Findings Of Fact Southern Bell Telephone and Telegraph Company filed petition with the Public Service Commission pursuant to Section 120.54(5), Florida Statutes, seeking to have the Commission adopt a new rule numbered 25-9.11(2). By Order entered April 10, 1979, the Commission initiated rule-making proceedings in accordance with the petition of Southern Bell, and by Order entered May 4, 1979, amended the rule-making proceeding by expanding the applicability of the proposed rule to include not only telephone utilities as proposed by Southern Bell, but also electric, gas, water and sewer utilities. On May 24, 1979, the Citizens of the State of Florida, represented by the Office of Public Counsel, initiated the instant proceeding by filing a petition to determine that a portion of the proposed rule is invalid. Various regulated utilities moved to intervene in the proceeding, and were granted intervenor status. The Public Service Commission and various other Intervenors moved to dismiss the proceeding on jurisdictional grounds. The motions were denied by Orders entered June 12 and 19, 1979. The Public Service Commission filed a Petition for Writ of Prohibition in the Supreme Court of Florida with respect to the jurisdictional issues. Proceedings before the Division of Administrative Hearings were stayed. The Petition for Writ of Prohibition was denied on September 5, 1979. Florida Public Service Commission v. Division of Administrative Hearings, Case No. 57,116 (Supreme Court of Florida). A Petition for Rehearing was denied by Order entered November 9, 1979. Subsequently, the final hearing was scheduled to be conducted on December 27, 1979, and upon stipulation of the parties was rescheduled for January 22, 1980. At the final hearing, the Public Service Commission and the Intervenors stipulated that the Petitioners have the requisite substantial interest in the proposed rule to maintain the instant rule challenge. The Petitioners and the Commission stipulated that the Intervenors have the requisite standing to participate in the proceeding as Intervenors. A copy of the rule was received in evidence. Issues respecting the validity of the rule are legal rather than factual, and the parties have submitted post-hearing briefs and legal memoranda. The proposed rule [25-9.11(2)] relates to whether a regulated utility is entitled to a rate increase during the period in which a rate proceeding is pending before the Public Service Commission. The rule provides: In any general rate case filed by a utility, the utility shall be permitted upon thirty (30) days' notice to increase its rate pending final disposition of the case by an amount sufficient to produce a rate of return on its investment rate base at the bottom of its most recent previously allowed zone of reasonableness; provided, however, that any such interim increase shall be subject to refund. The rule purports to implement the provisions of the so-called file and suspend laws. As to telephone companies, the file and suspend law is set out at Section 364.05(4), Florida Statutes. The section provides: Pending a final order by the Public Service Commission in any rate proceeding under this section, the commission may withhold consent to the operation of all or any portion of the new rate schedules, delivering to the utility requesting such increase, within 30 days, a reason or written statement of good cause for withholding its consent. Such consent shall not be withheld for a period longer than 8 months from the date of filing the new schedules. The new rates or any portion not consented to shall go into effect under bond at the end of such period, but the commission shall, by order, require such utility to keep accurate account in detail of all amounts received by reason of such increase, specifying by whom and in whose behalf such amounts were paid, and upon completion of hearing and final decision in such proceeding, shall by further order require such utility to refund with interest at a fair rate, to be determined by the commission in such manner as it may direct, such portion of the increased rate or charge as by its decision shall be found not justified. Any portion of such refund not thus refunded to patrons or customers of the utility shall be refunded or disposed of by the utility as the commission may direct; however, no such funds shall accrue to benefit of the utility. Virtually identical provisions have been adopted with respect to gas and electric utilities [Section 366.06(4), Florida Statutes], and with respect to water and sewer utilities [Section 367.081(5), Florida Statutes]. The leading judicial decision interpreting the provisions of the file and suspend laws is Citizens of the State of Florida v. Mayo, 333 So.2d 1 (Fla. 1976). The Court described the alternatives available to the Public Service Commission in conjunction with a request for interim rate increase as follows: (at p. 4) If the Commission does not affirmatively act within 30 days to suspend the proposed new rate schedule file as a part of the request for higher rates, the new rates go into effect automatically on the 31st day following the utility company's filing. Since the Commission's inaction is equivalent to its consent to the new rate schedule, no bond is required of the utility and there is no mechanism by which customers of the utility system can ever recover interim charges which, after the full rate proceeding, the Commission may find to have been wholly or partly unwarranted. If the Commission acts within thirty days to suspend all or part of the tariffs, the utility may not charge its customers the proposed new rates. The Commission's action is effective on a day to day basis until either (a) it grants full or partial consent to the new rates, or (b) eight months elapse from the date the new schedules were filed. If consent is given before the time expiration, as it was here, the utility may then begin to charge the new rates. Where consent is continuously withheld, the utility may still begin to charge its customers on the new basis after eight months have passed, under bond and record-keeping requirements required by statute. The relationship of the interim rate relief provisions to the general scheme of rate regulation was described by the Court as follows: (at p. 5) The Legislature did not intend all public utility filings to go into effect without some review by the Public Service Commission. Had that been the intent the Legislature would not have created a "suspend" power in the Commission. By placing the file and suspend law in Section 366.06, however, the Commission was given direct responsibility in this type of proceeding to insure that all charges collected by a public utility are lawful. See Section 366.06(1), Florida Statutes (1975). The Legislature did not intend a full rate hearing before all new rate schedules become effective. Had it intended that result, there would have been no need to enact subsection 366.06(4) at all. The Legislature obviously intended to allow public utilities the benefit of proposed rate increases from the date they could satisfy the Commission on the basis of an uncontested preliminary showing that the needs of the company were such as to necessitate immediate financial aid. Where the Commission is so satisfied after a preliminary analysis extending over a period not longer than thirty days, the rates become effective without further action by the Commission. (It follows from this, of course, that the Commission's affirmative act of suspending proposed rates means that the Commission is dissatisfied with the utility's preliminary showing.) The Legislature has relieved the Commission of the responsibility for balancing the rights of the company and its customers when the utility is unable to develop new facts to show that there exists good cause to put into operation the new rates which have been found to be unjustified on the basis of the preliminary showing. This was done by providing that Commission inaction following an initial suspension is overcome by time, and that the rates become effective at the end of eight months, automatically, under bond. In light of the conclusion in paragraph 5 and the fact that the Commission must provide its "reason or written statement of good cause" whenever it withholds consent to the new rates, the Legislature must have intended that there be some presentation of evidence or development of new facts between that initial withholding of consent by the Commission and its later grant of consent. (citations omitted) Petitioners contend that the proposed rule is invalid because it would render an interim rate increase automatic upon the filing of a request for interim rate relief by a regulated utility without regard to the merits of the request and without any review of the propriety of the request by the Commission. Petitioners argue that the proposed rule removes the discretion and range of alternatives available to the Commission set out in Citizens of Florida v. Mayo, supra. These contentions are without merit. Rather than making an interim rate increase automatic, the proposed rule sets the standard against which a proposed increase would be measured, that being a rate sufficient to produce a return on the utility's investment at the bottom of the most recently determined zone of reasonableness. The utility's expenses, revenues and investment rate would be calculated in the same manner as was used in the most recent general rate case involving the utility. See: proposed Rule 25-9.11(4). Under the proposed rule, the public Service Commission would retain its discretion to suspend an interim rate increase if the substantive requirements of the proposed rule were not met. The Commission would also retain its responsibility to consider the propriety of interim rate increases. Petitioners' contention that the proposed rule improperly denies appropriate parties who may contest the need for interim rate increases an opportunity for hearing is also without merit. The rule does not address procedures to be followed by the Commission in applying the substantive standards of the rule. The fact that procedures are not addressed does not mean that no such procedures exist. The rule neither expressly nor implicitly undermines rights to a hearing that parties may have under the Administrative Procedure Act, Chapter 120, Florida Statutes, or under constitutional due process requirements, Florida Power Corporation v. Hawkins, 367 So.2d 1011, 1013 (Fla. 1979). Petitioners further contend that the proposed rule is an effort to reinstate the so-called "make-whole" doctrine set out in Southern Bell Telephone and Telegraph Company v. Bevis, 279 So.2d 285 (Fla. 1973). Petitioners' argument is that the make-whole doctrine has been superseded by the file and suspend laws. In Southern Bell, the utility requested that the Public Service Commission grant it an interim rate increase pending completion of a general rate proceeding. The Commission denied the request for interim relief. The Court stated: (at p. 286) Thus when Southern Bell alleged that its rate of return was below that approved by the Commission as a minimum it had alleged a prima facie case to require approval of the Commission for an interim rate increase, so long as the increase would not raise the company's rate of return above the minimum level of 8.25 percent approved by the Commission. Since it must be assumed that the Commission obeyed its statutory mandate. . . any rate of return above the authorized minimum must, of necessity, be unfair, unjust, unreasonable and insufficient. If Southern Bell has proved the allegations which were made in its petition for an interim rate increase, the Commission must approve that request so as to bring the Southern Bell rates within statutory guidelines. It is for the Commission to determine whether or not Southern Bell has met this requirement, as the Commission sits as trier of fact, rather than this Court. The proposed rule adopts this same standard. The file and suspend laws have not changed that standard, but rather have streamlined the mechanism for considering whether interim rate increases should be granted. Maule Industries, Inc. v. Mayo, 342 So.2d 63 (Fla. 1977); Citizens of the State of Florida v. Mayo, supra, at Footnote 12, p. 6. The Petitioners have failed to establish that Public Service Commission Proposed Rule 25-9.11(2) constitutes an invalid exercise of delegated legislative authority. The proposed rule is presently pending for consideration before the Commission. Whether the proposed rule constitutes the best of various policy alternatives that may be available to the Commission has not been an issue in this proceeding. Based upon the foregoing, it is, hereby ORDERED: Petitioner has failed to establish that Proposed Rule 25-9.11(2) of the Public Service Commission constitutes an invalid exercise of delegated legislative authority, and the petition to determine invalidity of the proposed rule filed by the petitioners is hereby dismissed. ENTERED this 22nd day of February, 1980, in Tallahassee, Florida. G. STEVEN PFEIFFER Assistant Director Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Norman H. Horton, Jr., Esquire Marta Crowley, Esquire Staff Counsel Florida Public Service Commission 101 East Gaines Street Tallahassee, Florida 32301 Benjamin H. Dickens, Jr., Esquire Office of Public Counsel Room 4, Holland Building Tallahassee, Florida 32301 Lorin H. Albeck, Esquire Post Office Box 110 Tampa, Florida 33601 Lee L. Willis, Esquire Ausley, McMullen, McGehee, Carothers & Proctor Post Office Box 391 Tallahassee, Florida 32302 William E. Sundstrom, Esquire Myers, Kaplan, Levinson Kenin & Richards 1020 East Lafayette Street Tallahassee, Florida 32301 James F. Sanfield, Esquire Post Office Box 14042 St. Petersburg, Florida 33733 Ms. Nancy H. Roen 1111 South Bayshore Drive Miami, Florida 33131 Matthew M. Childs, Esquire 1400 Southeast First National Bank Bldg. Miami, Florida 33131 Ms. Mary Jo Francis Post Office Box 47000N Miami, Florida 33147 William B. Barfield, Esquire General Attorney 666 North West 79th Avenue, Room 680 Miami, Florida 33126 Ms. Liz Cloud, Chief Bureau of Administrative Code Department of State The Capitol Tallahassee, Florida 32301 Carroll Webb, Esquire Executive Director Administrative Procedures Committee Room 120, Holland Building Tallahassee, Florida 32301
Findings Of Fact Frank O. Sherrill is the sole stockholder of Oceania Charters, Inc. and is a resident of North Carolina from where he directs the operations of Oceania Charters, Inc. The principal, if not sole, asset of Oceania Charters, Inc. is the 101 foot motor yacht Captiva II. The Captiva II was built in Amsterdam, the Netherlands, pursuant to contract between the shipbuilder and Oceania Charters, Inc. and/or Frank Sherrill entered into in 1972. Sherrill purchased the vessel for the intended purpose that it be used as a charter vessel hired to various charterers for short or longer-term cruises. This is the fourth or fifth vessel that Respondent has owned and used in the charter business. The evidence was uncontradicted that the purpose of acquiring the Captiva II was to place it in charter service. The vessel was originally scheduled for completion in the summer of 1973 and it was intended to have the Captiva II proceed from Amsterdam to North Carolina under her own power. The vessel was not completed until late fall or early winter and the insurers would not insure the Captiva II if it proceeded across the North Atlantic under her own power at that time of year. Arrangements were made to ship the Captiva II from Amsterdam to Bermuda via freighter to off-load the Captiva II there and proceed under her own power to Wilmington, North Carolina for custom clearance and documentation. While loading the Captiva II damage was done to one stabilizer and to the hull. Upon arrival of the ship carrying the Captiva II at Bermuda, excess costs involved in off-loading and repairing there were weighed against the carrier's offer to off- load the Captiva II at the next port of call, Miami, and facilities at the latter port. It was then decided that the Captiva II should stay aboard for the voyage from Bermuda to Miami and there be off-loaded and repaired. This was done and upon arrival in Miami the Captiva II was off-loaded, repaired and fitted out for charter operations. Berthing arrangements were made and, except for charter trips, trips to Palm Beach soliciting charters, and sea trials the Captiva II has been moored at Miami. Mr. and Mrs. Sherrill stayed on board the Captiva II during the period she was being outfitted for charter operations and on several of the sea trials the vessel underwent. They were not on board during any of the charter trips and did not use the Captiva II for cruises themselves or make her available for use by their friends unless pursuant to a charter party. These facts were undisputed.
The Issue The issues in this case are whether Petitioner was provided incorrect, inaccurate, and erroneous information, and, if so, if she may transfer to the Florida Retirement System (FRS) Pension Plan (Pension Plan) by paying a “buy-in” amount of $2,418.55, consistent with the amount quoted to Petitioner in January 2020.
Findings Of Fact Ms. Evangelisto has been continuously employed by an FRS- participating employer since August 2012. As a new employee of an FRS-participating employer, Ms. Evangelisto had a choice to enroll in one of two FRS retirement plans: the Pension Plan or the Investment Plan. The Pension Plan is administered by the Florida Division of Retirement (Division of Retirement), which is housed within the Department of Management Services. The Pension Plan is a defined benefit plan; the benefit is formula-based. The formula used for calculating a pension plan benefit is based on total years of creditable service at the time of retirement, membership class, and average final compensation. See § 121.091, Fla. Stat. The Investment Plan is administered by SBA. The Investment Plan is a defined contribution plan; the benefit is based on gains and losses due to market performance. On January 22, 2013, Ms. Evangelisto enrolled in the Investment Plan, with an effective date of February 1, 2013. This choice is considered Ms. Evangelisto’s initial election. Ms. Evangelisto is still enrolled in the Investment Plan. After making an initial election, an employee may make a “second election” if still employed with an FRS-participating employer, earning salary and service credit. Ms. Evangelisto may utilize a second election to move into the Pension Plan, but must pay a “buy-in” amount to do so. This sum is derived from an actuarial calculation conducted by the Division of Retirement. To effectuate a second election, Ms. Evangelisto must complete and submit a 2nd Election Retirement Plan Enrollment Form (2nd Election Form) to the Plan Choice Administrator. The 2nd Election Form may be obtained by calling the MyFRS Financial Guidance Line or through the MyFRS.com website. When completed, the form may be submitted by facsimile, mail, or by electronic submission through the MyFRS.com website. Respondent is required to provide FRS Investment Plan participants with educational services, including: disseminating educational materials; providing retirement planning education; explaining the Pension Plan and the Investment Plan; and offering financial planning guidance on matters such as investment diversification, investment risks, investment costs, and asset allocation. See § 121.4501(8)(b), Fla. Stat. Respondent provides these educational services through Ernst & Young (EY), a contracted third-party administrator. EY financial planners provide information to FRS employees via the MyFRS Financial Guidance Line. On multiple occasions over the years, going back to as early as July 2018, Ms. Evangelisto spoke to EY financial planners via the MyFRS Financial Guidance Line to request a calculation of her buy-in amount.2 In July 2018, Ms. Evangelisto contacted the MyFRS Guidance Line to request her buy-in amount. In August 2018, she received a comparison estimate. The comparison estimate provided the estimated buy-in amount, the current value of her Investment Plan, and the amount of out-of-pocket funds 2 Ms. Evangelisto testified that she made requests to determine her buy-in amount even prior to 2018. Ms. Evangelisto would have to pay to buy into the Pension Plan. This out-of- pocket sum is the result of the difference between the buy-in amount determined by the Division of Retirement and her Investment Plan account balance. The amounts contained in the comparison estimate are only valid for the calendar month in which they are issued. From July 2018, through March 2019, there were numerous communications between Petitioner and EY Financial Planners by telephone conversation, email, and through voice messages. Ms. Evangelisto made requests for buy-in amounts and received updated comparison estimates in November 2018 and March 2019. On January 13, 2020, Petitioner requested a calculation of her buy-in amount. On January 22, 2020, she received a comparison estimate which set forth an out-of-pocket cost of $2,418.55 to transfer to the Pension Plan. The estimate indicated that it was valid until January 31, 2020. On February 14, 2020, Petitioner requested another calculation of her buy-in amount. On March 12, 2020, she received a comparison estimate with an out-of-pocket cost of $7,198.64. The estimate indicated that it was valid until March 31, 2020. Ms. Evangelisto testified that she did not transfer to the Pension Plan, after being provided comparison estimates, because she did not have the funds to pay for the associated out-of-pocket cost. On June 24, 2020, Petitioner called the MyFRS Guidance Line to request yet another comparison estimate. During this conversation, Petitioner inquired about potential changes to the buy-in amount associated with becoming “vested.” The conversation was recorded and later transcribed by a court reporter: Ms. Evangelisto: Does the cost to buy into the pension change significantly once you would be vested at the eight years? EY financial planner: I actually don’t know if it would or not. Ms. Evangelisto: Okay. EY financial planner: I can try to find out. I don’t think it’s necessarily based on vesting, but more the years of service. Ms. Evangelisto: Okay. During the June 24, 2020, call, the EY financial planner told Ms. Evangelisto that she could expect the comparison estimate in three weeks. Ms. Evangelisto agreed to July 16, 2020, for a follow-up call. On July 9, 2020, Ms. Evangelisto received an email from EY, but the email did not contain the requested comparison report. On July 15, 2020, Ms. Evangelisto called the MyFRS Guidance Line to follow up on her June 24 request and to ask about the July 9 email. The EY financial planner calculated the buy-in costs for her over the phone. He provided a verbal, estimated out-of-pocket cost of $17,657.00 to buy into the Pension Plan. Surprised by this number, which was over $10,000 higher than the out-of-pocket estimate provided in March 2020, Ms. Evangelisto asked why the cost increased. This telephone call was also recorded and later transcribed by a court reporter. Relevant parts of the conversation are as follows: Ms. Evangelisto: Does it normally jump up heftily at eight years of service -- EY financial planner: No. No. Ms. Evangelisto: -- or like in a yearly increment? EY financial planner: No. Ms. Evangelisto: It doesn’t? EY financial planner: It -- okay, you have been watching in and monitoring it very closely, so you had in December, January, March, and now we are a July figure. If all of those other figures were consistent, while the increase due to the change in the underlying interest rate might have a negative impact, it shouldn’t be so much that it’s going to bump up the cost by another $10,000. The EY financial planner promised to look into the numbers to ensure they were not miscalculated. On the same day, the EY financial planner called Ms. Evangelisto back and left a voicemail. He stated that the out-of-pocket cost he provided on the earlier phone call was correct and that the number had substantially increased because Ms. Evangelisto hit the eight-year vesting mark.3 The previous calculations were based on having an unvested account balance. Ms. Evangelisto returned the EY financial planner’s call and he confirmed the information he provided in the voicemail. Ms. Evangelisto asked EY financial planners, on two occasions, if her buy-in amount (and resulting out-of-pocket costs) would increase upon becoming vested. On the first occasion, during the June 24 call, the EY financial planner told her that he “did not know” and would endeavor to provide her with an answer by July 16. Unfortunately for Ms. Evangelisto, the final date to make the switch to the Pension Plan before the substantial increase4 was June 30. Ms. Evangelisto reached out to the MyFRS Guidance Line on July 15, prior to her scheduled July 16 call. On this occasion, the EY financial planner provided incorrect information when he told her that buy-in amounts did not 3 In her Proposed Recommended Order, Ms. Evangelisto asserted that she became “vested” on July 1, 2020, after completing eight years of creditable service with FRS-participating employers. 4 It is important to note that the amount to buy into the Pension Plan increased every time Ms. Evangelisto requested a calculation, albeit not the sizeable jump that occurred when she became vested. substantially increase upon vesting. This proved to be inconsequential, however, as the increase to Ms. Evangelisto’s buy-in amount had occurred as of July 1, 2020, prior to the EY planner providing the incorrect information. An EY financial planner provided inaccurate information to Ms. Evangelisto when he indicated that no substantial jump would occur upon vesting. Nevertheless, Ms. Evangelisto is required to pay a buy-in amount as calculated by the Division of Retirement when she chooses to move forward with making the second election. Petitioner did not prove that she should be entitled to pay the buy-in amount calculated in January 2020. That amount was valid until January 31, 2020, and the document provided to Ms. Evangelisto clearly notified her of such. Ms. Evangelisto still has a one-time second election to move into the Pension Plan.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the State Board of Administration enter a final order dismissing Petitioner’s Florida Retirement System Investment Plan Petition for Hearing. DONE AND ENTERED this 21st day of January, 2021, in Tallahassee, Leon County, Florida. S JODI-ANN V. LIVINGSTONE Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us COPIES FURNISHED: Elisha Marie Evangelisto 4604 20th Avenue West Bradenton, Florida 34209 Deborah Stephens Minnis, Esquire Ausley McMullen, P.A. Post Office Box 391 Tallahassee, Florida 32302 Ash Williams, Executive Director & Chief Investment Officer State Board of Administration 1801 Hermitage Boulevard, Suite 100 Post Office Box 13300 Tallahassee, Florida 32317-3300
The Issue The issue is whether the Department of Revenue (the "Department") may levy on deposits of Bell Industries, Inc. ("Bell Industries") held at Wells Fargo Bank as proposed in the Department's March 5, 2012, Notice of Intent to Levy.
Findings Of Fact The Department is the agency of the state of Florida charged with the duty to enforce the collection of taxes imposed pursuant to chapter 212, Florida Statutes, including the authority to levy against the credits or personal property of delinquent taxpayers. § 213.67, Fla. Stat. Bell Industries is a holding company for the operation of several operating entities. In early 2007, Bell Industries purchased Skytel, a telecommunications services company, from Verizon. The purchased entity was subject the communications services tax set forth in chapter 202, Florida Statutes. Mark A. Begle, an officer of Bell Industries, testified that the tax compliance issues undertaken by his company in this purchase were "quite painful and took a lot of time." Mr. Begle stated that the complexity of filings under the Florida communications services tax necessitated the hiring of Tax Partners, an outside specialty company based in Atlanta, to fulfill the Skytel tax obligations. It took Tax Partners several months to get the systems in place to properly file the Florida tax forms. Mr. Begle acknowledged that his company's initial Florida tax returns were late filed. After the Department received and processed the initial returns, it sent initial notices to Bell Industries advising the company of the late filing penalty and interest amounts due for the delinquent months. The Department sent the initial notices on August 23, 2007. Eventually, the Department sent out a Notice of Final Assessment to Bell Industries for each of the two tax periods for which the company had filed delinquent returns. The Notice of Final Assessment for the reporting periods of February 2007 through May 2007, was mailed on September 25, 2007. The Notice of Final Assessment for the reporting period of May 2008, was mailed on February 6, 2009. The Department's Notice of Final Assessment offers a taxpayer two routes for contesting an assessment. First, the taxpayer may commence an informal protest process by submitting a letter requesting review to the Department within 20 days of the date of the assessment. § 213.21, Fla. Stat. and Fla. Admin. Code R. 12-6.0033. Second, the taxpayer may choose to bypass the informal protest process and commence the formal appeals process provided by chapter 72, Florida Statutes, within 60 days of the date of the assessment. Bell Industries did not timely invoke either method of contesting the assessments. Therefore, the assessments became final. The Department filed a warrant, dated September 2, 2008, in Leon County stating that Bell Industries was indebted to the Department in the amount of $23,800.41.2/ Of this amount, $23,780.41 was listed as "penalty." The remaining $20.00 was listed as a "filing fee." Thus, for all practical purposes, the claimed amount of indebtedness is entirely a penalty. Department records indicated that the Department twice rejected Bell Industries' requests for compromise or waiver of the assessments, on September 14, 2007, and December 19, 2008. The Department issued a Notice of Freeze, dated March 5, 2012, to Wells Fargo Bank, a financial institution in Philadelphia, Pennsylvania. The Notice of Freeze instructed the bank that Bell Industries had a delinquent liability for tax, penalty and interest owed to the Department pursuant to section 213.67, and that the bank "may not transfer, dispose of, or return any credits, debts, or other personal property owned/controlled by, or owed to, this taxpayer which are in your possession or control or become under your possession or control up to the amount of $23,800.41." On March 15, 2012, Wells Fargo Bank reported to the Department that it was holding $23,800.41 in Bell Industries deposits. On March 5, 2012, the Department issued a Notice of Intent to Levy on credits or personal property belonging to Bell Industries. On March 21, 2012, the Department issued a Notice of Contested Intent to Levy, in acknowledgement that Bell Industries was contesting the Department's intended levy. At the hearing, Bell Industries essentially conceded its liability for the amount owed. Mr. Begle, Bell Industries' representative, credibly testified that the company endeavors to be timely and in full compliance as regards all of its tax obligations. Mr. Begle noted that his company sold Skytel in March 2008, which led to the termination of the relationship with Tax Partners and the dismantling of the entire management structure related to Skytel. Mr. Begle blamed these activities for Bell Industries' slow response, because correspondence from the Department regarding these tax issues was being sent to personnel no longer associated with Bell Industries. Mr. Begle requested that these unusual circumstances be taken into account and that the Department consider waiving or negotiating the penalty at issue in this proceeding. At the hearing, the Department took the position that section 213.21 allows the Department to negotiate a compromise of an assessment of tax, interest and penalty, but that once the time for filing a challenge to the assessment passes, as set forth in Florida Administrative Code Rule 12-6.0033, the Department no longer has the authority to compromise a claim. Because Bell Industries failed to file a timely challenge, the Department could not accept less than the amount claimed in the Notice of Intent to Levy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order finding that the $23,800.41 in the Wells Fargo Bank belonging to Bell Industries is subject to the Notice of Intent to Levy that the Department of Revenue issued on March 5, 2012, in accordance with section 213.67, Florida Statutes, but that the levy should not occur until Bell Industries is provided a reasonable period of time in which to submit a request for settlement or compromise pursuant to Florida Administrative Code Rule 12-13.003. DONE AND ENTERED this 27th day of August, 2012, 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 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of August, 2012.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Petitioner's 1978 cost report be modified consistent with the foregoing adjustments. DONE and ENTERED this 10th day of November, 1982, in Tallahassee, Florida. DONALD R. ALEXANDER 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 10th day of November, 1982.
The Issue Whether the Petitioners are responsible for a use tax on the purchase of tangible personal property as assessed by the Respondent and, if so, in what amount.
Findings Of Fact The Department of Revenue is the state agency charged with the responsibility of collecting use tax in accordance with Florida law. At all times material to the allegations of this case, Petitioners were residents of Miami, Florida. In August, 1992, Hurricane Andrew struck the Miami area and destroyed most, if not all, of Petitioners' household furnishings. The Petitioners were devastated by their personal losses. Financially the Petitioners did not recover enough from the losses to replace all that had been damaged or destroyed by the storm. When it came time to refurnish their home, Petitioners traveled to North Carolina and selected new household furnishings which were paid for by them and imported into the State of Florida at their direction. These household furnishings are considered tangible personal property under the applicable Florida laws. The trucking companies which transported Petitioners' new furnishings were required to stop at Department of Agriculture and Consumer Services weigh stations, and copies of the bills of lading for Petitioners' personal property were produced and copied. The Department of Revenue utilized such bills of lading to calculate the use tax owed and due on the Petitioners' personal property. The Department of Revenue does not instruct the employees of the Department of Agriculture to stop particular kinds of trucks for inspection, but rather trains the Agriculutre employees to look for certain kinds of commodities, in order to identify all commodities that may be subject to sales and use tax. The Department of Agriculture employees are instructed by the Department of Revenue to forward to the Department of Revenue the bills of lading from those shipments containing consumer commodities that are for use or consumption and are subject to tax, and they are instructed not to forward bills of lading for items which are exempt from tax or which are intended for resale. The purpose of this program is to assist the Department of Revenue in its enforcement of the sales and use tax. A purchaser of goods from out-of-state is required to voluntarily comply with the statutes imposing the use tax. The Department of Revenue calculated the amounts due from Petitioners for the use tax associated with their personal property imported into Florida and reduced such amounts to a final assessment. This assessment was issued by the Department on or about July 25, 1996. Petitioners have not disputed the accuracy of the assessment nor the fact that they imported the personal property described in the bills of lading used to calculate the assessment. Petitioners maintain that they should not be required to remit the tax set forth in the assessment as they were the victims of Hurricane Andrew and, but for their losses from that storm, would not have incurred the expense of new furnishings. The final assessment identified the following sums owed by Petitioners: tax in the amount of $1,020.84; penalty in the amount of $510.42; and interest through July 25, 1996, in the amount of $137.87. Petitioners did not establish that they had paid sales tax in North Carolina for the personal property shipped to Florida. Petitioners did not establish that they paid the use tax in Florida for the personal property described in the bills of lading used to calculate the tax assessed. Petitioners did not purchase the personal property through a charitable organization such as the Red Cross which was afforded tax exemption after Hurricane Andrew to purchase furnishings for the storm's victims. Petitioners did not establish that they are financially unable to pay the assessment.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order affirming the assessment in this cause. DONE AND ENTERED this 5th day of August, 1997, in Tallahassee, Leon County, Florida. J. D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 5th day of August, 1997. COPIES FURNISHED: Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Elizabeth T. Bradshaw Assistant Attorney General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Alphonso Thurman Betty Thurman 13603 Southwest 102 Court Miami, Florida 33176
Findings Of Fact The Petitioner, Greyhound Lines, Inc., operated as a motor carrier throughout the State of Florida prior to June 30, 1980. Greyhound provided regular route passenger service, sightseeing services, charter operations, tours and express package service. Prior to June 30, 1980, Greyhound, regulated by the Florida Public Service Commission, held Certificate of Public Convenience and Necessity #26. On or before June 30, 1980, the Florida Public Service Commission adopted various rules and regulations regulating motor carriage, including Rule 25-5.14, Florida Administrative Code, related to and pursuant to Chapter 323.22, requiring payment of cab card fees and road taxes by regulated motor carriers including Greyhound. Chapter 323 became invalid by operation of law on July 1, 1980, the subject rule was declared invalid by an Order of the Division of Administrative Hearings in Aero Mayflower Transit Company, Inc., et al., vs. State of Florida Public Service Commission and The Comptroller of the State of Florida, DOAH Case Number 82-131R. Under the Commission's procedures pursuant to Chapter 323, Florida Statutes, and Chapter 25-5, Florida Administrative Code, Greyhound was sent instructions each year (Exhibit 1) together with an application form (Exhibit 2) from the Transportation Section of the Public Service Commission. These instructions and applications were used to file for new cab card identifying devices for vehicles and for payment of road taxes each year. Such was the procedure for the tax year beginning February 1, 1980, and ending January 31, 1981. Pursuant to the Commission's rules and Chapter 323, Greyhound was required to pay $8 per bus for each bus used in intrastate carriage in the State of Florida. In return for that $8.00, Greyhound received a "cab card" to be retained aboard the bus as an identifying device for Public Service Commission enforcement purposes. See Exhibit 5. Road taxes were required to be paid for each Greyhound bus in operation in intrastate carriage which had a capacity of over 21 passengers. The road tax for each bus was in the amount of $100. A road tax identification stamp or device was provided for each bus upon payment of this tax, which evidenced payment of the tax for purposes of law enforcement personnel viewing buses in the field. In the late fall of 1979, Greyhound received the subject Public Service Commission application and instruction forms and accordingly purchased cab cards for its buses and paid road taxes for those buses for the ensuing tax year at various times beginning October, 1979 through January, 1980. The buses which were licensed in Florida for the 1980 tax year (and its other buses) also operated in Greyhound pools of buses throughout the United States, therefore Greyhound, by necessity, had to purchase cab cards and pay road taxes in advance of the February 1, 1980, deadline to allow sufficient time to locate each bus and thus legally qualify it for operation in Florida prior to its operating in Florida on or after February 1, 1980. Pursuant to the Commission's rules, Greyhound was required to assign each cab card and road tax identification decal to a specific bus, retain these on that bus and provide information of this to the Commission on a particular form for its records. On or before February 1, 1980, the beginning of the subject tax year, Greyhound paid the following amounts on the following dates: DATE AMOUNT October 5, 1979 $ 12,636.00 [For 1980 road tax decals on 117 buses.] November 7, 1979 134,244.00 [For registration of 1,243 buses for the 1980 tax year.] December 4, 1979 7,020.00 [For 1980 registration of 65 buses.] January 10, 1980 2,376.00 [For registration of 22 buses for tax year 1980.] Thus, the total amount paid by Greyhound for the tax year 1980 amounted to $156,276.00. Of this total amount, there was the sum of $11,576.00 paid for cab card fees at $8.00 per vehicle. Greyhound also paid for the tax year 1980 the amount of $144,700.00 which represented the road tax fees at $100 per bus. Greyhound was required to have road tax decals and cab cards aboard the buses after February 1, 1980, evidencing payment of the fees and taxes involved. If it did not do so the Commission, through its duly authorized investigators, would issue citations to Greyhound for failure to pay tax or to properly identify vehicles and could initiate penalty proceedings. The Respondent, through use of Exhibit A, established that an Auto Transportation Road Tax Clearing Fund was used by the Public Service Commission to account for the collection of road taxes assessed motor carriers, pursuant to Section 323.15, Florida Statutes, for the use of the public highways. Road tax moneys were transmitted to the State Treasury for the credit of the State's General Revenue Fund as required by Sections 215.20 and 215.22(24), Florida Statutes. Other portions of those receipts were transferred to the Public Service Commission's Regulatory Trust Fund and the Revenue Sharing Trust Funds for municipalities and counties as provided by Section 232.16, Florida Statutes. These distributions were made by the State Comptroller based on information provided by the Commission during the 1979-1980 fiscal year. The fourth-quarter receipts for that fiscal year, however, were not distributed because of the repeal of Chapter 323, Florida Statutes, by Chapter 76-168, Section 3(2)(h), Laws of Florida, 1976, as amended by Chapter 77-457, Section 1(3)(h), Laws of Florida (1977). Distribution of those fourth-quarter receipts is pending a legal determination regarding all motor carrier requests for refunds of fees and taxes for the calendar year 1980. Payments for cab cards and payments of road tax were deposited by the Public Service Commission into the Regulatory Trust Fund, general revenue, or revenue sharing trust funds pursuant to Chapter 323, Florida Statutes (1979). Upon receipt of the payments, with the proper application, the Public Service Commission issued and sent the number of cab cards paid for to the Petitioner. Each cab card specified an expiration date of February 1, 1981. The payment of road taxes was evidenced by the sending of road tax decals by the Public Service Commission to the Petitioner for each vehicle for which such road tax was paid. These decals also specified an expiration date of February 1, 1981. A motor carrier regulatory program of Public Service Commission was administered by the Transportation Section. The operation of this section was paid for out of the regulatory trust fund established under Section 350.78, Florida Statutes (1979). The major functions of this section involved enforcement efforts in the field to ensure that only certificated motor carriers were providing intrastate carriage and that those motor carriers operated in the territory, on the routes, and hauled the commodities or types of passengers which they were authorized to transport. Regulatory functions and enforcement functions also included field inspections of motor vehicles for safety purposes; field analysis of the adequacy of motor carrier service to shippers; verifying registration of ICC certificated carriers and verifying and updating records relative to evidence of insurance by motor carriers, including the Petitioner. Finally, investigations were routinely conducted attendant to new requests for operating authority and certificates of public convenience and necessity by new motor carriers or those seeking to extend their area of operations. The moneys paid into the Regulatory Trust Fund were commingled and were lawfully expended without specific identification of the source of the funds. The road taxes collected pursuant to Section 323.15, Florida Statutes (1979), were deposited pursuant to Section 323.16, Florida Statutes (1979), in the State Treasury credited in the amount of 35 percent deposited in the Regulatory Trust Fund for use by the Commission in the administration of its statutory responsibilities; 2 percent credited to the Revenue Sharing Trust Fund for municipalities; and the remainder of the funds placed in the State Treasury to the credit of the Revenue Sharing Trust Fund for counties. All moneys for cab card fees were deposited in the Florida Public Service Commission Regulatory Trust Fund pursuant to Section 323.011(11), Florida Statutes (1979). The Petitioner timely applied for a refund of the payments made to the Public Service Commission pursuant to Chapter 323, Florida Statutes (1979), for the 1980 cycle or "tax year," as follows: seven-twelfths of amounts paid for cab cards and seven-twelfths of amounts paid for road taxes.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence in the record, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is RECOMMENDED: That a Final Order be entered which refunds the Petitioner, on a pro rata basis, seven-twelfths of 35 percent of the road taxes paid by the Petitioner for the year February 1, 1980, through January 31, 1981; and refunds all recurring, second time or renewal fees paid for those identifying devices known as cab cards and identification stamps related to the year February 1, 1980, through January 31, 1981; and refunds all charges related to cab cards or road tax decals issued subsequent to June 30, 1980, or issued prior to July 1, 1980, to be used July 1, 1980, or on a later date. DONE and ENTERED this 1st day February, 1983, in Tallahassee, 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 1st day of February, 1983.
The Issue Whether the Department of Revenue (DOR) has properly issued an assessment against Petitioner for sales and use tax, interest, and penalty.
Findings Of Fact Petitioner is a Florida resident. In 1996, Petitioner began doing business as a sole proprietor under the name of "Duraline Industries" and registered with DOR as a sales tax dealer. Later, this entity was called "Dura Steel." Petitioner also operated as a corporation, Steel Engineered Design Systems, Inc. Petitioner's Florida sales tax numbers are 42-11-009271-63 and 40-00-003416- For purposes of these consolidated cases, Petitioner has been audited and charged individually as "Charles R. Bielinski," because the audit revealed that no checks were made out to the corporation(s) and that the monies received were received by Mr. Bielinski as a sole proprietor in one or more "doing business as" categories. Petitioner engaged in the business of fabricating items of tangible personal property, i.e., prefabricated steel buildings, many of which later became improvements to real property in Florida. Petitioner used some of the steel buildings in the performance of real property contracts by installing the buildings as improvements to real property. Petitioner also engaged in the business of selling buildings and steel component parts such as sheets and trim in Florida. Petitioner sold buildings and component parts in over- the-counter retail sales, also. On October 7, 2002, DOR issued Petitioner a Notification of Intent to Audit Books and Records for the period of September 1, 1999 through August 31, 2002. This audit was assigned number AO226920428. In 2002, Petitioner provided DOR's auditor with his sales activity records, such as contracts and job information. A telephone conversation/interview of Petitioner was conducted by the auditor. Over a period of several months, the auditor attempted to get Petitioner to provide additional records, but none were forthcoming. DOR deemed the contracts and job information provided by Petitioner to be an incomplete record of his sales activity for the audit period. Petitioner claimed that most of his sales activity records had been lost or destroyed. Due to the absence of complete records, DOR sampled Petitioner's available records and other information related to his sales in order to conduct and complete its audit. Petitioner purchased materials used to fabricate his steel buildings. Petitioner sometimes would erect the buildings on real property. Petitioner fabricated main frames for smaller buildings at a shop that he maintained at the Bonifay Airport. Otherwise, Petitioner subcontracted with like companies to fabricate main frames for larger buildings. Petitioner made some sales to exempt buyers, such as religious institutions and government entities. When he purchased the materials he used to fabricate the buildings, Petitioner occasionally provided his vendors with his resale certificate, in lieu of paying sales tax. Petitioner did not pay sales tax on the materials he purchased to fabricate buildings when such buildings were being fabricated for exempt buyers such as churches and governmental entities. On June 23, 2003, DOR issued Petitioner a Notice of Intent to Make Audit Changes (Form DR-840), for audit number AO226920428, covering the period of November 1, 1997 through August 31, 2002. DOR has assessed Petitioner sales tax on the buildings, sheets, and trim he sold over-the-counter in Florida. DOR has assessed Petitioner use tax on sales of the materials used in performing real property contracts in Florida. The auditor calculated a method of estimating taxes based on the limited documentation that had been provided by Petitioner. She used a sampling method based on Petitioner's contract numbering system; isolated the Florida contracts; and divided the Florida contracts between the actual sale of tangible property (sale of just the buildings themselves) and real property contracts (where Petitioner not only provided the building but also provided installation or erection services). The auditor scheduled the real property contracts and assessed only the material amounts as taxable in Florida. Since she had only 19 out of 47 probable contracts, or 40 percent, she projected up to what the taxable amount should be and applied the sales tax and surtax at the rate of seven percent, as provided by law. She then divided that tax for the entire audit period by the 58 months in the audit period, to arrive at a monthly tax amount. This monthly tax amount was broken out into sales and discretionary sales tax. Florida levies a six percent State sales tax. Each county has the discretion to levy a discretionary sales tax. Counties have similar discretion as to a surtax. The auditor determined that Petitioner collected roughly $22,000.00 dollars in tax from one of his sales tax registrations which had not been remitted to DOR. During the five-year audit period, Petitioner only remitted tax in May 1998. DOR gave Petitioner credit for the taxes he did remit to DOR during the audit period. The foregoing audit processes resulted in the initial assessment(s) of August 28, 2003, which are set out in Findings of Fact 25-31, infra. On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR-832/833), for additional discretionary surtax, in the sum of $2,582.19; interest through August 28, 2003, in the sum of $782.55; and penalty, in the sum of $1,289.91; plus additional interest that accrues at $0.50 per day. (DOAH Case No. 04-0008) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional sales and use tax in the sum of $154,653.32; interest through August 28, 2003, in the sum of $50,500.06; and penalty, in the sum of $77,324.54, plus additional interest that accrues at $31.54 per day. (DOAH Case No. 04-0009) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional local governmental infrastructure surtax, in the sum of $7,001.82; interest through August 28, 2003, in the sum of $2,352.09; and penalty in the sum of $3,497.35; plus additional interest that accrues at $1.45 per day. (DOAH Case No. 04-0010) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional indigent care surtax, in the sum of $513.08; interest through August 28, 2003, in the sum of $156.33; and penalty, in the sum of $256.24; plus additional interest that accrues at $0.10 per day. (DOAH Case No. 04-0011) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional school capital outlay surtax in the sum of $3,084.49; interest through August 28, 2003, in the sum of $922.23; and penalty, in the sum of $1,540.98; plus additional interest that accrues at $0.60 per day. (DOAH Case No. 04-0012) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional charter transit system surtax, in the sum of $2,049.22; interest through August 28, 2003, in the sum of $766.07; and penalty, in the sum of $1,023.27; plus additional interest that accrues at $0.46 per day. (DOAH Case No. 04-0013) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), additional small county surtax, in the sum of $10,544.51; interest through August 28, 2003, in the sum of $3,437.85; and penalty in the sum of $5,282.30; plus additional interest that accrues at $2.15 per day. (DOAH Case No. 04-0014) However, the auditor testified at the May 13, 2004, hearing that she attended Petitioner's deposition on March 18, 2004. At that time, Petitioner provided additional documentation which permitted the auditor to recalculate the amount of tax due. The auditor further testified that she separated out the contracts newly provided at that time and any information which clarified the prior contracts she had received. She then isolated the contracts that would affect the Florida taxes due. Despite some of the new information increasing the tax on some of Petitioner's individual Florida contracts, the result of the auditor's new review was that overall, the contracts, now totaling 33, resulted in a reduction in total tax due from Petitioner. These changes were recorded in Revision No. 1 which was attached to the old June 23, 2003, Notice of Intent to Make Audit Changes, which was sent by certified mail to Petitioner. The certified mail receipt was returned to DOR as unclaimed. The auditor's calculations reducing Petitioner's overall tax are set out in Respondent's Exhibit 16 (Revision No. 1). That exhibit appears to now show that taxes are owed by Petitioner as follows in Findings of Fact 34-40 infra. For DOAH Case No. 04-0008, discretionary surtax (tax code 013), Petitioner only owes in the amount of $1,937.37, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0009, sales and use tax (tax code 010), Petitioner only owes in the amount of $111,811.04, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0010, local governmental infrastructure surtax (tax code 016), Petitioner only owes in the amount of $5,211.00, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0011, indigent care surtax (tax code 230), Petitioner only owes in the amount of $317.39, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0012, school capital outlay tax (tax code 530), Petitioner only owes in the amount of $2,398.68, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0013, charter transit system surtax (tax code 015), Petitioner only owes in the amount of $1,558.66, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0014, small county surtax (tax code 270), Petitioner only owes in the amount of $7,211.83, plus penalties and interest to run on a daily basis as provided by law.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law set forth above, it is RECOMMENDED that the Department of Revenue enter a final order upholding the amount of tax calculated against Petitioner in its June 21, 2003, Notice of Intent to Make Audit Changes, Revision No. 1, in the principal amounts as set forth in Findings of Fact Nos. 34-40, plus interest and penalty accruing per day as provided by law, until such time as the tax is paid. DONE AND ENTERED this 14th day of July, 2004, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of July, 2004.
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.
Findings Of Fact The parties executed and filed a Prehearing Stipulation in this proceeding stipulating to the facts and agreeing that there were no issues of fact which remain to be litigated. Based upon the stipulation of facts, the facts found relevant to the issues in this rule challenge proceeding are as follows: Petitioner, American Telephone and Telegraph Company, is the parent corporation of the "Bell System," a group of corporations consisting of twenty- three associated operating telephone companies and other related corporations. For the 1972, 1973 and 1974 tax years, petitioner and its qualified subsidiaries filed a consolidated return for federal income tax purposes. Having made a valid election of the 100 percent dividend received deduction under Section 243 of the Internal Revenue Code, the Internal Revenue Service did not tax dividends received by petitioner from its affiliates. Petitioner's federal income tax returns were audited by the Internal Revenue Service and the respective tax liabilities were determined and paid for each of the years in question. For the same 1972, 1973 and 1974 tax years, petitioner filed Florida income tax returns on a separate unconsolidated basis. Petitioner did not elect and was not required to file a Florida consolidated income tax return under Section 220.131, Florida Statutes. Having timely made a valid election of the 100 percent dividend received deduction under Section 243 of the Internal Revenue Code for the 1972, 1973 and 1974 tax years, such dividends were excluded from taxable income on petitioner's Florida income tax returns. For each of the tax years in question, petitioner reported on line 1 -- "federal taxable income (line 30, Form 1120 or corresponding line on related form in 1120 series, 990C or 990T)" -- of its Florida corporation income tax return (Form F-1120) its taxable income for federal income tax purposes computed as if petitioner had filed a separate federal income tax return for each of the years in question and for each preceding taxable year for which it was a member of an affiliated group. Petitioner, on its Florida corporation income tax return for each of the years in question, made the additions and subtractions required by the return in computing "adjusted federal income" and apportioned this amount of the prescribed three-factor formula to obtain "Florida net income." The Department of Revenue adjusted the amount of "federal taxable income" and hence "Florida net income" of petitioner for each of the years in question by adding thereto 15 percent of the dividends received from petitioner's affiliates which were deductible for federal income tax purposes under Section 243(a)(3) of the Internal Revenue Code. The income which the respondent seeks to tax is derived from dividends received by petitioner primarily from earnings generated by the property and employees of petitioner's affiliates which are devoted to furnishing intrastate and inter- state telecommunications services in their operating territories in states other than the State of Florida. These earnings are subject to income taxes in all states in which the petitioner's affiliates provide telecommunications services that impose income taxes on corporations. On April 10, 1978, the Department of Revenue issued a notice of proposed deficiency for petitioner's tax years ended December 31, 1972, December 31, 1973 and December 31, 1974, representing a potential tax liability to the petitioner in the amount of $304,103 for 1972, $387,429 for 1973, and $439,626 for 1974, plus accrued interest on each proposed deficiency. Petitioner timely filed a protest to the proposed deficiencies, an informal conference was held and, on April 16, 1981, the respondent Department of Revenue issued a final notice of proposed deficiency. This document applied the policies which are being challenged in this proceeding so as to add back to petitioner's taxable income an amount equal to 15 percent of the dividends received by petitioner from affiliated corporations which were not incorporated, located or engaged in business in the State of Florida. Stated differently, the respondent's policy is to allow the 100 percent dividend received deduction for those dividends received from subsidiaries or affiliates subject to the Florida tax, but to allow only an 85 percent deduction on those dividends received from subsidiaries which are not subject to the Florida tax. This policy has been applied to other similarly situated taxpayers in Florida and it has not been promulgated as a rule. The Florida corporate income tax forms in use for 1972, 1973 and 1974 did not require taxpayers to add back any amount of dividends received from affiliates. There is no existing statute or rule which specifically imposes such a requirement.
