Findings Of Fact Stipulated Facts Respondent conducted an audit of Petitioner's business records for the period July 1, 1985, through June 30, 1990. Respondent determined a deficiency in sales tax of $174,823.96, including penalty and interest through August 22, 1990. Petitioner objected to the deficiency. Respondent reviewed the audit, and made audit changes that are the subject of this proceeding. The audit changes determined a deficiency in use tax of $76,035.60, including tax ($47,910.10), penalty ($11,977.68), and interest through March 12, 1991 ($16,147.60). Interest accrues daily in the amount of $15.75. A First Revised Notice Of Intent To Make Sales Tax Changes, for the reduced assessment of $76,035.60, was issued on March 21, 1991. A Notice Of Proposed Assessment was issued on July 2, 1991. The Notice Of Proposed Assessment became a Final Assessment on August 31, 1991. Respondent made a prima facie showing of the factual and legal basis for the use tax assessment. Section 120.575(2), Florida Statutes. 1/ The audit and assessment are procedurally correct. Tax, interest, and penalty are correctly computed. Formation Petitioner was incorporated in Florida, in January, 1983, by Mr. B. Theodore Troy, president and sole shareholder. Petitioner's principal place of business is 101 Wymore Road, Suite 224, Altamonte Springs, Florida. Petitioner conducted business as American Advertising Distributors of Central Florida. Mr. Troy and his wife operated the business until liquidating Petitioner's assets in 1992. Operation Petitioner sold direct mail advertising to Florida businesses. Petitioner operated pursuant to a franchise agreement with American Advertising Distributors, Inc., of Mesa, Arizona ("AAD"). AAD was Petitioner's franchisor until AAD filed for bankruptcy in 1990. Petitioner solicited orders from Florida businesses 2/ for advertising coupons designed and printed by AAD in Arizona. AAD mailed the advertising coupons to addressees in Florida who were potential customers for Florida businesses. Florida businesses placed orders with Petitioner on written contracts, or sales agreements, labeled "advertising orders." AAD was not a party to advertising orders. Advertising orders identified "AAD" as American Advertising Distributors of Central Florida, and were imprinted with the name and address of "AAD" in Central Florida. Advertising orders specified the total charges, color and stock of paper, number of addressees, and areas of distribution. Petitioner assisted businesses with rough layout for art work. The rough layout was forwarded to AAD. AAD prepared finished art work and sent copies back to Petitioner for approval by Florida businesses. AAD then printed, collated, and mailed advertising coupons to addressees in Florida, without charge to addressees. Florida businesses paid non-refundable deposits when placing advertising orders. The remaining balance was paid upon approval of final art work. AAD did not submit invoices to Florida businesses. AAD submitted invoices to Petitioner for the amount due from Petitioner. 3/ Petitioner paid AAD 10 days before advertising coupons were mailed. Some advertising coupons were produced by Laberge Printers, Inc., in Orlando, Florida ("Laberge"). Coupons from Laberge were designed, printed, and distributed in the same manner as coupons from AAD. Two types of advertising coupons were provided by AAD and Laberge. The majority of coupons were distributed in coop mailings, or "bonus express" envelopes, containing coupons for up to 20 businesses. Bonus express envelopes were mailed approximately eight times a year. Advertising coupons were also distributed in "solo" mailings. A solo mailing was an individualized, custom printed coupon, or flyer, mailed to individual addressees. The total charges stated in advertising orders included the cost of services provided by Petitioner, AAD, and Laberge. Services included typesetting, art work, printing, inserting envelopes, and mailing. Florida imposed a tax on services, from July 1, 1987, through December 31, 1987. Petitioner collected and remitted tax imposed on the cost of services included in the total charges stated on advertising orders. Except for the services tax, neither Petitioner, AAD, nor Laberge collected and remitted sales or use tax to Florida or to Arizona. Petitioner never utilized resale certificates for any tax other than the tax on services. Collectibility Petitioner was financially able to pay the use tax assessment during 1990 and 1991. No later than August 22, 1990, Mr. Troy knew of the sales tax deficiency of $174,823.96. By March 21, 1991, Mr. Troy knew of the reduced use tax assessment of $76,035.60. During 1990 and 1991, Petitioner made discretionary payments to Mr. Troy of $110,389. Petitioner reported federal taxable income of $58,279 in 1990 and 1991. 4/ In arriving at taxable income, Petitioner deducted payments to Mr. Troy of $59,430 for compensation to officers, management fees, and salary. 5/ From taxable income of $58,279, Petitioner paid approximately $50,959 to Mr. Troy in nondeductible shareholder loans. 6/ Discretionary payments of $110,389, 7/ made to Mr. Troy in 1990 and 1991, were more than adequate to pay the use tax assessment of $76,036.60. At the end of 1991, Petitioner reported fixed assets with a book value of $14,933, a customer list valued at $104,447.72, and retained earnings of $102,605. The book value of intangible assets was $82,943, comprised primarily of the franchise, valued at $35,000, and goodwill of $45,000. Termination Of Operations But Continued Existence AAD petitioned for bankruptcy in 1990. Petitioner subsequently determined that its franchise and goodwill were worthless. In 1992, Petitioner reported a loss of $99,726 for federal tax purposes. All of Petitioner's assets, including its customer lists, were sold or transferred for $1,330 to Florida Mail, Inc. ("Florida Mail"). Florida Mail is a Florida corporation wholly owned by Mr. Troy. Florida Mail sells direct mail advertising; and shares Petitioner's principal place of business. Since 1992, Petitioner has been a shell corporation with $579 in assets.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order upholding the assessment of tax and interest and waive all of the penalty included in the assessment. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 2nd day of June, 1994. DANIEL MANRY 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 2nd day of June, 1994.
The Issue The issue in this proceeding is whether the Florida Corporate Income Tax Code subjects to taxation items realized for federal income tax purposes prior to the effective date of the Code but recognized for federal purposes after the effective date of the Florida Code.
Findings Of Fact In a joint stipulation filed with the Hearing Officer, the parties stipulated to the relevant facts of this proceeding. Findings (1) through (6) listed below are quoted directly from that stipulation of facts. In 1965 MORRIS TRADING CORPORATION (whose name at that time was Morris Grain Corporation) exchanged certain property used in its trade or business with Continental Grain Company for six thousand seven hundred twenty three (6,723) acres of real estate located in Florida a description of which is attached hereto and made a part hereof as Exhibit 1 containing a layout of the ranch acreage acquired by MORRIS TRADING CORPORATION from Continental Grain Company, including the nine hundred fifty eight (958) acre parcel sold in the fiscal year ending in 1968, the one thousand (1,000) acre parcel sold in the fiscal year ending in 1969, and the remaining acreage sold in the fiscal year ending in 1973, as well as a small parcel of property retained by the Corporation. Although MORRIS TRADING CORPORATION realized income for federal tax purposes in 1965 when it exchanged a grain elevator and other property for real estate described on Exhibit 1, the Corporation did not recognize any income for federal tax purposes in 1965 pursuant to Section 1031 of the Internal Revenue Code of 1954 as amended. The real estate acquired in exchange for the property traded by MORRIS TRADING CORPORATION had a fair market value in 1965 of ONE MILLION SIX HUNDRED THIRTEEN THOUSAND FIVE HUNDRED TWENTY AND NO/100 DOLLARS ($1,613,520.00), or TWO HUNDRED FORTY AND NO/100 DOLLARS ($240.00) per acre. The tax cost basis of the property given up by MORRIS TRADING CORPORATION in the exchange was TWO HUNDRED SIXTY SEVEN THOUSAND EIGHT HUNDRED THIRTY TWO AND SIXTY SIX/100 DOLLARS ($267,832.66). MORRIS TRADING CORPORATION paid TWENTY THOUSAND FOUR HUNDRED FIFTY THREE AND FIFTY FIVE/100 DOLLARS ($20,453.55) in cash for the purchase of mineral rights to the four thousand six hundred five (4,605) acres sold during the fiscal year ending in 1973 and there were ONE HUNDRED SIXTY TWO THOUSAND FIVE HUNDRED TWENTY TWO AND FIFTY FIVE/100 DOLLARS ($162,522.55) of costs connected with the sale of the property consisting of commissions of ONE HUNDRED THIRTY THREE THREE HUNDRED AND NO/100 DOLLARS ($133,300.00), attorneys fees of EIGHTEEN THOUSAND AND NO/100 DOLLARS ($18,000.00), and documentary" stamps and miscellaneous expenses of ELEVEN THOU- SAND TWO HUNDRED TWENTY TWO AND FIFTY FIVE/100 DOLLARS ($11,222.55). MORRIS TRADING CORPORATION sold four thousand six hundred five (4,605) acres-of the property acquired in the exchange in 1965 during its fiscal year ending May 31, 1973, for a gross sales price of TWO MILLION NINE HUNDRED SIXTY ONE THOUSAND EIGHT HUNDRED SEVEN AND NINETY SIX/100 DOLLARS ($2,961,807.96). On its Florida corporate income tax return for the fiscal year ending May 31, 1973, Petitioner excluded income from the 1973 sale of the 4,605 acres, although this income was reported as recognized on its federal income tax return. The Respondent, Department of Revenue, issued its proposed deficiency for the 1973 fiscal year assessing Petitioner $121,389.33. This assessment was based upon the gain received by Petitioner for the 1973 transaction, said gain being measured by the difference between the original cost of the property exchanged in 1965 and the adjusted sales price of the property sold in 1973. The Petitioner filed a protest against the proposed deficiency. An informal conference failed to resolve the matter and the Petitioner thereafter filed its petition for an administrative hearing. On August 4, 1976, the parties entered into a joint motion for stay of proceedings pending the Florida Supreme Court's resolution of the case of Dept. of Revenue v. Leadership Housing, Inc. and Leadership Communities, Inc., 343 So.2d 611 (Fla. 1977). Thereafter, a prehearing conference was held to narrow and define the issues, briefs were filed and a hearing was held to receive oral argument on the legal issues involved.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that the proposed corporate income tax deficiency for the Petitioner's fiscal year ending in 1973 be held invalid. Said deficiency should be recomputed by subtracting from the gross, sales price of the real estate sold in 1973 the amount realized on Petitioner's federal return in 1965, the selling expenses and the purchase of additional mineral rights. Respectfully submitted and entered this 15th day of February, 1978, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Gerald T. Hart Thompson, Wadsworth, Messer, Turner and Rhodes Post Office Box 1876 Suite 701, Lewis State Bank Building Tallahassee, Florida 32302 E. Wilson Crump, II Assistent Attorney General Department of Legal Affairs Post Office Box 5377 Tallahassee, Florida 32301
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that petitioners' request for a refund of corporate income taxes for the year ending January 31, 1975, be DENIED. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 14th day of January, 1981. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of January, 1981.
The Issue The issues are whether Respondent, Alachua County Tax Collector, discriminated against Petitioner based upon her race, in violation of section , Florida Statutes,1 and/or whether Respondent retaliated against Petitioner for the exercise of protected rights under section 760.10.
Findings Of Fact Based on the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: The Tax Collector is an employer as that term is defined in section 760.02(7). Ms. Tyson is an African American female who worked for the Tax Collector from 1993 until her employment was terminated on June 22, 2017. John Power is the elected Alachua County Tax Collector. Below him in the chain of command is Jon Costabile, the Chief Deputy Tax Collector. Directly below Mr. Costabile is Executive Director Donna Johnson. The Tax Collector has four offices in Gainesville: Downtown, Southwest, Northwest, and a Communication and Processing Center (the “CPC”). Each of these offices is supervised by a branch Director who reports to Ms. Johnson. Two supervisors called Coordinators directly report to each Director. At the time of her dismissal, Ms. Tyson was a Coordinator at the Downtown office. The other Coordinator at the Downtown office was Veronica Taylor, also an African American female. Ms. Tyson’s employee evaluations over the years were generally positive as to her performance. However, she had a reputation, at least among her fellow supervisory employees, of being temperamental and difficult to work with. Her ultimate dismissal was based on her insubordinate conduct, not her job performance. The series of events leading to Ms. Tyson’s dismissal began in Spring 2017, when the decision was made to move Lori Carmichael, the Director of the Downtown office, to the CPC facility. This move created a vacancy in the Downtown office. For supervisory positions, the Tax Collector seeks to promote internally. Mr. Costabile testified that the pool for the vacant Director position comprised the current branch Coordinators, including Ms. Tyson. Mr. Costabile and Ms. Johnson consulted the Directors regarding their recommendations for the position. Mr. Costabile testified that Venus McCray, a Coordinator in the Southwest office, was the clear number one choice for the Downtown Director position. All of the Directors agreed on the choice of Ms. McCray, who is African American. Not only was Ms. McCray the unanimous choice of the other Directors, but she was senior to Ms. Tyson in the Tax Collector’s office. Mr. Costabile testified that the Directors are a close knit group that works closely together. Two of the Directors told him point-blank that they did not want to work with Ms. Tyson. There were no specific complaints about Ms. Tyson, just a general feeling that she was “standoffish” and people had to “walk on eggshells” around her. Ms. Tyson testified that Ms. Carmichael recommended her for the Downtown Director position. In her testimony, Ms. Carmichael was generally positive about Ms. Tyson but did not confirm that she recommended her as Director. Ms. Carmichael did confirm Ms. Tyson’s testimony that, upon learning of Ms. McCray’s promotion, Ms. Tyson asked Ms. Carmichael why she was passed over for promotion. Ms. Carmichael agreed to take up the issue with Ms. Johnson, who told her that Ms. Tyson had a propensity for ignoring the Directors and needed to make an effort to be more interactive and look people in the eye. Ms. Carmichael passed this information on to Ms. Tyson. Ms. Tyson testified that Ms. Johnson was referring to occasions when Directors from other offices would visit the Downtown office. She stated that these were four white women who would not acknowledge her when she spoke to them, or at best would “smirk” at her. Ms. Tyson felt insulted by their behavior. She told Ms. Carmichael that Ms. Johnson’s advice was demeaning, inhumane, and “slave-ish.” Ms. McCray testified that she had “bumped heads” with Ms. Tyson in the past and therefore had some reservations about accepting the Downtown position. Her misgivings appeared justified when she went to the office to shadow Ms. Carmichael before taking over her position. Ms. Carmichael was not there when Ms. McCray arrived, so she spoke to Ms. Tyson and Ms. Taylor, the two Coordinators in the Downtown office. Ms. Tyson asked Ms. McCray why she had not personally contacted her to tell her about her promotion. Ms. McCray responded that she had been told not to discuss the promotion before the official announcement. This answer did not satisfy Ms. Tyson. The conversation was uncomfortable enough that Ms. Taylor felt compelled to walk away and give privacy to the other two women. After taking over as Director, Ms. McCray would have regular meetings with her Coordinators. She testified that Ms. Taylor was positive and cooperative but Ms. Tyson was consistently disagreeable. Ms. McCray testified that she dreaded coming to work in the morning knowing she had to deal with Ms. Tyson. At a meeting on June 19, 2017, Ms. McCray was questioning her Coordinators about the duties of office personnel, trying to get a feel for the daily operation of the Downtown office. Ms. McCray testified that Ms. Tyson studiously avoided making any eye contact with her. Ms. Tyson sat with her head down. She doodled on a piece of paper while Ms. McCray spoke. Ms. McCray asked Ms. Tyson to please do her the courtesy of looking her in the eye. Ms. Tyson said, “I don’t have to,” and continued scribbling on the paper. Ms. Tyson testified that she was taking thorough notes during the meeting. She stated that she takes pain medications for carpal tunnel syndrome and wants to be sure she gets things right because she does not want her superiors blaming mistakes on her medications. Ms. Tyson testified that when Ms. McCray asked her to look her in the eye, she looked up and asked Ms. McCray why she needed to look her in the eye while taking notes. Ms. McCray’s version of the June 19, 2017, meeting is more believable. Ms. McCray is credited with knowing the difference between avid notetaking and idle scribbling. It is noted that even Ms. Tyson’s version of the meeting presents Ms. Tyson as defensive and somewhat truculent toward her superior. Mr. Costabile testified that after she had been at the Downtown office for a couple of weeks, Ms. McCray requested a meeting with Ms. Johnson and him to discuss her difficulties with Ms. Tyson. Ms. McCray stated that she might have to go back to being a Coordinator in a different office if the situation did not improve. Mr. Costabile recalled Ms. McCray stating that she did not want to be a Director if it was going to affect her health. Mr. Power testified that Ms. Johnson came to him with concerns about Ms. Tyson’s acceptance of Ms. McCray as her Director. Ms. Johnson reported that Ms. Tyson was being very disrespectful and difficult to work with. Mr. Power testified that he took this matter seriously because Ms. Johnson does not come to him with personnel matters unless they are important. Mr. Power testified that Ms. McCray herself spoke to him after a morning meeting at the Northwest office. She told him that things were not going well and he responded that he had heard about the problem. Ms. McCray told him that Ms. Tyson was being disrespectful, embarrassing, and disruptive. Mr. Power advised her to give the situation some time to sort itself out. The Downtown office opened to the public at 8:30 a.m. It was Ms. McCray’s practice to hold an all-employees meeting at 8:15 each morning. On the morning of June 22, 2017, Mr. Power, Mr. Costabile, and Ms. Johnson happened to be present at the meeting. Ms. McCray stood at the front of the group, flanked by her Coordinators, Ms. Tyson and Ms. Taylor. Ms. McCray convened the meeting and announced that she wanted the employees to set personal and professional goals for themselves. She distributed “goal sheets” for each employee to fill out. This exercise served the dual purpose of helping the employees establish priorities and helping Ms. McCray get to know them better. The general feeling in the room was enthusiastic support for Ms. McCray’s idea. The meeting lasted about 15 minutes. Everyone in the room was oriented toward, and listening to, Ms. McCray, except for Ms. Tyson. Ms. Tyson stood with her arms folded across her chest, ostentatiously turned away from Ms. McCray. She stared at the ceiling, apparently uninterested, while Ms. McCray spoke. At the conclusion of her presentation, Ms. McCray turned to her Coordinators to ask if they had anything to add. She first asked Ms. Taylor, who responded that she thought the goal setting exercise was a good idea. Ms. McCray then asked Ms. Tyson if she had anything to add. Without looking away from the ceiling or turning toward Ms. McCray, she said, “Nope.” The testimony of Mr. Power, Mr. Costabile, Ms. McCray, and Ms. Taylor all agreed on the facts as set forth in the previous two paragraphs. Ms. Tyson stood in front of all the Downtown employees and all her superiors in the Tax Collector’s office in a manner clearly intended to convey contempt for Ms. McCray. Each of these witnesses heard Ms. Tyson answer “nope” to Ms. McCray’s question.2 Ms. Tyson testified that she was turned away from Ms. McCray because she was speaking to another employee. She stated that her arms are always crossed because of her severe pain. She testified that the state of her C5 and C7 vertebrae make it impossible for her to look at the ceiling for 15 minutes. She stated that it is “not my nature” to turn away from Ms. McCray and that “‘nope’ is not in my vocabulary.” Given the unanimity of the contrary testimony, Ms. Tyson’s version of the June 22, 2017, meeting cannot be credited. Mr. Power testified that Ms. Tyson’s behavior at the meeting left him aghast. Her body language indicated she was removing herself from the meeting, though as a supervisor she was expected to set an example for the front line employees. Mr. Power stated that he “about fell on the floor” when Ms. Tyson said “nope” in answer to Ms. McCray’s question. After the meeting, Mr. Power retired to his office to ponder his options as to Ms. Tyson. He had been hearing reports about Ms. Tyson’s behavior for the past month and now he had seen it with his own eyes. Ms. Tyson was a leader in the organization and had blatantly shown disrespect to a member of senior management in front of all the Downtown staff. She was advertising her opinion that no one should listen to Ms. McCray. Mr. Power decided that Ms. Tyson’s employment should be terminated. He directed Mr. Costabile to release Ms. Tyson from the Tax Collector’s office. Mr. Costabile prepared the paperwork and convened the termination meeting with Ms. Tyson. Also present at the meeting was Human Resources Administrator Linda Power, whose only function was to serve as a witness. 2 It is possible to answer “nope” in a way that conveys a positive attitude toward the questioner. However, each of these witnesses demonstrated the contemptuous manner in which Ms. Tyson spoke the word. The meeting was brief. Mr. Costabile told Ms. Tyson that her insubordination was a serious matter. He stated that every employee needs to accept change, but Ms. Tyson was apparently unable to accept Ms. McCray’s promotion. Ms. Tyson was a member of management and was expected to set an example for her subordinates. The Tax Collector’s policy is to offer an employment resignation agreement, waiver, and release when a long-term employee is terminated for cause, in lieu of termination. The agreement includes a severance package. Ms. Tyson declined to accept the offer to resign. Mr. Costabile terminated her employment effectively immediately. Ms. Tyson testified that Mr. Costabile told her that she was being fired for failing to look Donna Johnson in the eye at the morning meeting. Ms. Tyson responded that Donna Johnson wasn’t speaking at the meeting. “Why would I be looking her in the eye?” She testified that Mr. Costabile told her she was bringing down the morale of the office and that people were complaining. Mr. Costabile credibly denied telling Ms. Tyson she was being fired for not looking someone in the eye. Ms. Tyson’s position as Coordinator was ultimately filled by Christie Tyson, a white woman who is not related to Ms. Tyson. Ms. McCray testified that Ms. Johnson asked her whether she thought the job should go to Christie Tyson or to Regina Gainey, an African American woman. Ms. McCray testified that she recommended Christie Tyson, based on prior experience of working with her. Ms. Taylor, the other Coordinator in the Downtown office, also recommended Christie Tyson.3 3 Ms. Tyson made an issue of the fact that Christie Tyson and Donna Johnson share a grandson. However, given the unanimity of the recommendation, it is found that Ms. Johnson did not improperly favor Christie Tyson. Furthermore, whether Ms. Tyson’s replacement had a familial relationship with one of her former superiors has nothing to do with whether Ms. Tyson was terminated on the basis of her race. Ms. Tyson believed that her dismissal had been in the works since April, and that Christie Tyson had been “groomed” to take her place. She saw a nefarious connection between Ms. Johnson’s advice that she greet and look the Directors in the eye and Ms. McCray’s request that she look her in the eye at the June 19 meeting. She offered no supporting evidence for her intuitions. Ms. Tyson testified that because the Tax Collector’s office was planning to fire her, a black woman, they needed another black woman to take her place in order to fend off public complaint. She further testified, without support, that Ms. McCray was a useful pawn in that regard, willing to lie about her interactions with Ms. Tyson to advance her own career. Ms. Tyson testified that after being told multiple times to look people in the eye, she was sure that something was up. She stated that she went to Veronica Taylor’s office and told her she knew she would not be around much longer. Ms. Taylor did not confirm this incident in her testimony. Ms. Tyson testified that, a day or so after her conversation with Ms. Taylor, she accidentally bumped into Mr. Power in the office, and he said to her, “You look like the type that will fight.” Ms. Tyson stated that this scared her because she did not know why he would say that. She went to her office and scoured her notes looking for what she had done wrong. She tearfully phoned her mother and asked for her prayers because she was about to be fired. Mr. Power flatly and credibly denied telling Ms. Tyson that she looked like she would fight. Ms. Tyson presented the testimony of other Tax Collector employees who believed there was an element of racism in the running of the office. Isaiah Minter, an African American male, worked in the Tax Collector’s office in a non-supervisory capacity from 2013 to 2015. Ms. Tyson was his Coordinator. He testified that he came to the job with a bachelor’s degree from the University of Florida and experience as a driver’s license examiner. He expected to advance quickly. He was upset when Ms. Johnson told him that he would have to prove himself and that it might take five years for him to be promoted into a supervisory job. He was offended that Mr. Power told him he was needed at the front desk. Mr. Minter left the Tax Collector’s office in good standing to take a job at the Veterans Administration. Moranda Bethley, an African American female, worked in the Tax Collector’s office from December 2003 until March 2017. She worked with Ms. Tyson at the Northwest and Downtown offices. Ms. Bethley described Ms. Tyson as a “saint,” always friendly, personable, positive, and helpful. Ms. Bethley testified that there was no room for black people to advance in the Tax Collector’s office. The supervisors would tell the black employees they were doing a good job, keep up the good work, but would never offer a promotion. The white supervisors were less interested in helping than in pointing the finger at the employee seeking help. Ms. Bethley would seek out the assistance of Ms. Tyson rather than her own supervisor because of the latter’s negativity. Ms. Bethley resigned in lieu of termination as a result of her persistent practice of disruptive behavior in the workplace, culminating in a weeks-long conflict with a fellow employee that could not be resolved and that escalated to the point that management concluded that Ms. Bethley’s employment was no longer tenable. The weight given to Ms. Bethley’s testimony as to the atmosphere of the office is lessened by the evidence of her own unprofessional behavior. Toya Williams, an African American female, worked at the Tax Collector’s office from 2013 until May 11, 2017. Ms. Tyson supervised her for at least part of that time. She found it unsettling that in her two interviews for positions with the agency, she met with two white males and five white females. She asked questions about the racial mix of personnel and was assured that progress would come. Ms. Williams testified that in her four years, she never served under a Director of color. Ms. Williams initially worked at the Southwest office, where there was a lot of “cliquish foolery.” The Director was incompetent, unable to explain the work they were doing. Venus McCray was one of the Coordinators and was the only knowledgeable supervisor in the office. At one point, Ms. McCray asked the employees to stop coming to her for help so often, because the Director and the other Coordinator had noticed that no one ever sought their assistance. Ms. Williams immediately felt a difference when she moved to the Downtown office. There were frequent morning meetings and Ms. Tyson went out of her way to greet everyone in the morning. Ms. Tyson was good for morale. If an employee made a mistake, she used it as a teaching method rather than an opportunity to castigate the employee. Ms. Williams testified to being shocked when Mr. Power referred to the Downtown office as the “ghetto office” at a morning meeting. She wondered whether he gave it that name because it was in a decrepit old building, or because it was the only office with two black Coordinators and was located in a part of town where many black people lived. Ms. Williams resigned from the Tax Collector’s office as an employee in good standing to accept another job. Amber Allen, an African American female, worked as an intern at the Tax Collector’s office from 2013 through March 2016. Ms. Allen testified that she worked with Ms. Tyson at the Downtown office and that Ms. Tyson was the only reason she stayed as long as she did. Ms. Tyson encouraged her to focus on her work instead of office politics and the racism of the white supervisors. Ms. Allen testified that one day she changed into flat shoes before going out into the street for her lunch hour. Ms. Johnson told her that her overall demeanor, appearance, and hairstyle were too relaxed for the Tax Collector’s professional environment. Ms. Allen stated that on that day, she had pinned up her hair on one side. The other side was in an Afro style. Ms. Allen testified that she spent the rest of that lunch hour on the phone crying to her mother, asking why she was required to gauge how black she was allowed to look at work. She wanted to quit the job, but Ms. Tyson took her into her office and counseled her to advocate for herself in the office, but not in a disrespectful or demeaning way. Ms. Allen testified that Ms. Johnson never made any more comments about her relaxed appearance but that she did make comments about her hair. Ms. Allen found this especially galling because her white counterparts would arrive at work with hair so wet that it soaked the backs of their chairs and their shirts, but Ms. Johnson said nothing. Ms. Allen stated that Ms. Johnson’s comments made her feel small. Ms. Allen testified that she was also at the meeting at which Mr. Power referred to the Downtown office as the ghetto office. Mr. Power stated that the office dealt with many different types of people, many of them unsavory. He also mentioned that much of the Downtown client base came from the east side of Gainesville, known as a minority area. Ms. Allen was certain that Mr. Power was not referring to the physical condition of the building, but the people who were being served in the building. She testified that a number of black employees found the comments “disgusting.” Mr. Power testified that he indeed referred to the Downtown office as the ghetto office at a morning meeting. He stated that he used that term because the building was in a “deplorable condition,” like a building in a ghetto. It was embarrassing to the staff. One day, a rat fell through the ceiling in the middle of work. Mr. Power testified that his use of “ghetto” referred only to the building, not to any of the building’s customers. He stated that he would not use “east side” as a pejorative term, if for no other reason than because he lives on the east side. Copious evidence was presented attesting to Mr. Power’s personal and professional involvement in the African American community of Alachua County. There is little question that Mr. Power does not harbor any animosity or personal discriminatory feelings toward African Americans. However, this finding is not inconsistent with Ms. Tyson’s allegation that there is an element of institutional racism at work in the Tax Collector’s office. The testimony of Petitioner’s supporting witnesses should not be minimized. It is clear that the Tax Collector has at least a perception problem. Rightly or wrongly, some African American employees believe that their working environment and path to advancement are tainted by racism. It might prove fruitful for Mr. Power to institute a program of institutional soul-searching on the question. That being said, the purpose of this proceeding is not to undertake a systemic analysis of racism in the Tax Collector’s office. This proceeding is limited to the question of whether the adverse employment action taken against Ms. Tyson was an act of racial discrimination. The overwhelming evidence is that it was not. Ms. Tyson presented no persuasive evidence that comparable employees outside of her protected group were treated differently. She alleged that a white supervisor named Valerie Jerkins had a practice of clocking in to the workplace then leaving without clocking out, thus stealing time from the Tax Collector, without being subject to any adverse employment action. Ms. Tyson had no firsthand knowledge of this alleged behavior. The only employee claiming direct knowledge of Ms. Jerkins’s behavior was Ms. Bethley, who claimed that she reported the matter to Ms. Johnson. None of the supervisory employees who testified, including Ms. Johnson, had any recollection of having received a report or complaint of Ms. Jerkins stealing time. Mr. Costabile testified as to a former employee named Tracy Jones, a Caucasian woman who held several positions in the Tax Collector’s office and was a Director at the time her employment was terminated in June 2018. Ms. Johnson had asked Ms. Jones to accept a reassignment. Ms. Jones proceeded to announce her displeasure to other employees and customers. Ms. Jones was dismissed for insubordination. In summary, it is found that the decision to terminate Ms. Tyson’s employment was based entirely on her own behavior. It is clear that Ms. Tyson’s bitterness at being passed over for the Director’s job poisoned her relationship with Ms. McCray and led her to behave in a manner so startlingly unprofessional that Mr. Power saw no option but to dismiss her.4 Ms. Tyson offered no evidence that, prior to her termination, she opposed any discriminatory practices at the Tax Collector’s office, or that she participated in an investigation, proceeding, or hearing challenging discriminatory practices at the Tax Collector’s office. Ms. Tyson offered no evidence to support her allegation that the Tax Collector retaliated against her for engaging in protected activity. Ms. Tyson offered no credible evidence disputing the legitimate, non- discriminatory reason given by the Tax Collector for her termination. Ms. Tyson offered no credible evidence that the Tax Collector’s stated reason for her termination was a pretext for discrimination based on her race or color. Ms. Tyson offered no credible evidence that the Tax Collector discriminated against her because of her race or color in violation of section 760.10.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Commission on Human Relations issue a final order finding that the Alachua County Tax Commissioner did not commit any unlawful employment practices and dismissing the Petition for Relief filed in this case. DONE AND ENTERED this 31at day of March, 2020, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of March, 2020. COPIES FURNISHED: Tammy S. Barton, Agency Clerk Florida Commission on Human Relations Room 110 4075 Esplanade Way Tallahassee, Florida 32399-7020 (eServed) William H. Andrews, Esquire Gray Robinson Suite 1100 50 North Laura Street Jacksonville, Florida 32202-3611 (eServed) Salana Tyson 21812 Northwest 210th Avenue High Springs, Florida 32643 (eServed) Cheyanne Costilla, General Counsel Florida Commission on Human Relations Room 110 4075 Esplanade Way Tallahassee, Florida 32399-7020 (eServed)
The Issue Petitioners' liability for corporate income tax deficiency under Chapter 220, Florida Statutes.
Findings Of Fact Petitioner is a Georgia Corporation doing business as a heavy electrical contractor in Georgia and eight other states including Florida. In 1972, Petitioner submitted a request to the Department of Revenue that it be allowed to use "separate accounting" as the method for determining the amount of its adjusted federal income that was subject to taxation by the State of Florida under Chapter 220,Florida Statutes. By letter of October 3, 1972, T.H. Swindal, Respondent's Chief of the Corporation Income Tax Bureau, denied Petitioner's request with the following language: "The economics of large scale interstate construction operations, as we understand them, necessitate maximum utilization of a company's resources. At particular times and in a particular locale or with respect to particular types of construction activity contracts may be initially or regularly bid upon and undertaken which, on an individual contract basis, will be minimally profitable, if at all. Nevertheless, because these contracts permit cost absorption, continuing use and charge for equipment, trained crews and know-how; permit maximum employment of the company's capital and credit accomo- dations; permit initial entry into a new field of construction activity or a new locale, these contracts indirectly but significantly add to the profitability of the enterprise as a whole. We recognize too, that separate accounting essentially serves management and that management must evaluate competitive tax implications. "Separate accounting" does not, in our view, measure the impact of these cir- cumstances. We are of the opinion that Florida's three factor formula does measure the impact of these circumstances upon profit and thus provides a fairer Florida tax base." (Complaint, Petitioner's Exhibit 1) Respondent however, pursuant to a request of Petitioner, permitted the latter to leave its 1972 return as filed, but instructed it to file in the future utilizing the "three-factor" formula. Accordingly, the Petitioner filed its 1973 and 1974 tax returns utilizing the "three-factor" formula" as directed by the Respondent, and paid the appropriate tax due. By letter, dated September 15, 1975, Mr. Swindal informed Petitioner that examination of its returns for the years 1972 thru 1974 had resulted in a net proposed deficiency of $12,417.60. An accompanying report showed that the primary basis for the deficiency was Respondent's determination that the Florida portion of adjusted federal income for the years 1973 and 1974 should have been increased by the amounts of $87,772.93 and $160,117.83, respectively, based on a "separate accounting" computation. The reason given for this determination was stated as follows in the report: "Florida Statute 214.73(1) says in part that if the apportionment methods of Florida Statute 214.71 and 214.72 do not fairly represent the extent of a taxpayer's base attributable to this state, the department may require separate accounting. The department has determined the taxpayer should use separate accounting in accordance with the above-mentioned, statute." (Complaint and exhibits thereto) Respondent had not notified Petitioner between 1972 and 1975 of its apparent change in position with respect to the required method of accounting. At a conference held on February 19, 1976, between Petitioner's representatives and Mr. William T. Lutschak who represented the Respondent, Petitioner protested the asserted deficiency and requested that the Respondent adhere to its former determination that the "three-factor method" be applied in computing the tax. Petitioner's protest was denied orally at the conference and such denial w-s confirmed by Mr. Swindal's letter of February 24, 1976, as follows in pertinent part: "Careful analysis of the taxpayer's Florida activity and the financial results of that activity clearly demonstrate that the amount of income set forth in the auditor's report for the years at issue are attributable to taxpayer's Florida business and that F.S. 214.73(1), rather than F.S. 214.71, fairly represents the extent of the taxpayer's tax base attributable to this state." (Comp. & Exh. thereto) Respondent's auditor of Petitioner's 1973 and 1974 tax returns found nothing unusual concerning the latter's business operations during the above tax periods and is of the opinion that based on formulary accounting Petitioner's returns "fulfill the letter of the law". He also acknowledged that Petitioner met the criteria of a "unitary business". He testified that he was unable to determine the amount of property used by Petitioner on its various jobs in and out of Florida while at the audit site at Petitioner's home office in Alabama and that without such information it would be impossible to determine Petitioner's tax liability under the "three-factor method" because property is one of the factors. The auditor, after making a request of Petitioner for such figures during his audit, which did not produce immediate results, did not pursue the matter because he "had to go back to Tallahassee". In fact, such information was available in Petitioner's records. Respondent changed its policy with respect to the method of accounting required of Petitioner after consideration of a textbook on the concept of separate accounting and a resulting determination that the contracting business in general is a unique industry warranting special tax treatment. (Testimony of Harnden, Puckett, Malone, Exhibit 1, Pleadings). The alleged deficiency of $12,417.60 is correctly computed and properly due and owing if "separate accounting" is validly required with respect to Petitioner's tax returns. (Stipulation).
Recommendation That Petitioner be relieved from payment of the proposed assessment based on any tax deficiency produced by the requirement of separate accounting under Section 214.73, Florida Statutes. DONE and ENTERED 21st day of July, 1976, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs Tax Division Northwood Mall Tallahassee, Florida 32303 James R. English, Esquire HENRY & BUCHANAN, P.A. P.O. Drawer 1049 Tallahassee, Florida 32302
Findings Of Fact The Petitioner, Florida Welding Services Corp., is a Florida corporation doing business in the State of Florida. The Respondent, Florida Department of Revenue, is the agency charged with enforcing the taxing statutes of this State, including the Florida Income Tax Code, Chapter 220, Florida Statutes. Pursuant to Chapter 220, Florida Statutes, the Petitioner is required to file a Florida Corporate Income Tax Return annually with the Respondent. The Return is due on the first day of the fourth month after the close of the tax year. The Petitioner's tax year for 1977 was April 1, 1976, through March 31, 1977. The Florida Corporation Income Tax Return for the 1977 tax year was due on July 1, 1977, and the Petitioner failed to file its Return by this date. The Petitioner's tax year for 1978 was April 1, 1977, through March 31, 1978. The Florida Corporation Income Tax Return for the 1978 tax year was due on July 1, 1978, and the Petitioner failed to file its Return by this date. In January 1977, all of the Petitioner's corporate records were seized, pursuant to a subpoena issued in the United States Federal District Court in and for the Southern District of Florida. (See Exhibit 1) The Petitioner's records were not returned to it for over a year. On September 15, 1978, the Petitioner filed a Tentative Income Tax Return and Application for Extension of Time to File Income Tax Return, wherein Petitioner requested an extension of time until November 15, 1978, in which to file its Florida income tax return for the 1977 and 1978 tax years. (See Exhibit 2) On October 5, 1978, the Department of Revenue denied the Petitioner's request for an extension of time on grounds that the request had been filed after the respective due dates of July 1, 1977, and July 1, 1978. (See Exhibit 2) On November 16, 1978, the Department of Revenue received Petitioner's Florida Corporation Income Tax Returns for the tax years 1977 and 1978. The Petitioner also remitted the tax it believed owing for each taxable year, $3,734.96 for 1977 and $6,803.56 for 1978. On February 2, 1979, the Department of Revenue, Corporate Income Tax Bureau, issued a Delinquent Notice of Tax Due to the Petitioner. The Notice indicated that the Petitioner had a balance due of $1,547.28 for the tax year ending March 31, 1977, which amount represented $933.74 penalty and $613.54 interest. (See Exhibit 3) On February 5, 1979, the Department of Revenue, Corporate Income Tax Bureau, issued a Delinquent Notice of Tax Due to the Petitioner. The Notice indicated that the Petitioner had a balance due of $1,986.43 for the tax year ending March 31, 1978, which amount represented $1,700.89 penalty and $285.54 interest. (See Exhibit 4) On March 15, 1979, Mr. Karl J. Leib, Jr., contacted the Department of Revenue on behalf of his client, the' Petitioner, requesting the Department to delay in issuing any tax warrants against the Petitioner until Mr. Leib had an opportunity to communicate with someone from the Department. (See Exhibit 5) A follow-up letter was sent by Mr. Leib to the Department on June 8, 1979. (See Exhibit 6) On April, 23, 1980, the Department of Revenue issued to the Petitioner a Final Notice and Demand for payment in the amount of $1,547.28. (See Exhibit 7) Although no Final Notice and Demand for payment in the amount of $1,986.43 was issued by the Department, the amount is still outstanding and the Department maintains that Petitioner owes this sum as well. It is the Petitioner's position that its inability to timely file its Florida Corporate Income Tax Returns was entirely due to factors beyond its control, i.e., the confiscation of its corporate records. The Petitioner maintains that it should not be assessed penalty and interest for late filing, as its failure to timely file was "due to reasonable cause and not willful neglect," as is provided for in Section 214.40(1), Florida Statutes. The Department's position is twofold. First, the Petitioner's failure to make a timely request for extension of time in which to file its return does constitute willful neglect. Second, that while Section 214.40(1), Florida Statutes, may provide the Department with some discretion in assessing penalties, there is no comparable provision for modifying interest payments and such amount is absolutely mandated by the statute for any late filed returns. In addition to the foregoing, along with the attached Exhibits, the undersigned hereby incorporate by reference and jointly offer as evidence those Exhibits attached to Petitioner's Request for Formal Proceedings. WHEREFORE, both parties respectfully request the Hearing Officer to consider the foregoing facts and exhibits, along with a Memoranda of Law to be filed by each party within 10 days of the filing of this Joint Stipulation, and to issue his Recommended Order, without the necessity of holding a formal hearing.
Findings Of Fact Having listened to the testimony and considered the evidence presented in this cause, it is found as follows: Dr. Melvin J. Hellinger is licensed to practice dentistry in the State of Florida by the State Board of Dentistry. Dr. Melvin J. Hellinger is currently practicing dentistry in Miami, Florida. Dr. Melvin J. Hellinger was indicted on three counts of income tax evasion in the United States District Court, District of Massachusetts. The indictment charged that Dr. Melvin J. Hellinger did willfully and knowingly attempt to evade and defeat a large part of the income taxes due and owing by him and his wife to the United States of America for the calendar years 1969, 1970 and 1971, by filing and causing to be filed with the District Director of Internal Revenue for the Internal Revenue District of Boston, in the District of Massachusetts, a false and fraudulent joint income tax return for the calendar years 1969, 1970 and 1971, each calendar year constituting a separate count. On March 10, 1975, Dr. Melvin J. Hellinger pled guilty to and was convicted of the offense of willfully and knowingly attempting to evade and defeat a large part of the income taxes due and owing by him and his wife to the United States of America by filing and causing to be filed with the Internal Revenue, a false and fraudulent joint income tax return, in violation of Section 7201, I.R.C., Title 26, U.S.C., Sec. 7201, as charged in Counts 2 and 3 of the aforementioned indictment. Count 2 charged that Dr. Hellinger did evade income taxes by filing an income tax return wherein it was stated that his and his wife's taxable income for calendar year 1970 was $47,883.08 and that the amount of tax due and owing thereon was $16,401.58, whereas, as he then and there well knew, their joint taxable income for said calendar year was $101,503.07, upon which said taxable income there was owing an income tax of $47,264.70. Count 3 charged that Dr. Hellinger did evade income taxes by filing an income tax return wherein it was stated that his and his wife's taxable income for calendar year 1971 was $50,877.52 and that the amount of tax due and owing thereon was $17,498.76, whereas, as he then and there well knew, their joint taxable income for said calendar year was $67,786.12, upon which said taxable income there was owing an income tax of $26,502.36. The United States District Court for the District of Massachusetts sentenced Dr. Melvin J. Hellinger to imprisonment for a period of three months, execution of prison sentence to be suspended and Dr. Hellinger placed on probation for a period of two years. As a special condition of his probation, he is to spend two days a month doing work at a charitable hospital or some similar institution under the supervision of the probation office. It was further ordered that Dr. Hellinger pay a fine in the amount of $10,000, payable on or before March 17, 1975. Dr. Melvin J. Hellinger is presently performing voluntary work one day a week at Jackson Memorial Hospital in Miami, Florida. Dr. Melvin J. Hellinger is a competent oral surgeon. Dr. Melvin J. Hellinger currently holds a valid license to practice dentistry in the state of Massachusetts, which license was renewed after his conviction for income-tax evasion. By his own statement, Dr. Hellinger can return to Massachusetts to practice dentistry. Dr. Melvin J. Hellinger was removed from the staff at Miami-Dade General Hospital because of the subject conviction for income tax evasion and omissions he made from his application to Miami-Dade General Hospital, which omissions reflected upon his character. Dr. Melvin J. Hellinger's membership in the American Dental Association and the American Society of Oral Surgeons has been revoked as a result of accusations by Blue Cross-Blue Shield concerning duplicate claims filed by Dr. Hellinger, which accusations have now been settled between Dr. Hellinger and Blue Cross-Blue Shield. Dr. Melvin J. Hellinger became a diplomate of the American Board of Oral Surgery in 1965, when in his late 20's. He has published in dental journals and taught at Tuft's University in oral pathology and Boston University in oral surgery. Dr. Melvin J. Hellinger came to Florida in December of 1974 from Wakefield, Massachusetts. In Wakefield, Massachusetts, Dr. Melvin J. Hellinger was very active in civic and religious affairs, contributing a substantial amount of time to community service. During the time within which Dr. Hellinger committed the subject felonies, his wife discovered that she had a cancer malignancy, which is presently being treated by a specialist in Miami. Also at that time, Dr. Hellinger's father-in-law, of whom he thought highly, suffered several strokes. Further, during that time, Dr. Hellinger suffered large stock-losses, putting a severe financial burden on him. Dr. Hellinger and his wife have four children, ages seven to twelve. Since moving to Florida, Dr. Hellinger has been active in his temple and coaches children's league football. Dr. Hellinger has no other criminal record. Dr. Melvin J. Hellinger pled guilty to and was adjudged guilty of a felony under the laws of the United States involving income tax evasion as set forth in Counts and 2 of the Accusation filed herein by the Florida State Board of Dentistry.
Findings Of Fact Having considered the pleadings, evidence and legal arguments presented in this cause, the following facts are found: Petitioner is a corporation duly organized under the laws of the State of New Jersey and qualified to do business is one State of Florida. Two of the subsidiaries of Petitioner are Island Properties, Inc., formerly known as Heftler International, Inc., and Island Land Corporation, formerly known as Heftler Construction Company of Puerto Rico, Inc. These corporations are organized under the laws of the State of Florida and the State of New Jersey respectively and maintain principal places of business in Puerto Rico. For the fiscal years ending July 31, 1972 and July 31, 1973, petitioners properly included losses from the operations of the Puerto Rico corporations in their consolidated income tax returns filed with the Internal Revenue Service. For the fiscal years ending July 31, 1972, and July 31, 1973, petitioners timely filed with the respondent consolidated income tax returns including therein the operations of the Puerto Rico corporations. After a timely audit, the respondent excluded, for the purposes of computing adjusted federal income as defined by 220.13, the losses sustained by the Puerto Rico corporations. The respondent also excluded from the computation of the apportionment factors defined in F.S. s. 214.71 and 220.15 the value of the property, payroll and sales utilized in the operations of the Puerto Rico corporations. The respondent cited F.S. ss. 220.13(1)(b)2.b, 220.15(3) and 214.71 as its authority. The adjustments made by the respondent results in a net proposed deficiency of $75,076.46 for the two fiscal years in question. After attempts by the parties to resolve the issues by informal means failed, the petitioner requested a formal hearing and the respondent requested the Division of Administrative Hearings to conduct the hearing.
Recommendation Based upon the above findings of fact and conclusions of law, it is recommended that there is no basis for affording petitioners any relief from the proposed deficiency and that said deficiency in the amount of $75,076.46 be sustained. Respectfully submitted and entered this 20th day of November, 1975, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Lewis M. Kanner, Esquire WILLIAMS, SALOMON, KANNER DAMIAN 1003 du Pont Building Miami, Florida 33131 E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303 Mr. J. Ed Straughn Executive Director Department of Revenue Tallahassee, Florida 32304
Findings Of Fact The Surf Club, Inc. is a corporation which in the taxable year commencing on or after January 1, 1972, earned a received income in the State of Florida and was a resident or citizen of this state. In December, 1972, The Surf Club filed an exempt organization business income tax return with the Department of Treasury, Internal Revenue Service, using Form 990-T. The taxpayer also filed a Florida Corporate Tax Return showing a tax due of $447.00. See Exhibit 1. Subsequently, the taxpayer filed an amended tax return for the year ending September 30, 1972, with the Department of Treasury, Internal Revenue Service, using Form 1120. Schedule D of Form 1120 reports a long-term capital gain in the amount of $54,601.00. Form 4797, page two, indicates that this capital gain was realized from the sale of an apartment building and land for a gross sales price of $1,496,184.00. The adjusted basis was $741,583.00 and the total gain was $754,601.00. The taxpayer filed an Amended Florida Corporation Income Tax Return, Form 1120X. Part II of this amended return reported the $754,601.00 sale of the real property. Attached to the federal tax return was an addendum showing the change of status of Surf Club from a social club exempt under the provisions of Section 501(c)(7) to a nonexempt organization. See Exhibit 2. The Department of Revenue controverted the amended return on the basis that the $754,601.00 in capital gains was deducted from taxable income by the taxpayer because the taxpayer had eliminated the value of the property accruing prior to the imposition of the Florida corporate income tax. Because the date of the sale closely approximated the date or the imposition of the tax, the taxpayer had deducted the total amount of the income derived from the sale. The tax due is $10,203.00. Exhibit 3. Introduced as Exhibit 4 was a revocation agreement whereby the exempt status of The Surf Club was revoked for all years beginning on or after October 1, 1970. The Surf Club did not have exempt status or assert exempt status as of the date that it filed its amended federal tax return for the year ending September 30, 1972.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, the Hearing Officer recommends that the corporate income tax in the amount of $10,203.00 be assessed against Surf Club. DONE and ORDERED this 25th day of October, 1978, in Tallahassee, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Patricia Turner, Esquire Department of Legal Affairs The Capitol Tallahassee, Florida 32304 Dan Paul, Esquire 1300 Southeast First National Bank Building Miami, Florida 33131
Findings Of Fact Pursuant to a stipulation, the following facts are found. Petitioner is a West Virginia corporation, organized under the laws of that state on January 4, 1958. Prior to June 1, 1962, it operated an automobile dealership in Huntington, West Virginia. On June 1, 9162, Petitioner exchanged assets of its automobile dealership for fifty (50 percent) percent of the capital stock of Dutch Miller Chevrolet, Inc., a West Virginia corporation organized to succeed the automobile dealership formerly operated by the Petitioner. Prior thereto, in 1961, the Petitioner had acquired one hundred percent (100 percent) of the capital stock in Palm Beach Motors (the name of which was changed on August 10, 1961 to Roger Dean Chevrolet, Inc.). Roger Dean Chevrolet, Inc. is a wholly owned subsidiary of the Petitioner which operated on property owned by the Petitioner. The years involved herein are the fiscal years ending December 31, 1972 and 1973, during which years the Petitioner's principal income (except for the gain involved herein) consisted of rents received from Roger Dean Chevrolet, Inc. Petitioner and its subsidiary filed consolidated returns for the years involved. During the fiscal year ending December 31, 1972, Petitioner sold its stock in Dutch Miller Chevrolet, Inc. to an unrelated third party for a gain determined by the Respondent to be in the amount of $349,217.00, which, although the sale took place out of the State of Florida, the Respondent has determined to be taxable under the Florida Income Tax Code* (Chapter 220, Florida Statutes). In the fiscal years ending December 31, 1972 and 1973, Petitioner included in Florida taxable income, the amounts of $76.00 and $6,245.00, respectively, from the sale of property on April 23, 1971, such gain being reported for federal income tax purposes on the installment method under Section 453 of the Internal Revenue Code of 1954. Roger H. Dean, individually or by attribution during the years involved herein, was the owner of one hundred (100 percent) percent of the stock of Roger Dean Enterprises, Inc. and seventy-five (75 percent) percent of the stock of Florida Chrysler-Plymouth, Inc. The remaining twenty-five (25 percent) percent of Florida Chrysler-Plymouth, Inc. was owned by Robert S. Cuillo, an unrelated person. The Respondent disallowed the $5,000.00 exemption to the Petitioner in computing its Florida corporate income tax for each of the years in question on the theory that the two corporations were members of a controlled group of corporations, as defined in Section 1563 of the Internal Revenue Code of 1954. By letter dated April 13, 1976, the Respondent advised Petitioner of its proposed deficiencies for the fiscal years ending December 31, 1972 and 1973, in the respective amounts of $19,086.25 and $1,086.79. Within sixty (60) days thereafter (on or about May 10, 1976), Petitioner filed its written protest in response thereto. By letter dated May 27, 1976, the Respondent rejected the Petitioner's position as to the stock sale gain and exemption issues. Thereafter on September 17, 1976, a subsequent oral argument was presented at a conference held between the parties' representatives in Tallahassee, and by letter dated September 23, 1976, Respondent again rejected Petitioner's position on all pending issues raised herein. The issues posed herein are as follows: Whether under the Florida Corporate income tax code, amounts derived as gain from a sale of intangible personal property situated out of the State of *Herein sometimes referred to as the Code. Florida are properly included in the tax base of a corporation subject to the Florida code. Whether amounts derived as installments during tax years ending after January 1, 1972, from a sale made prior to that date are properly included in the tax base for Florida corporate income tax purposes. Whether two corporations one of whose stock is owned 100 percent by the same person who owns 75 percent of the stock in the other, with the remaining 25 percent of the stock in the second corporation being owned by an unrelated person, constitute members of a control group of corporations as defined by Section 1563 of the Internal Revenue Code of 1954. Many states, in determining corporate income tax liability, utilize a procedure generally referred to a "allocation" to determine which elements of income may be assigned and held to a particular jurisdiction, where a corporation does business in several jurisdictions. By this procedure, non- business income such as dividends, investment income, or capital gains from the sale of intangibles are assigned to the state of commercial domicile. This approach was specifically considered and rejected when Florida adopted its corporate income tax code. Thus, in its report of transmittal of the corporate income tax code to the legislature, at page 215, it was noted: "The staff draft does not attempt to allocate any items of income to the commercial domicile of a corporate taxpayer. It endeavors to apportion 100 percent of corporate net income, from whatever source derived, and to attribute to Florida its apportionable share of all the net income." Additional evidence of the legislature's intent in this area can be seen by noting that when the corporate income tax code was adopted, Florida repealed certain provisions of the Multi-state Tax Compact (an agreement for uniformity entered into among some twenty-five states). Thus, Article IV, Section (6)(c), a contained in Section 213.15, Florida Statutes, 1969, which previously read: "Capital gains and losses from sales of intangible personal property are allocable to this state if the taxpayer's commercial domicile is in this state", was repealed by Chapter 71-980, Laws of Florida, concurrently with the adoption of the Corporate Income Tax Code. This approach has survived judicial scrutiny by several courts. See for example, Johns-Mansville Products Corp. v. Commissioner of Revenue Administration, 343 A.2d 221 (N.H. 1975) and Butler v. McColgan, 315 U.S. 501 (1942). Respecting its constitutional argument that amounts derived as installments during tax years subsequent to January 1, 1972, from a sale made prior to the enactment of the Florida Corporate Income Tax Code, the Petitioner concedes that the Code contemplates the result reached by the proposed assessment. However, it argues that in view of the constitutional prohibition which existed prior to enactment of the Code, no tax should now be levied based on pre-Code transactions. The Florida Supreme Court in the recent case of the Department of Revenue v. Leadership Housing, So.2d (Fla. 1977), Case No. 47,440 slip opinion p. 7 n. 4, cited with apparent approval the decision in Tiedmann v. Johnson, 316 A.2d 359 (Me. 1974). The court in Tiedmann, reasoned that the legislature adopted a "yard-stick" or measuring device approach by utilizing federal taxable income as a base, and reasoned that there was no retroactivity in taxing installments which were included currently in the federal tax base for the corresponding state year even though the sale may have been made in a prior year. The Respondent denied the Petitioner a $5,000.00 exemption based on its determination that the two corporations herein involved were members of a controlled group of corporations as defined in Section 1563 of the Internal Revenue Code. Chapter 220.14(4), Florida Statutes, reads in pertinent part that: "notwithstanding any other provisions of this code, not more than one exemption under this section shall be allowed to the Florida members of a controlled group of corporations, as defined in Section 1563 of the Internal Revenue Code with respect to taxable years ending on or after December 31, 1972, filing separate returns under this code." Petitioner's reliance on the case of Fairfax Auto Parts of Northern Virginia, 65 T.C. 798 (1976), for the proposition that the 25 percent ownership of an unrelated third party in one of the corporations precluded that corporation and the Petitioner from being considered a "controlled group of corporations" within the meaning of Section 1563 of the Internal Revenue Code, is misplaced in view of the recent reversal on appeal by the Fourth Circuit. Fairfax Auto Parts of Northern Virginia v. C.I.R., 548 F.2d 501 (4th C.A. 1977). Based thereon, it appears that the Respondent correctly determined that the Petitioner and Florida Chrysler-Plymouth, Inc., were members of the same controlled group of corporations as provided in Section 1563 of the Internal Revenue Code and therefore properly determined that Petitioner was not entitled to a separate exemption. Based on the legislature's specific rejection of the allocation concept and assuming arguendo, that Florida recognized allocation income for the sales of intangibles, it appears that based on the facts herein, Petitioner is commercially domiciled in Florida. Examination of the tax return submitted to the undersigned revealed that the Petitioner has no property or payroll outside the state of Florida. Accordingly, it is hereby recommended that the proposed deficiencies as established by the Respondent, Department of Revenue, be upheld in its entirety. RECOMMENDED this 7th day of July, 1977, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303 David S. Meisel, Esquire 400 Royal Palm Way Palm Beach, Florida 33480 Thomas M. Mettler, Esquire 340 Royal Poinciana Plaza Palm Beach, Florida 33480
