence that this is his residence. The facts support Petitioner's qualifications as a "religious institution" or "church".

RECOMMENDATION

Based upon the consideration of the facts found and the conclusions of law reached, it is,

RECOMMENDED:

That the application of the Petitioner as a religious institution be approved.

DONE and ENTERED this 7th day of September, 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 7th day of September, 1995.

APPENDIX

The Department filed proposed findings which were read and considered. The following states which of those findings were adopted and which were rejected and why:

Respondent's Recommended Order:

Findings:

Paragraphs 1, 2 Paragraphs 1, 2

Paragraphs 3, 4 Subsumed by Paragraphs 3, 4

Paragraph 5 Subsumed in part in 3, 4; and rejected in part as irrelevant

Paragraphs 6, 7 Subsumed in Paragraph 1

Paragraph 8 Irrelevant There is no allegation that the application was incomplete

Paragraph 9 Irrelevant except that the Department

automatically considers alternative basis for exemptions

Paragraph 10 Subsumed in Paragraph 1

Paragraph 11 Subsumed in Paragraph 6 It is irrelevant that there are no signs or ads or telephone These are not required of a church.

Paragraph 12 Deleted from Respondent's findings Paragraph 13 Statement of Case

Paragraph 14 The listing of items is not necessary as a finding.

Paragraph 15 Subsumed in Paragraph 6

Paragraphs 16, 17 Subsumed in Paragraph 4

Paragraph 18 Subsumed in Paragraph 5

Paragraph 19 Irrelevant and invades the province of the fact finder

Paragraph 20 Conclusion of Law

COPIES FURNISHED:

George B. Cooper, Pastor 2172 McQuade Street

Jacksonville, FL 32209

and

610 Winchester Street Daytona Beach, FL 32114

Nancy Francillon, Esquire Lisa M. Raleigh, Esquire Assistant Attorneys General

Office of the Attorney General The Capital-Tax Section Tallahassee, FL 32399-1050

Linda Lettera, General Counsel Department of Revenue

204 Carlton Building Tallahassee, FL 32399-0100

Larry Fuchs, Executive Director Department of Revenue

204 Carlton Building Tallahassee, FL 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.

Docket for Case No: 95-002114

Orders for Case No: 95-002114