STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

TEL-WORLD MINISTRIES, )

)

Petitioner, )

)

vs. ) CASE NO. 96-2312

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this matter was heard before the Division of Administrative Hearings by its assigned Hearing Officer, Donald R. Alexander, on July 18, 1996, in Daytona Beach, Florida.

APPEARANCES

For Petitioner: Frederick J. Hoffman, pro se

1728 Derbyshire Road

Holly Hill, Florida 32117

For Respondent: William B. Nickell, Esquire

Department of Revenue Post Office Box 6668

Tallahassee, Florida 32314-6668 STATEMENT OF THE ISSUE

The issue is whether petitioner qualifies for a consumer's certificate of exemption as a religious or charitable institution within the meaning of Sections 212.08(7)(o)2.a. and b., Florida Statutes.

PRELIMINARY STATEMENT

This matter began on an undisclosed date in early 1996 when petitioner, Tel-World Ministries, filed an application as either a religious or charitable institution for a consumer's certificate of exemption with respondent,

Department of Revenue. If approved, petitioner would be able to make tax-exempt purchases that would otherwise be taxable under Chapter 212, Florida Statutes.

On April 26, 1996, the application was denied on the grounds the organization did not qualify as a religious or charitable institution with the meaning of Section 212.08, Florida Statutes. By letter dated May 1, 1996, petitioner requested a hearing to contest the denial of its application.

The matter was referred by respondent to the Division of Administrative Hearings on May 15, 1996, with a request that a Hearing Officer be assigned to conduct a formal hearing. By Notice of Hearing dated May 28, 1996, a final hearing was scheduled on July 18, 1996, in Daytona Beach, Florida.

At final hearing, petitioner was represented by its president, Frederick J. Hoffman, who also testified on its behalf. Petitioner also presented the testimony of Pastor George B. Cooper, a local minister, and David Young, an agency tax specialist, and offered petitioner's exhibits 1 and 2. Both exhibits were received in evidence. Respondent offered respondent's exhibits 1-3. All exhibits were received in evidence. In addition, the undersigned took official notice of various federal and state statutes, an administrative rule, and four final agency orders.

This order was prepared without the benefit of a transcript of hearing. Proposed findings of fact and conclusions of law were filed by respondent on July 31, 1996. A ruling on each proposed finding has been made in the Appendix attached to this Recommended Order.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of fact are determined:

1. Petitioner, Tel-World Ministries (petitioner), is a private, non-profit association formed on January 24, 1996. According to its articles of association, petitioner was formed "to operate for the advancement of religion, religious education and charitable purposes, by the distribution of its funds for such purposes, and in particularly to promote understanding and truth and save soul's in Christ Jesus." Its president is Frederick J. Hoffman, a resident of Holly Hill, Florida.

   
   

2. Respondent, Department of Revenue (DOR), is charged with the responsibility of administering and implementing the Florida Revenue Act of 1949, as amended. It has the specific task of collecting sales taxes and enforcing the State Tax Code and rules.

   
   

3. By law, certain transactions are exempt from the state sales and use tax. Among these are sales or lease transactions by qualified "charitable" or "religious" institutions. In order for an organization to be entitled to an exemption, it must make application with DOR for a consumer's certificate of exemption and demonstrate that it is a qualified religious or charitble organization within the meaning of the law. Once the application is approved, the certificate entitles the holder to make tax-exempt purchases that are otherwise taxable under Chapter 212, Florida Statutes.

   
   

4. Claiming that it was entitled to a certificate of exemption as either a religious or charitable organization, petitioner filed an application with DOR on an undisclosed date in early 1996. The application itself has not been offered into evidence. After requesting additional information, on April 26, 1996, DOR preliminarily disapproved the application on the grounds petitioner did not qualify under the statutory definition of a religious institution, and it did not have as its primary purpose one of seven defined charitable purposes set forth in the law. Thereafter, petitioner filed a request for hearing to contest this decision. In its request for hearing, petitioner contended, among other things, that DOR had failed to consider the legislative intent of the law, failed to consider an amendment to the application, and failed to properly interpret its own rules and the general law.

   
   

5. Petitioner agrees it is not a church but rather is a ministry. It has no building or established physical location from which it provides charitable or religious services. As described by its president at hearing, its president,

   and perhaps two other officers, go to other churches, primarily the Seventh Day Adventist Church, and they "assist" the pastors of those churches by giving "input" at mass, prayer, and Bible study classes. The association also disseminates religious materials, including brochures and the like.

   
   

6. Under Section 212.08(7)(o)2.b., Florida Statutes, a charitable institution is generally defined as an entity which holds a current exemption from the federal income tax under Section 501(c)(3) of the Internal Revenue Code. The entity must also have as its "sole or primary function" the provision of, or raising funds for organizations which provide, one of seven defined charitable services, if a reasonable percentage of such services is provided free of charge, or at a substantially reduced cost, to persons who are unable to pay for such services. The parties agree that petitioner has a current exemption from the federal income tax under section 501(c)(3) and, in this respect, it meets the statutory requirements.

   
   

7. Petitioner contends that its sole or primary function is to provide services of the type that fall within the charitable purpose defined in subparagraph (IV) of the statute. That purpose is defined as being "(s)ocial 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." According to petitioner, it does God's work at other churches by assisting those churches' pastors in saving souls, and thus these services fall within the broad definition of "social welfare services." However, within the narrow context of the statutory exemption, and when the term "social welfare services" is given its plain and ordinary meaning, religious or spiritual activities do not qualify as "charitable" services.

   
   

8. In general terms, to qualify as a religious institution, an entity must be (a) a church, synagogue, or established physical place for worship at which nonprofit religious services and activities are regularly conducted and carried on, (b) a nonprofit corporation the sole purpose of which is to provide free transportation services to church members and attendees, (c) a "state, district or other governing or administrative office whose function is to assist or regulate the customary activities of religious organizations or members within the state or district organization," or (d) a corporation qualified as nonprofit under section 501(c)(3) that owns or operates a Florida television station. Petitioner has no "established physical place for worship," its sole purpose is not to provide free transportation services to church members and attendees, and it does not operate a television station. Thus, it cannot qualify under the first, second and fourth parts of the definition. Petitioner's president contends, however, that he represents the "state office" of Tel-World Ministries, and therefore the association meets that part of the test. It is noted that the only "office" within the entity is that found in Holly Hill and it is not a part of a larger organization.

   
   

9. Under DOR policy, in order to pass muster as a state, district or administrative office, petitioner must be a part of a larger organization and, within the hierarchy of that larger organization, assist or regulate the activities of those beneath it in the organizational hierarchy. This interpretation of the law is found in prior agency orders and is deemed to be reasonable. Because petitioner does not comport with this policy, it cannot qualify as a "state administrative office" within the meaning of the law.

   
   

10. In summary, while petitioner submitted evidence to show that it is engaged in laudable religious efforts, the entity itself does not qualify as a

    religious or charitable institution for tax purposes, and thus it is not entitled to a consumer certificate of exemption.

    
    

    CONCLUSIONS OF LAW

    
    

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

    
    

12. As the party seeking an exemption, petitioner bears the burden of proving its entitlement to a certificate of exemption by a preponderance of the evidence. At the same time, it is well established that an exemption clause in a tax statute must be strictly construed against the person claiming the exemption. See, e. g., Asphalt Pavers, Inc. v. Department of Revenue, 584 So.2d 55, 57 (Fla. 1st DCA 1991). This judicial holding is consistent with the terms of Section 212.08(7)(o)2., Florida Statutes, which provides that "the provisions of this section authorizing exemptions from tax shall be strictly defined, limited, and applied in each category . . ."

    
    

13. In this case, petitioner seeks a consumer certificate of exemption as either a religious or charitable institution. A religious institution is defined in Subsection 212.08(7)(o)2.a., Florida Statutes, as follows:

    
    

    1. "Religious institutions" means churches, synagogues, and established physical places for worship at which nonprofit services and activities are regularly conducted and carried

       on. The term "religious institutions" includes nonprofit corporations the sole purpose of which is to provide free transportation services to church members, their families, and other church attendees. The term "religious institutions" also includes state, district, or other governing or administrative offices the function of which is to assist or regulate the customary activities of religious organizations or members. The term "religious institutions" also includes any non-

       profit corporation which is qualified as nonprofit pursuant to s. 501(c)(3), United States Internal Revenue Code, 1986, as amended, which owns and operates a Florida television station, at least

       90 percent of the programming of which station consists of programs of a religious nature, and the financial support for which, exclusive of receipts for broadcasting from other nonprofit organizations, is predominately from contribu- tions from the general public.

       
       

       Subsection 212.08(7)(o)2.b., Florida Statutes, defines a charitable institution in relevant part as follows:

       
       

    2. "Charitable institutions" means only non- profit corporations qualified as nonprofit pursuant to s. 501.(c)(3), United States Internal Revenue Code of 1954, as amended, and other nonprofit entities, the sole or primary function of which is 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, animals, or organizations that are unable to pay for

       such service:

       * * *

       (IV) 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;

       * * *

       
       

       Similar definitions have been codified by DOR in Rule 12A-1.001(3), Florida Administrative Code.

       
       

14. Because the evidence shows clearly that petitioner does not qualify as a religious or charitable institution under either definition, the application must be denied. This is because petitioner does not have an "established physical place" for worship at which nonprofit religious services are regularly conducted, its sole purpose is not to provide free transportation services to church members and attendees, and it does not operate a Florida television station. In addition, its Holly Hill "office" is not a part of a larger organization, and it does not assist or regulate the activities of those associated within the organizational hierarchy. Therefore, it cannot qualify as the "state office" of the organization. See, e.g., Christian Interactive Network, Inc. v. Dep't of Revenue, Case No. 95-2064 (DOR, June 19, 1996). Further, when strictly defining, limiting and applying the charitable institution exemption, as the undersigned is required to do under section 212.08(7)(o)2., the described activities of petitioner, while extremely laudable, do not fall within the definition of "other social welfare services."

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent enter a Final Order denying petitioner's

application for a consumer certificate of exemption as a religious or charitable

institution.

DONE AND ENTERED this 7th day of August, 1996, in Tallahassee, Florida.

DONALD R. ALEXANDER, 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 August, 1996.

APPENDIX TO RECOMMENDED ORDER

Respondent:

Respondent's proposed findings, while substantially altered, have been adopted in substance.

COPIES FURNISHED:

Larry 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

Frederick J. Hoffman 1728 Derbyshire Road

Holly Hill, Florida 32117

William B. Nickell, Esquire Department of Revenue

Post Office Box 6668 Tallahassee, Florida 32314-6668

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 Department of Revenue concerning its rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the Department of Revenue.

Docket for Case No: 96-002312

Orders for Case No: 96-002312