STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

VICTOR F. NOVOA, ANNA M. SOCARRAS, ) ENRIQUE ALTUZARRA, and )

LANDER E. CARN, )

)

Petitioners, )

)

vs. ) Case No. 98-1763RU

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

FINAL ORDER

Following notice to all parties, Don W. Davis, Administrative Law Judge for the Division of Administrative Hearings, held a final hearing in the above-styled case on May 20, 1998, in Tallahassee, Florida.

APPEARANCES

For Petitioners: Jerry G. Traynham, Esquire

Post Office Box 4289 Tallahassee, Florida 32315-4289

For Respondent: Patrick A. Loebig, Esquire

H. Wayne Mitchell, Esquire Department of Revenue

Post Office Box 6668 Tallahassee, Florida 32314-6668

STATEMENT OF THE ISSUE

The issue in this case is whether a policy of Respondent prohibiting Respondent’s employees from engaging in preparation of federal income tax returns for profit during off-hours

constitutes a rule subject to promulgation requirements of Chapter 120, Florida Statutes.

PRELIMINARY STATEMENT

Petitioners, through their counsel, filed a Petition To Determine The Invalidity Of Rules on April 14, 1998.

By motion filed May 4, 1998, Respondent sought dismissal of the Petition on the basis that the challenged provisions do not operate or have the effect of a generally applicable policy, and do not constitute “rules” as defined under Section 120.52(15), Florida Statutes. The Motion to Dismiss was denied, and the case proceeded to final hearing as scheduled.

At the final hearing, proceedings with regard to Petitioner Angel Casanova were dismissed due to that individual’s non- appearance and submission of proof of standing The remaining Petitioners presented the testimony of two witnesses and had 6 exhibits admitted into evidence. Respondent presented the testimony of three witnesses and 22 exhibits, one of which was not admitted into evidence.

The transcript of the final hearing was filed on June 8, 1998.

Proposed findings of fact submitted by the parties have been considered in the preparation of this final order.

FINDINGS OF FACT

1. Petitioners are employees of the Department of Revenue

   (DOR) who wish to prepare federal income tax returns. They assert they wish to prepare the returns on a pro bono basis and for hire in their non-working time for persons who are not

   required to file any tax returns with the State of Florida, and who are not required to pay court-ordered payments of child support.

2. Each of the Petitioners is employed with the Respondent as a Tax Auditor II, III, or IV, and each is a Career Service employee with permanent status.

3. Petitioners’ primary work function for the Respondent entails auditing State tax returns filed with DOR by business entities.

4. Victor Novoa holds a bachelors degree in finance, and has 20 years experience working in the accounting field, including nine years auditing experience with the Respondent.

5. Ana Socarras has a bachelor’s degree in the accounting field, and has been employed with the Respondent as an auditor since 1994. She has 15 years experience working in the accounting field.

6. Enrique Altuzarra is a licensed Certified Public Accountant. He has more than 25 years experience in the area of accounting and auditing.

7. Lander Carn holds a master’s degree in taxation, is a licensed Certified Public Accountant, and has 15 years experience in the accounting and auditing fields.

8. Petitioners became aware, following their employment by Respondent, of Respondent’s policy prohibiting its employees from preparation of federal income tax returns for compensation during

   their non-working time.

9. Respondent’s policy has been consistently disseminated to employees through group meetings with employees and in memoranda circulated by management to employees. Pro bono preparation of federal tax returns is permitted in some situations.

10. Respondent’s policy is expressed also in Respondent’s “Code of Conduct” which is published to all employees. The policy provides:

    
    

    (2) Outside Preparation of Tax Returns and Other Forms

    
    

    Preparation of tax returns and other forms required by the Department of Revenue or the Internal Revenue Service, whether compensated or uncompensated, for persons other than family members is not permitted.

    
    

11. Respondent also states the policy in its auditor’s manual in the following language:

    The Department has a policy specifically prohibiting all employees from preparing any state or federal tax returns, reports, declarations or documents, or otherwise [sic]engage in accounting, use, analysis or preparation of any financial records for consideration, or [sic] sign such tax document for compensation, gift, or favor.

12. Respondent’s policy has found expression in Respondent’s official writings, monthly newsletter to employees, and memoranda addressed to employees and management. Statements of the policy have been systematically communicated to agency personnel with the intent and effect of prohibiting employee

    preparation of federal tax returns for compensation in the course of secondary employment and implemented with the direct and consistent effect of law.

13. Respondent’s Code of Conduct literally prohibits any exception to the policy prohibiting participation by an employee in preparation of federal tax returns for pay during off-duty hours for anyone other than family members. Respondent’s Employee Handbook also makes it clear that any employee engaging in such conduct, absent specific approval, faces disciplinary action “up to and including dismissal.” As established by testimony of Glenn Bedonie, an employee of Respondent in various, highly responsible, management positions, and William P. Fritchman, a participant in development of the policy and Respondent’s former chief of personnel for 23 years, there has been no instance in which any employee has ever been permitted to prepare federal income tax returns “for hire” during off-duty time.

14. As stipulated by the parties, Respondent has not adopted, in compliance with Section 120.54, Florida Statutes, the policy of refusing to allow employees to prepare federal tax returns for hire in secondary employment.

15. Petitioners do not contemplate and do not desire to prepare federal tax returns in circumstances that would present a conflict of interest with their employment with Respondent. They do not seek to prepare tax returns for individuals who own a

    business, who are required to file state returns, and who are subject to audit by Respondent.

16. Confidential tax information possessed by Respondent is not available to the Petitioners or other auditors within Respondent’s employment. Such information must be requested from a Computer Audit Analyst or a Senior Tax specialist on a specific taxpayer which the particular auditor has been assigned to audit. If deemed appropriate, the information may be made available to the auditor. Similarly, confidential tax information obtained by Respondent from the Internal Revenue Service (IRS) is adequately safeguarded from ready abuse by employees by requiring an auditor to justify the need for such information to a series of supervisory personnel.

17. Respondent presented no creditable or persuasive evidence that it would be impractical or unfeasible to enact its present policy in compliance with requirements of Chapter 120, Florida Statutes.

    CONCLUSIONS OF LAW

    
    

18. The Division of Administrative Hearings has jurisdiction over this matter. Section 120.56, Florida Statutes.

19. Petitioners have standing to bring this proceeding.

    
    

20. The term “[r]ule” is defined in pertinent part in Section 120.52(15), Florida Statutes, as follows:

    'Rule' means each agency statement of general applicability that implements, interprets, or prescribes law or policy or describes the procedure or practice requirements of an

    agency and includes any form which imposes any requirement or solicits any information not specifically required by statute or by an existing rule. The term also includes the amendment or repeal of a rule. The term does not include:

    1. Internal management memoranda which do not affect either the private interests of any person or any plan or procedure important to the public and which have no application outside the agency issuing the memorandum.

21. The policy of Respondent addressed in this proceeding implements, interprets, or prescribes “law or policy” concerning the substance and procedure surrounding after-hours employment of employees in the area of preparation of federal tax returns for hire. The policy is implemented on a consistent basis with the effect of law. Additionally, this policy is applicable to a class of persons, i.e., employees of Respondent, and affects their private monetary interests. As a result, the internal management memorandum exception set forth in Section 120.52(15)(a), Florida Statutes, is not applicable. Department of Highway Safety and Motor Vehicles v. Schluter, 705 So. 2d 81 (Fla. 1st DCA 1997).

22. Accordingly, Respondent’s policy is a rule that has not been adopted in compliance with Section 120.54, Florida Statutes. Further, with regard to the policy which is the subject of this proceeding, Respondent has made no attempt to comply with requirements for rule promulgation contained in Chapter 120, Florida Statutes.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is ordered that Respondent’s policy in this instance constitutes a rule under provisions of Section 120.52, Florida Statutes, which has not been adopted in compliance with

Section 120.54, Florida Statutes.

It is further ordered that, pursuant to Section 120.595(4), Florida Statutes, Petitioners are awarded reasonable costs and reasonable attorney fees to which end jurisdiction is retained to make the determination of the amount of such cost and fees in a subsequent proceeding upon filing of appropriate documentation by Petitioner.

DONE AND ORDERED this 9th day of July, 1998, in Tallahassee, Leon County, Florida.

DON W. DAVIS

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 9th day of July, 1998.

COPIES FURNISHED:

Jerry G. Traynham, Esquire Patterson and Traynham Post Office Box 3289

Tallahassee, Florida 32315-4289

Linda Lettera, General Counsel

Department of Revenue

204 Carlton Building Tallahassee, Florida 32399-0100

Larry Fuchs, Executive Director Department of Revenue

104 Carlton Building Tallahassee, Florida 32399-0100

Carroll Webb, Executive Director

Joint Administrative Procedure Committee

120 Holland Building Tallahassee, Florida 32399-1300

Liz Cloud, Chief

Bureau of Administrative Code The Elliott Building Tallahassee, Florida 32399-0250

NOTICE OF RIGHT TO APPEAL

A party who is adversely affected by this final order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing one copy of the notice of appeal with the Agency Clerk of the Division of Administrative Hearings and a second copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the Appellate District where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.

Docket for Case No: 98-001763RU

Orders for Case No: 98-001763RU