The Issue The issues in this case are: (1) whether portions of Florida Administrative Code Rules 12D-9.020 and 12D-9.025 constitute invalid exercises of delegated legislative authority; (2) whether sections of Modules Four and Six of the 2010 Value Adjustment Board Training are unpromulgated rules; and (3) whether Property Tax Oversight Bulletin 11-01 is an unpromulgated rule.
Findings Of Fact The Parties Petitioner Turner is the Property Appraiser for Hillsborough County, Florida. Petitioners Crapo, Higgs, and Smith are the Property Appraisers for Alachua, Monroe, and Okaloosa Counties, respectively. Respondent, the Department of Revenue ("DOR"), is an agency of the State of Florida that has general supervision over the property tax process, which consists primarily of "aiding and assisting county officers in the assessing and collection functions." § 195.002(1), Fla. Stat. DOR is also required to prescribe "reasonable rules and regulations for the assessing and collecting of taxes . . . [to] be followed by the property appraisers, tax collectors . . . and value adjustment boards." § 195.027(1). Petitioner-Intervenor Roger A. Suggs is the Clay County Property Appraiser. Petitioner-Intervenor Gary R. Nikolitis is the Palm Beach County Property Appraiser. Petitioner-Intervenor PAAF is a statewide nonprofit professional association consisting of 35 property appraisers in various counties throughout Florida. Petitioner-Intervenor FAPA is a statewide nonprofit professional organization of Florida property appraisers. Respondent-Intervenor FUTMA is a statewide nonprofit association consisting of 46 of the largest property taxpayers in Florida. Ms. Cucchi, the second Respondent-Intervenor, is a property owner and taxpayer in Hillsborough County. Background of Florida's Property Tax System Article VII, Section Four of the Florida Constitution mandates that all property be assessed at "just value," and further requires that the Legislature prescribe, by general law, regulations that "shall secure a just valuation of all property for ad valorem taxation." Pursuant to chapters 192 through 196 of the Florida Statutes, locally elected property appraisers in each of Florida's 67 counties develop and report property assessment rolls. The assessment rolls——which property appraisers prepare each year and submit to DOR by July 1——contain information such as the names and addresses of the property owners, as well as the just, assessed, and taxable values of the properties within each appraiser's respective county. DOR is responsible for reviewing and ultimately approving or disapproving the assessment rolls. § 193.1142, Fla. Stat. Once DOR approves the assessment rolls, the property appraiser mails a "Notice of Proposed Property Taxes and Non-ad Valorem Assessments" (known as a "TRIM" notice) to each property owner. § 200.069, Fla. Stat. The notices advise each owner of his property's assessment for that year, the millage (tax) rate set by the taxing authorities, and the dates of the budget hearing for those authorities. After receiving a TRIM notice, a property owner may request an informal conference with the property appraiser's office to discuss the assessment of his or her property. Alternatively, or in addition to the informal conference, a property owner may challenge the assessment by filing a petition with the county value adjustment board or by brining a legal action in circuit court. § 194.011(3), Fla. Stat.; § 194.171, Fla. Stat. Value Adjustment Boards Pursuant to section 194.015(1), Florida Statutes, each of Florida's 67 value adjustment boards is composed of two members of the county commission, one member of the school board, and two citizen members.1 Of particular import to the instant case, section 194.015(1) requires value adjustment boards to retain private counsel to provide advice regarding legal issues that may arise during value adjustment hearings.2 In counties with populations greater than 75,000, the value adjustment board must appoint special magistrates3 to conduct hearings and issue recommended decisions. § 194.035(1), Fla. Stat. Hearings in counties with 75,000 citizens or fewer may be conducted by either magistrates or the value adjustment board itself. Id. DOR has no involvement in the appointment or removal of board attorneys, magistrates, or the members of value adjustment boards. Should a property owner choose to contest an assessment through the value adjustment board process, the board's clerk schedules an administrative hearing and sends a notice of hearing to the property owner and the property appraiser. § 194.032(2), Fla. Stat. At the hearing, the determinative issue is whether the assessment of the particular property at issue exceeds just value. In the event that a property owner is dissatisfied with the outcome of a value adjustment hearing, an appeal may be taken to the circuit court, where a de novo hearing will be conducted. § 194.036(2) & (3), Fla. Stat. Under certain conditions, the property appraiser may likewise appeal an adverse value adjustment board decision to the circuit court. § 194.036(1).4 2008 Legislative Reforms Prior to 2008, DOR was not charged with the responsibility of training value adjustment boards or their magistrates. However, pursuant to chapter 2008-197, Laws of Florida, the Legislature enacted a series of changes to the VAB process, including a new requirement that DOR "provide and conduct training for special magistrates at least once each state fiscal year." See § 194.035(3), Fla. Stat. Immediately after enactment of the law, DOR initiated rulemaking and developed 2008 interim training for value adjustment boards and special magistrates. Persons required to take the training include all special magistrates, as well as value adjustment board members or value adjustment board attorneys in counties that do not use special magistrates. § 194.035(1) & (3), Fla. Stat. In addition to the new training requirement, chapter 2008-197 mandated that DOR develop a Uniform Policies and Procedures Manual for use by value adjustment boards and magistrates. The Uniform Policies and Procedures Manual ("The Manual"), which is posted on DOR's website and is separate and distinct from DOR's training materials for value adjustment boards, consists of relevant statutes, administrative rules, provisions of the Florida Constitution, as well as forms. The Manual is also accompanied by two sets of separate documents, which are likewise available on DOR's web page: (1) "Other Legal Resources Including Statutory Criteria; and (2) "Reference Materials Including Guidelines," consisting of guidelines and links to other reference materials, including DOR's value adjustment board training materials, bulletins, and advisements. The introduction to the "Reference Materials Including Guidelines" reads in relevant part as follows: The set of documents titled "Reference Materials Including Guidelines," contains the following items: Taxpayer brochure General description and internet links to the Department's training for value adjustment boards and special magistrates; Recommended worksheets for lawful decisions; The Florida Real Property Appraisal Guidelines; * * * 7. Internet links to Florida Attorney General Opinions, Government in the Sunshine Manual, PTO Bulletins and Advertisements, and other reference materials. These reference materials are for consideration, where appropriate, by value adjustment boards and special magistrates in conjunction with the Uniform Policies and Procedures Manual and with the Other Legal Resources Including Statutory Criteria. The items listed above do not have the force or effect of law as do provisions of the constitution, statutes, and duly adopted administrative rules. Revisions to Value Adjustment Board Procedural Rules Pursuant to section 194.011, Florida Statutes, the Legislature charged DOR with the responsibility to prescribe, by rule, uniform procedures——consistent with the procedures enumerated in section 194.034, Florida Statutes——for hearings before value adjustment boards, as well as procedures for the exchange of evidence between taxpayers and property appraisers prior to value adjustment hearings. On February 24, 2010, following a 12-month period of public meetings, workshops, and hearings, the Governor and Cabinet approved the adoption of chapter 12D-9, Florida Administrative Code, which is titled, "Requirements for Value Adjustment Board in Administrative Reviews; Uniform Rules of Procedure for Hearings Before Value Adjustment Boards." As discussed in greater detail in the Conclusions of Law of this Order, Petitioner Turner contends that portions of Florida Administrative Code Rule 12D-9.020, which delineate the procedures for the exchange of evidence between property appraisers and taxpayers, contravene section 194.011. Petitioner Turner further alleges that section 194.011 is contravened by parts of Florida Administrative Code Rule 12D- 9.025, which governs the procedures for conducting a value adjustment hearing and the presentation of evidence. 2010 Value Adjustment Training Materials In 2010, following the adoption of Rule Chapter 12D-9, DOR substantially revised the value adjustment board training materials. After the solicitation and receipt of public comments, the 2010 VAB Training was made available in late June 2010 on DOR's website. The 2010 VAB Training is posted on DOR's website in such a manner that an interested person must first navigate past a bold-font description which explains that the training is not a rule: This training is provided to comply with section 194.035, Florida Statutes. It is intended to highlight areas of procedure for hearings, consideration of evidence, development of conclusions and production of written decisions. This training is not a rule. It sets forth general information of which boards, board attorneys, special magistrates and petitioners / taxpayers should be aware in order to comply with Florida law. (Emphasis in original). The 2010 VAB Training consists of eleven sections, or "modules," portions of two of which Petitioners allege constitute unadopted rules: Module 4, titled "Procedures During the Hearing"; and Module 6, titled "Administrative Reviews of Real Property Just Valuations." While words and phrases such as "must," "should," and "should not" appear occasionally within the materials, such verbiage is unavoidable——and indeed necessary——in carrying out DOR's statutory charge of disseminating its understanding of the law to magistrates and value adjustment board members. Although DOR is required to create and disseminate training materials pursuant to section 194.035, the evidence demonstrates that the legal concepts contained within the 2010 VAB Training are not binding. Specifically, there is no provision of law that authorizes DOR to base enforcement or other action on the 2010 VAB Training, nor is there a statutory provision that provides a penalty in situations where a value adjustment board or special magistrate deviates from a legal principle enumerated in the materials. Further, the evidence demonstrates DOR has no authority to pursue any action against a value adjustment board or magistrate that chooses not to adhere to the legal concepts contained within the training. PTO Bulletin 11-01 On January 21, 2011, DOR issued Property Tax Oversight Bulletin 11-01, titled "Value Adjustment Board Petitions and the Eighth Criterion," to the value adjustment board attorneys for all 67 counties. DOR also disseminated courtesy copies of the bulletin by e-mail to over 800 interested parties. The bulletin, the full text of which is reproduced in the Conclusions of Law section of this Summary Final Order, consisted of a non-binding advisement regarding the use of the eighth just valuation criterion (codified in section 193.011(8), Florida Statutes5) in administrative reviews. The bulletin advised, in relevant part, that the eighth just value criterion: "must be properly considered in administrative reviews"; "is not limited to a sales comparison valuation approach"; and "must be properly considered in the income capitalization and cost less depreciation approaches" to valuation. The bulletin further advised that when "justified by sufficiently relevant and credible evidence, the Board or special magistrate should make an eighth criterion adjustment in any of the three valuation approaches." Although certain interested parties (i.e., a special magistrate in Nassau County, the director of valuation for the Hillsborough County Property Appraiser's Office, and legal counsel for the Broward County value adjustment board) perceived the bulletin to be mandatory, the evidence demonstrates that value adjustment boards and magistrates were not required to abide by the bulletin's contents. As with the training materials, DOR possesses no statutory authority to base enforcement action on the bulletin, nor could any form of penalty be lawfully imposed against a magistrate or value adjustment board that deviates from the legal advice contained within the document. Further, there is no evidence that DOR has taken (or intends to take) any agency action in an attempt to mandate compliance with the bulletin.
The Issue The issue is whether respondent's license as a public adjuster should be revoked, suspended, or otherwise disciplined after his conviction for aiding in the preparation of a false tax return in violation of 26 U.S.C. Section 7206(2).
Recommendation It is RECOMMENDED that Mr. Lesser be found guilty of violation of Section 626.611(7), Florida Statutes (1987), and that his licensure as a public adjuster be suspended for a period of six months. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 28th day of December, 1989. WILLIAM R. DORSEY, JR. 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 28th day of December, 1989. APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 89-0502 Rulings on findings proposed by the Department: 1 and 2. Adopted in finding of fact 3. Adopted in finding of fact 4. Implicit in findings of fact 5 and 6. Adopted in finding of fact 6. Adopted in finding of fact 8. Adopted in finding of fact 8. Adopted in finding of fact 8. Implicit in finding of fact 11. Rulings on findings proposed by Mr. Lesser: 1-11. Inapplicable. Adopted in finding of fact 3. Adopted in finding of fact 3, to the extent necessary. Rejected as unnecessary. Adopted in finding of fact 5. Adopted in finding of fact 5. Adopted in finding of fact 5, though finding of fact 5 includes certain logical deductions or inferences. Made more specific in findings of fact 5 and 6. Adopted as modified in finding of fact 7. Rejected. Not only were the laundering transactions illegitimate because they allowed Benevento Maneri to mischaracterize the source of their income, they also created false expenses for Lesser and Company, Inc., which artificially lowered the income of Lesser and Company, Inc., by the amount of the expense. Adopted as modified in finding of fact 7. It is difficult to determine what Mr. Lesser actually thought the source of the money was, but he knew it was illicit. See, finding of fact 7. Adopted as modified in finding of fact 8. Adopted as modified in finding of fact 9. 25 and 26. Adopted as modified in finding of fact 9. Adopted as modified in finding of fact 10 The extent of Mr. Lesser's danger cannot be determined from this record, although he was in some danger. Covered in finding of fact 9 Adopted as modified in finding of fact 11. Rejected. See, finding of fact 8. The IRS first contacted Mr. Lesser. He then went to Mr. Weinstein to set matters straight. Adopted as modified in finding of fact 11. Adopted as modified in finding of fact 4. Adopted as modified in finding of fact 12. Adopted as modified in finding of fact 12. A light sentence implies the factors set out in finding of fact 35, were taken into consideration, but does not prove that they were all the reasons the U.S. District Judge took into consideration. To the extent necessary, mentioned in finding of fact 12. Rejected as procedural. 38-51. Covered in findings of fact 13 and 14. The proposed findings are subordinate to the findings made in findings of fact 13 and 14. COPIES FURNISHED: S. Marc Herskovitz, Esquire Robert V. Elias, Esquire Office of Legal Services 412 Larson Building Tallahassee, Florida 32399-0300 William W. Corry, Esquire Jack M. Skelding, Jr., Esquire Patrick J. Phelan, Jr., Esquire Parker, Skelding, Labasky & Corry 318 North Monroe Street Post Office Box 669 Tallahassee Florida 32301 Honorable Tom Gallagher State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300 Don Dowdell, General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, Florida 32399-0300
Findings Of Fact The facts in this cause are essentially undisputed. The Pen Haven Company was a Subchapter "S" corporation for federal income tax purposes and therefore incurred no State income tax liability. It was formed in 1960 and retained its Subchapter "S" status thorough 1976 for federal income tax purposes. In December of 1977, the capital stock of Pen Haven Sanitation Company was sold to the Board of County Commissioners of Escambia County. Inasmuch as the sole corporate stock holder then was no longer an individual, but rather a governmental entity, the corporation Subchapter "S" election for federal income tax purposes was terminated. Escambia County did not wish to own stock in a private corporation so it accordingly liquidated Pen Haven and its assets were distributed to the County's direct ownership. Thereafter the Corporation filed a final corporate income tax return for 1977 which reflected capital gains on the assets of the corporation which had been distributed. Some of those assets had tax bases which had been reduced to zero through reduction by depreciation, most of which had been charged off prior to January 1, 1972, the effective date of the Florida corporate income tax code. All of the depreciation deductions had been taken prior to the termination of the Subchapter "S" status of the Pen Haven Company. On disposition of the Pen Haven assets however, a gain was reported equal to the fair market value or salvage value, less the basis. This gain was accordingly reported on Pen Haven's federal income tax return, and on the 1977 Florida corporate income tax return, albeit under the protest as to the Florida tax return. Inasmuch as Pen Haven had previously deducted depreciation since its inception, and had the benefit thereof for federal tax purposes, it was required by the Internal Revenue Service to recapture the depreciation for federal tax purposes upon its sale and the filing of its tax return in 1977. The same recapture of depreciation treatment was required of West Florida Utilities. Thereafter an application was made by the Petitioner corporations for Florida Corporate Income Tax Refunds asserting that they should have not paid taxes on the amount of gains which represented a recapture of depreciation which had been taken as a deduction prior to the effective date of the Florida corporate income tax on January 1, 1972. In effect the Petitioner is contending that the so- called "income" which is the subject of the tax in question was not realized in 1977, but rather merely "recognized" in that year by the federal tax law and that it represented income actually "realized" during the years when the depreciation was taken as a deduction prior to January 1, 1972. The Petitioners contend that "realization" for federal income tax purposes occurs when the taxpayer actually receives an economic gain. "Recognition" on the other hand refers only to that time when the tax itself becomes actually due and payable. The Petitioners maintain that when the tax became due and payable in 1977 that was merely the point of "recognition" of the subject taxable gain and not "realization" in that the gain was actually realized prior to the Florida Jurisdictional date of January 1, 1972, in the form of the economic benefit derived from those depreciation deductions applied to federal tax liability prior to that date. The Petitioners cite SRG Corporation vs. Department of Revenue, 365 So2d 687 (Fla. 1st DCA 1978), for the proposition that Florida could not tax those gains accruing to the taxpayer prior to Florida's having the constitutional and statutory power to impose a corporate income tax. The Respondent in essence agrees that the question of when the economic benefit to the Petitioners was received by them or was "realized" is the key question in this cause. The Respondent contends, however, that "realization" of a taxable gain occurred when the assets were disposed of by the Petitioners in 1977, well after the date when Florida's power to tax such a gain was enacted. The underlying facts in the case of West Florida Utilities are substantially similar. This corporation, however, was organized in 1962 and has never been clothed with Subchapter "S" corporate status. The only grounds upon which it can therefore claim a refund is its assertion that Florida does not have authority to tax that portion of the capital gains attributable to recapture of depreciation which was originally charged off as a deduction prior to January 1, 1972. The Department of Revenue and the Comptroller of the State of Florida both denied the refund claim made on behalf of the Petitioners, and thereafter they seasonably petitioned for a formal administrative hearing pursuant to Chapter 120.57(1), Florida Statutes.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence in the record, the candor and demeanor of the witness and pleadings and arguments of counsel it is, therefore RECOMMENDED this 3rd day of September, 1981, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 904/488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of September, 1981. COPIES FURNISHED: Thurston A. Shell Post Office Box 1831 Pensacola, Florida 32578 Robert A. Pierce, Esquire General Counsel Department of Revenue Tallahassee, Florida 32301 Michael Basile, Esquire Deputy General Counsel Office of Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32301 Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32310
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.
Findings Of Fact In 1972 Petitioner received $743,982 of income from state and municipal bonds. On its federal income tax return the Petitioner allocated $471,229 of this amount to the policyholders' share as required by law and $272,753 to the company's share (Phase I). The Phase II figures were $359,669 and $384,313 respectively. Respondent has added back the entire $743,982 for purposes of computing Petitioner's Florida taxable income. Petitioner added back the $272,753 (Phase I) and $384,313 (Phase II). For 1972 Petitioner accrued $350,000 of Florida taxes on its federal income tax return. In computing its deductions on its federal income tax return 36.6612 percent of this amount was deducted in the Phase I computation and 51.6564 percent in the Phase II computation. Respondent has added back all of the Florida tax accrued in computing the Florida income tax owed by Petitioner. Petitioner's position is that only the company's percentages were deductible and only these amounts should be added back. The amount of additional Florida income tax assessment proposed for 1972 by the Respondent over that paid by Petitioner is $21,234. In 1973 Petitioner received $552,408 of income from state and municipal bonds. On its federal income tax return Petitioner allocated $335,662 of this amount to policyholders' share as required by law and $216,786 to the company's share (Phase I). The Phase II figures were $248,789 and $303,619 respectively. Respondent has added back the entire $552,408 for purposes of computing Petitioner's taxable income. Petitioner added back the $216,786 (Phase I) and $303,619 (Phase II). For 1973 Petitioner accrued $475,000 of Florida taxes on its federal income tax return. In computing its deductions on its federal income tax return 39.2438 percent of this amount was deductible in Phase I and 54.9628 percent in Phase II. Respondent has added back all of the Florida tax accrued. Petitioner's position is that only the company's percentages were deductible and only these amounts should be added back. The amount of additional Florida income tax assessment proposed for 1973 by Respondent was $20,184. It was further stipulated that the sole issues here involved are: The computation of the amount of tax exempt interest which is excludable from taxable income under section 103(a) Internal Revenue Code for purposes of the Florida corporate income tax; and The computation of the amount of Florida income tax accrued which is deductible for purposes of federal income tax and added back for purposes of computing the Florida income tax.
Findings Of Fact In 1962, the Corporation decided to relocate its corporate offices from Newark, New Jersey, to the State of Florida. Implementing this decision, the Corporation secured a twenty year leasehold interest of an entire floor in the Universal Marion Building in Jacksonville, Florida, under which it was obligated to pay an annual rental of $52,000.00. Within a few months during the year 1962, the decision to relocate was rescinded. During the tax year in question, the Corporation retained a part-time employee in Florida for the sole purpose of attempting to either locate a purchaser of the leasehold interest or to avoid further obligations under the lease by negotiations and settlement with the landlord. This part-time employee received his directions from the corporate offices in Newark, New Jersey. Other than these efforts to relieve the burden of the unused leased premises, the Corporation conducted no commercial activities in the State of Florida during the tax year 1973. Although the Corporation's headquarters were ultimately moved to Jacksonville, in January 1976, the Corporation has never occupied the leased premises in question. In fact, in 1974, the Corporation entered into a sublease with the State of Florida for the duration of the lease. Pursuant to audit, DOR assessed the Corporation an additional $12,616.89 in income tax for the year ended December 31, 1973, using the three-factor formula method of apportionment.
The Issue The issue is whether Petitioners owe the taxes, interest, and penalties assessed by the Department of Revenue based upon Petitioners’ alleged rental of their real property to a related corporation from June 2000 through August 2003.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following findings are made: In July 1997, Petitioners acquired the real property located at 640 North Semoran Boulevard in Orlando, Florida (hereafter “the Property”). The Property was acquired in Petitioners’ individual capacities, and they financed the purchase of the Property through a loan secured by a mortgage on the Property. The documents relating to the 1997 loan and mortgage were not introduced at the hearing. At the time the Property was acquired, Petitioner Paul Solano was engaged in the practice of accounting through a sole proprietorship known as P. Solano and Associates. Mr. Solano has been practicing accounting in Florida since 1969 and he is familiar with Florida's sales tax laws. The Property was treated as an asset of Mr. Solano’s sole proprietorship even though he was not using it as his place of business at the time. For example, depreciation expense related to the Property was itemized on Petitioners’ tax returns as a business expense. The mortgage payments made by Petitioners were also treated as business expenses of the sole proprietorship. In October 1999, Mr. Solano incorporated his accounting practice into an entity known as Solano & Associates Enterprises, Inc. (hereafter “the Corporation”). The sole business of the Corporation is providing accounting services. At the time of its formation, the Corporation was owned in equal 20 percent shares by Mr. Solano, his wife (Petitioner Diane Solano), their two daughters, and their son-in-law. There has been no change in the ownership of the Corporation since its inception. Mr. Solano is the president of the Corporation. The other owners/family members are also officers in the Corporation. Once the Corporation was formed, the depreciation expense related to the Property was included on the Corporation's tax returns, not Petitioners' tax return. At the time the Property was purchased, it was zoned for residential use. Between 1997 and 1999, Petitioners took the necessary steps to get the Property rezoned for commercial use so that the Corporation could conduct its accounting practice from that location. In November 1999, after the property had been rezoned, the Corporation and its owners applied for a loan from First Union National Bank (First Union) to obtain the funds necessary to renovate the existing building on the Property. Although unclear from the documentation in the record, Petitioners both testified that the 1999 loan was effectively a refinancing of the 1997 loan. The Corporation was not able to obtain a loan in its own name because it had only been in existence for a short period of time. The owners of the Corporation were not able to obtain a loan at a favorable interest rate, primarily because of the lack of credit history of Petitioners’ daughters and son-in- law. As a result, the loan was obtained by Petitioners in their individual capacities. Petitioners gave a mortgage on the Property as collateral for the 1999 loan. The mortgage document, entitled “Mortgage and Absolute Assignment of Leases” (hereafter "the 1999 mortgage"), was signed by Petitioners in their individual capacities on November 18, 1999; the Corporation was not identified in the 1999 mortgage in any way. The 1999 mortgage includes boiler-plate language referring to Petitioners’ obligation to maintain and enforce any leases on the Property and requiring the assignment of rents from any such leases to First Union. That language cannot be construed to mean that a lease actually existed at the time; in fact, the Property was still undergoing renovations at the time. The Corporation began doing business from the Property in February 2000 after the renovation work was complete and a certificate of occupancy was issued. The 1999 loan was refinanced in May 2000 with First Union. The loan amount was increased from $145,000 to $200,000 and the term of the loan was extended through a document entitled “Mortgage and Loan Modification and Extension Agreement” (hereafter "the 2000 mortgage"). The 2000 mortgage refers to the Corporation as the borrower and refers to Petitioners as the guarantors. Petitioners signed the 2000 mortgage in their individual capacities (to bind themselves as guarantors) as well as their capacities as corporate officers (to bind the Corporation as borrower). The related promissory note, dated May 5, 2000, also refers to the Corporation as the borrower, and it is signed by Petitioners in their capacity as officers of the Corporation. As part of the documentation for the refinancing in 2000, Petitioners executed an “Affidavit of Business Use” in which they attested they were the owners of the Property and that the loan proceeds would be “utilized exclusively for business or commercial purposes and not for personal use.” Petitioners also executed a “Mortgagors" Affidavit” in which they attested that they were in sole possession of the Property and that no other persons have claims or rights to possession of the property “except Solano & Associates Enterprises by virtue of a written lease which does not have an option to purposes or right of first refusal.” The monthly mortgage payment for the refinanced loan was $2,044.91. That amount was due on the fifth day of each month beginning on June 5, 2000, and it was automatically deducted from the Corporation’s bank account with First Union. In addition to making the mortgage payment for the Property, the Corporation paid the ad valorem taxes, insurance, and related expenses. The amount of those payments is not quantified in the record. Petitioners formally deeded the Property to the Corporation in October 2003. Mrs. Solano testified that the failure to do so earlier was simply an “oversight.” When the Property was formally deeded to the Corporation, Petitioners did not report any income or loss on the transaction for tax purposes. Any equity that had accumulated in the Property was simply “given” to the Corporation. The First Union mortgages were satisfied in October 2003 as part of a refinancing done by the Corporation with SunTrust bank after it became the owner of the Property.1 At that point, the Corporation had been in existence long enough to establish a credit history and obtain financing in its own name. The record does not include any documentation related to the 2003 refinancing transaction. Despite the representation in the “Mortgagors’ Affidavit” quoted above, there has never been any written or oral lease between Petitioners and the Corporation with respect to the use of the Property. Petitioners have always considered the Property to be a business asset, initially an asset of Mr. Solano’s sole proprietorship and then an asset of the Corporation. Petitioners never collected any sales tax from the Corporation on the mortgage payments made by the Corporation. Petitioners did not consider those payments to be rental payments. In late-June or early-July 2003, the Department sent a letter to Petitioners stating that the Property “appears to be subject to sales tax pursuant to Chapter 212.031, Florida Statutes.” The letter was sent as part of the Department’s “Corporation Rent Project” through which the Department compares records in various databases to identify commercial properties whose owner of record is different from the business operating at that location. Included with the letter was a questionnaire soliciting information from Petitioners regarding the Property and its use. The questionnaire was completed by Mr. Solano and returned to the Department in a timely manner. Mr. Solano marked a box on the questionnaire indicating that the Property is “[o]ccupied by a corporation in which a corporate officer is the property owner,” and he identified the Corporation as the entity occupying the Property. In response to the question as to “which of the following considerations are received by you,” Mr. Solano marked the following boxes: “The corporation remits payment for the mortgage loan”; “I do not receive rental income, but the related entity pays the mortgage payments”; and “No consideration is received from this related entity.” In response to the questions regarding the “monthly gross rental income of the property” and the “amount of real estate taxes . . . paid on the property by the lessee” for 2000 through 2003, Mr. Solano answered $0 for all periods. Terry Milligan, a tax specialist with the Department, determined based upon Mr. Solano’s responses on the questionnaire that the Corporation’s use of the Property was subject to the sales tax on rentals. Mr. Milligan advised Petitioners of that determination by letter dated July 29, 2003. The letter requested that Petitioners provide “a detailed month by month breakdown of rent (or mortgage payment) amounts, any other consideration, and property taxes that you received from the tenant (or tenant paid on your behalf) for the last thirty-six (36) months).” (Emphasis in original). Petitioners responded to Mr. Milligan’s request through a letter dated August 11, 2003. The letter explained that the reason that the title to the Property appeared under Petitioners’ name rather than the Corporation's name is “due to credit history.” More specifically, the letter stated that “[i]t was decided by the Board members, my wife and our [] children, to put it under our name since we have a long history of good credit.” Included with the letter was a bank statement showing the monthly mortgage payment of $2,044.91 and a notice of the proposed property tax assessment from Orange County for the Property, which was addressed to the Corporation. In addition to providing the requested documentation to Mr. Milligan, one of Petitioners’ daughters, Joylynn Aviles, spoke with Mr. Milligan to explain the circumstances relating to the financing and use of the Property. Ms. Aviles is the Secretary of the Corporation. Ms. Aviles also spoke with Mr. Milligan’s supervisor and an individual in the Department’s legal division. When it became apparent that the matter could not be resolved informally, Ms. Aviles requested that Mr. Milligan issue a final assessment so that Petitioners could bring a formal protest. In response, the Department issued the NOFA on September 11, 2003. The NOFA was preceded by a spreadsheet dated September 3, 2003, which showed how Mr. Milligan calculated the tax, penalties, and interest amounts set forth in the NOFA. As described in Mr. Milligan’s spreadsheet and his testimony at the hearing, the tax was computed based upon the monthly mortgage payments of $2044.91 made by the Corporation from June 2000 to August 2003. The June 2000 start-date for the assessment corresponds to the 36-month period referred to in Mr. Milligan’s July 29, 2003, letter; it also happens to correspond to the date that Corporation began making the mortgage payments. The August 2003 end-date for the assessment was used because it was the month preceding the date of the NOFA. The Department has not sought to expand the assessment to include the period between August 2003 and October 2003 when the Property was formally deeded to the Corporation. The NOFA does not include any assessment for the property taxes, insurance or other expenses paid by the Corporation on the Property. The Department has not sought to expand the assessment to include those amounts. The sales tax rate in effect in Orange County during the assessment period was six percent from June 2000 through December 2002, and it was 6.5 percent from January 2003 through August 2003. The 0.5 percent increase resulted from the imposition of a county surtax of some kind. The NOFA calculated a total tax due of $4,784.91. As shown in Mr. Milligan’s spreadsheet, that amount was calculated by multiplying the monthly mortgage payment by the tax rate in effect at the time of the payment and then totaling those monthly amounts. The NOFA calculated $465.79 in interest due on the unpaid tax through September 13, 2003. As shown in Mr. Milligan’s spreadsheet, that amount was calculated at the applicable statutory rates. Interest continues to accrue at 53 cents per day. The NOFA calculated a penalty due of $2,233.97. That amount was calculated based upon the applicable statutory rate as shown in Mr. Milligan’s spreadsheet and explained in the NOFA. In total, the NOFA imposed an assessment of $7,566.43. That amount includes the taxes, interest, and penalties described above. The NOFA informed Petitioners of the procedure by which they could protest the Department's assessment. On November 10, 2003, the Department received Petitioners' timely protest of the assessment. This proceeding followed.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue issue a final order rescinding the Notice of Final Assessment issued to Petitioners. DONE AND ENTERED this 17th day of March, 2004, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II 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 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of March 2004.
The Issue The issue is whether petitioner's candidacy for the office of Tax Collector would conflict or interfere with his employment as an auditor for the Department of Revenue.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioner, Robert M. Hendrick, a career service employee, is employed with respondent, Department of Revenue (DOR), as a Tax Auditor IV in its Leesburg, Florida field office. He has been employed by DOR since September 1991. In his position, petitioner primarily audits tangible personal property assessments performed by the local Property Appraiser and, on occasion, he inspects the property which is the subject of the assessment. In March 1996, the Lake County Tax Collector publicly announced that he would not run for reelection. After learning of this decision, by letter dated March 19, 1996, petitioner requested authorization from his employer to run for that office. The letter was received by DOR's Executive Director on April 1, 1996. On April 10, 1996, the Executive Director issued a letter denying the request on the ground the candidacy would conflict with petitioner's job duties. More specifically, the letter stated in relevant part that: Under section 195.002, Florida Statutes, the Department of Revenue has supervision of the tax collection and all other aspects of the administration of such taxes. Your position with the Department may require you to review or audit the activities of the office you propose to seek. Also some of your duties in supervising other officials in the administration of property taxes may be affected by your proposed candidacy. Your job requires you to review appropriate tax returns, and other records to resolve complex issues related to taxing statutes administered by the Department of Revenue. It also requires you to identify and scrutinize transactions to ascertain whether taxpayers have escaped paying property taxes. In addition, it also requires you to review and audit procedures used by counties to identify and value tangible personal property and accomplish statutory compliance, to investigate taxpayer complaints, to conduct field review with county staff as appropriate, and to provide education and assistance to county taxing officials. Because of the Department's statutory supervision of the office of tax collector, there cannot be a certification that your candidacy would involve "no interest which conflicts or activity which interferes" with your state employment within the definitions in section 110.233(4), Florida Statutes. The letter went on to say that This letter is a specific instruction to you that you should not qualify or become a candidate for office while employed in your current position. If you wish to commence your campaign by performing the pre-filing requirements, the law requires that you first resign from the Department. Failure to do so shall result in disciplinary action to dismiss you from your position in accordance with the Department's disciplinary standards and procedures, and Rule 60K-4.010, F.A.C., on the grounds that you are in violation of the Department's Code of Conduct, Section 110.233, Florida Statutes, and Rule 60K- 13.002(3), F.A.C. After receiving the above decision, by letter dated April 15, 1996, petitioner requested that the Executive Director reconsider his decision. Thereafter, on April 24, 1996, petitioner filed a request for a formal hearing to contest the agency's decision. Both the Property Appraiser and Tax Collector play a role in the property tax program in the State of Florida. The Property Appraiser generally values or assesses property subject to taxation and applies the millage rate set by the taxing authority. After the tax roll is approved by DOR, it is certified to the Tax Collector who then collects the taxes and distributes them to the appropriate taxing authorities. It is noted that ad valorem taxes make up the lion's share of taxes at the local level while tangible personal property taxes are a very small source of revenues. DOR is charged with the duties of providing oversight to the property tax program and aid and assistance to the Property Appraiser and Tax Collector. In this regard, DOR views the two offices as an integral part of the property tax program rather than two separate entities. It characterizes the program as "a stream or process where (the) lines of delineation (between the two offices) are not as distinct as they might have been ten or fifteen years ago." Because of the highly sensitive nature of the tax program, it follows that a certain degree of trust and integrity must exist between DOR (and its employees) and the local offices. Petitioner does not interface with the office of Tax Collector in any respect, and his duties do not require that he audit any of that office's records. His only duties are to audit the tangible personal property assessments performed by the Property Appraiser. These facts were not controverted. Although he has never differed with a valuation of the Property Appraiser during his five year tenure at DOR, and no such disagreement has occurred in Lake County during the last twenty-five years, petitioner could conceivably disagree with an assessment while running for office during the next few months. If the matter could not be informally settled, the tax rolls would not be certified by DOR, and litigation against DOR could be initiated by the Property Appraiser. Under those unlikely circumstances, petitioner might be called as a witness in the case, although the general practice has always been for DOR to use personnel from the Tallahassee office in litigation matters. To the very minor extent that petitioner could affect the tax rolls by disagreeing with the Property Appraiser's valuations, this could also impact the amount of money collected by the Tax Collector. DOR cites these circumstances as potentially affecting in an adverse way the level of trust and integrity between DOR and the office of Tax Collector. However, under the facts and circumstances of this case, this potential conflict is so remote and miniscule as to be wholly immaterial. The evidence also shows that in his audit role, petitioner has the "opportunity . . . to look and have access to tax returns," some of which "are of TPP (tangible personal property) nature (and) have attached to them federal tax returns" which might be used by the Property Appraiser for establishing the value of tangible personal property. Whether petitioner has ever had access to, or reviewed such, returns is not of record. In any event, to the extent this set of circumstances would pose a potential conflict with the Property Appraiser, as to the Tax Collector, it would be no more significant than the purported conflict described in finding of fact 7. Finally, DOR suggests that if petitioner was unsuccessful in his bid for office, it would likely damage the "relationship of trust" that now exists between DOR and the Tax Collector. Again, this purported conflict is so speculative as to be deemed immaterial. The parties have stipulated that, as of the date of hearing, petitioner's only option for qualifying to run for office is to pay a $6,173.00 qualifying fee no later than noon, July 19, 1996. The opportunity for submitting an appropriate number of signatures in lieu of a filing fee expired on June 24, 1996. On the few, isolated occasions during the last twenty-five years when the Lake County Tax Collector has requested information from DOR personnel, he has spoken by telephone with DOR legal counsel in Tallahassee. Those matters of inquiry, primarily relating to ad valorem taxes, do not concern any area related to petitioner's job duties. He also pointed out that his office always cooperates with the office of the Property Appraiser, especially when "corrections" must be made due to errors by that office. Even so, he described the two offices as being separate and with entirely different duties. This testimony is accepted as being the most persuasive on this issue. At least four persons have already announced that they would run for Tax Collector for Lake County. The parties have stipulated that one of those persons is a regional administrator for the Department of Highway Safety and Motor Vehicles who was not required to resign his position in order to run for office. According to the incumbent Tax Collector, that individual supervises other state employees who occasionally audit certain aspects of his office pertaining to automobile license plates and decals. Because of the time constraints in this case, and although not legally obligated to do so, respondent has voluntarily agreed to allow petitioner to take annual leave (or presumably leave without pay) commencing on the date he qualifies for local public office, or July 19, 1996, and to remain on leave until a final order is issued by the agency. At that time, if an adverse decision is rendered, petitioner must choose between resigning or withdrawing as a candidate. These terms are embodied in a letter from DOR's counsel to petitioner dated July 3, 1996. If petitioner is allowed to run for office without resigning, he has represented that he will campaign while on leave or after regular business hours. He has also represented, without contradiction, that his campaign activities will not interfere with his regular duties. If elected, he intends to resign his position with DOR.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue enter a final order granting petitioner's request that it certify to the Department of Management Services that his candidacy for the office of Lake County Tax Collector would involve no interest which conflicts, or activity which interferes, with his state employment. DONE AND ENTERED this 10th day of July, 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 10th day of July, 1996. APPENDIX TO RECOMMENDED ORDER Respondent: Partially accepted in finding of fact 1. Partially accepted in findings of fact 2 and 3. 3-5. Partially accepted in finding of fact 1. 6. Partially accepted in finding of fact 5. 7-9. Partially accepted in finding of fact 4. 10-11. Partially accepted in finding of fact 7. 12. Rejected as being irrelevant since petitioner was not an employee of DOR in 1990. 13-17. Partially accepted in finding of fact 7. 18. Rejected as being unnecessary. 19-20. Partially accepted in finding of fact 5. 21. Partially accepted in finding of fact 8. 22-23. Partially accepted in finding of fact 5. Partially accepted in finding of fact 9. Rejected as being unnecessary. Note - Where a proposed finding of fact has been partially accepted, the remainder has been rejected as being irrelevant, not supported by the evidence, unnecessary, subordinate, or a conclusion of law. COPIES FURNISHED: L. H. Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Mr. Robert M. Hendrick 5022 County Road 48 Okahumpka, Florida 34762 Peter S. Fleitman, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
Findings Of Fact Petitioner, Lloyd Enterprises, Inc. (Lloyd) has requested that it be awarded $22,006.00 in attorney's fees and out-of-pocket expenses of $589.31 for a total of $22,595.31. All fees and expenses listed by Lloyd were incurred in its successful appeal of the adverse decision in its Section 120.57(1) F.S. proceeding challenging the Respondent agency's tax assessment. All fees and costs claimed were incurred during appeal after the recommended and final orders were entered against Lloyd in a formal tax assessment proceeding, Lloyd Enterprises, Inc. v. Department of Revenue, DOAH Case No. 92-2348. The formal tax assessment proceeding arose pursuant to Section 72.011 and Chapter 212 F.S. concerning the balance ($57,471.43) of a greater sales and use tax assessment levied against Lloyd for its alleged failure to pay sales tax on goods and services sold to customers of concession stands on Daytona Beach for an audit period before Lloyd owned and operated the stands. Because Lloyd was unable to provide records of predecessors in interest, the agency estimated tax on the basis of Lloyd's existing records after purchasing the stands. Also, Lloyd was assessed sales taxes (approximately $6,004.38 of the assessed tax liability) for all beach concession fees it had paid to Volusia County during the audit period of 11/1/85--12/31/90, pursuant to Section 212.031, F.S. [1989]. Lloyd's petition for formal hearing before DOAH was a letter previously utilized in the parties' informal negotiations. FDOR moved for a more definite statement and time to file an answer if Lloyd were required to file a more definite statement or a more definite petition. An order dated May 19, 1992 denied the agency's request for more definite statement and provided, in pertinent part, "...As Respondent's motion has observed, an answer in this type of proceeding is not mandatory. Respondent is, however, granted 10 days from the date of this order in which to file an answer should the agency elect to do so." The agency elected to stand on its prior notices of proposed assessment. Therefore, for purposes of this proceeding, the agency's "petition," as contemplated by Section 120.575(5) F.S. is the original tax assessment. The tax assessment proceeding went to formal hearing pursuant to Section 120.57(1) F.S. without any motions to dismiss or for other summary relief filed by either party. The recommended order found in favor of the agency's assessment, with some minor arithmetical adjustments required. The final order adopted the recommended order in toto. Lloyd appealed the final order. In Lloyd Enterprises, Inc. v. Department of Revenue, 651 So. 735 (Fla. 5th DCA 1995), decided upon Lloyd Enterprises, Inc. v. Department of Revenue, DOAH Case No. 92-2348, (RO entered by the undersigned Hearing Officer on 4/01/93; FDOR's FO entered 5/24/93), Lloyd argued that Section 212.031, F.S. [1989], had been erroneously applied to the beach concession fees charged by Volusia County and that Section 212.10 [1989] was unconstitutional as applied to Lloyd in this case and that the "projection" method used by FDOR's auditors to determine the amount of taxes due was unauthorized, unreasonable, and arbitrary. FDOR argued that the transfer and annual fees charged by the County to beach concessionaires pursuant to its Unified Beach Code and Ordinance, (Volusia County Ordinance 88-32), constituted rent payments for the various beach locations. The Fifth District Court of Appeal partially agreed with Lloyd and reversed. The court did not reach Lloyd's argument that Section 212.10 F.S. is arbitrary and capricious and, therefore, unconstitutional but did agree with Lloyd that under the facts of this case and the statutory framework, the best estimate provisions of Section 212.12(5)(b), F.S. [1989], could not be invoked to impose liability upon Lloyd as a "successor" dealer. (615 So.2d 735 at 736). The appellate court ruled with regard to the first issue raised on appeal that, The hearing officer erred in deciding it was proper to impose a sales tax on the fees Volusia County charged Lloyd for the privilege of selling and renting goods and services to the public on public beaches and that these privileges constituted taxable events under Rule 12A-10.070 F.A.C. and Section 212.031 F.S.. It ruled further that, The hearing officer arrived at this ruling simply by deferring to the Department's interpretation of the rule and by noting there was no contrary case law. The hearing officer correctly pointed out that deference should be given to an agency's interpretation of its rules and the statutes it is charged to administer. However, the agency's interpretation is subject to review and is not conclusive. (651 So.2d 735 at 736). The court went on to say, We hold that, in exercising the duties imposed on it by the Unified Beach Code, the County did not enter into the business of renting, leasing, or licensing real property. Accordingly, the tax liability assessed on the basis of the concession- aire fees being a license or lease of land is reversed. (651 So.2d 735 at 737) The appellate court also stated that, At the time Lloyd purchased the concessions, neither Lloyd nor the sellers were aware of the duties imposed by Section 212.10 [1989] which imposed on a purchasing or successor dealer the sales tax liabilities of a selling dealer under certain circumstances, and Lloyd concedes it did not comply with the statute. (651 So.2d 735 at 738). The Fifth District Court of Appeal majority opinion criticized the agency for relying solely on Lloyd's own, adequate records for the more current years after Lloyd purchased the concessions which are records not listed in Section 212.12(5)(b) F.S. as usable even if that section were applicable. It further criticized the agency for making no effort to obtain or project--or estimate--sales tax liabilities of the prior concessionaires on the basis of their own records which would have been for the relevant taxable period. However, the appellate court's ultimate ruling on the second issue raised on appeal was that the agency was not entitled to invoke Section 212.12(5)(b) F.S. without showing that Lloyd was guilty of a default listed by the statute. The opinion relies on the fact that, because there was no statutory or regulatory mechanism in place by which Lloyd could have ascertained the prior owners' tax liability, Lloyd, the taxpayer, could not be in default. The court observed the longstanding and frequently reiterated precedent that, "tax laws should be construed strongly in favor of the taxpayer and against the government with all ambiguities or doubts resolved in the taxpayer's favor." The opinion stops short of finding the statute unconstitutional as written or as applied to Lloyd. The foregoing rulings by the appellate court are res judicata for purposes of determining whether or not there was any justiciable issue of law or fact raised by the agency's initial tax assessment. The recommended and final orders appealed from did not reserve jurisdiction to determine entitlement to any fees or costs. The Petitioner made no request for fees and costs to the appellate court and none were awarded. There is no order of the appellate court requiring FDOR or DOAH to award fees or costs. Petitioner makes its claim herein only pursuant to Sections 57.111 and 120.575(5), F.S. The agency has never entered a final order on remand in accord with the decision of the Fifth District Court of Appeal, but clearly, Lloyd ultimately prevailed at the appellate level. Petitioner filed its original fees and costs petition with DOAH within 60 days of the appellate court's mandate. That petition was dismissed by an order herein dated June 28, 1995. The second paragraph of the June 28, 1995 order read, "Petitioner shall have 15 days from date of this order to amend its motion (sic=petition)." The fifteenth day was July 13, 1995. The Amended Petition was served and filed with DOAH on July 14, 1995. Respondent set forth no showing of prejudice by the one day's delay.
