The Issue Petitioners' liability for corporate income tax deficiency under Chapter 220, Florida Statutes.
Findings Of Fact Petitioner is a Georgia Corporation doing business as a heavy electrical contractor in Georgia and eight other states including Florida. In 1972, Petitioner submitted a request to the Department of Revenue that it be allowed to use "separate accounting" as the method for determining the amount of its adjusted federal income that was subject to taxation by the State of Florida under Chapter 220,Florida Statutes. By letter of October 3, 1972, T.H. Swindal, Respondent's Chief of the Corporation Income Tax Bureau, denied Petitioner's request with the following language: "The economics of large scale interstate construction operations, as we understand them, necessitate maximum utilization of a company's resources. At particular times and in a particular locale or with respect to particular types of construction activity contracts may be initially or regularly bid upon and undertaken which, on an individual contract basis, will be minimally profitable, if at all. Nevertheless, because these contracts permit cost absorption, continuing use and charge for equipment, trained crews and know-how; permit maximum employment of the company's capital and credit accomo- dations; permit initial entry into a new field of construction activity or a new locale, these contracts indirectly but significantly add to the profitability of the enterprise as a whole. We recognize too, that separate accounting essentially serves management and that management must evaluate competitive tax implications. "Separate accounting" does not, in our view, measure the impact of these cir- cumstances. We are of the opinion that Florida's three factor formula does measure the impact of these circumstances upon profit and thus provides a fairer Florida tax base." (Complaint, Petitioner's Exhibit 1) Respondent however, pursuant to a request of Petitioner, permitted the latter to leave its 1972 return as filed, but instructed it to file in the future utilizing the "three-factor" formula. Accordingly, the Petitioner filed its 1973 and 1974 tax returns utilizing the "three-factor" formula" as directed by the Respondent, and paid the appropriate tax due. By letter, dated September 15, 1975, Mr. Swindal informed Petitioner that examination of its returns for the years 1972 thru 1974 had resulted in a net proposed deficiency of $12,417.60. An accompanying report showed that the primary basis for the deficiency was Respondent's determination that the Florida portion of adjusted federal income for the years 1973 and 1974 should have been increased by the amounts of $87,772.93 and $160,117.83, respectively, based on a "separate accounting" computation. The reason given for this determination was stated as follows in the report: "Florida Statute 214.73(1) says in part that if the apportionment methods of Florida Statute 214.71 and 214.72 do not fairly represent the extent of a taxpayer's base attributable to this state, the department may require separate accounting. The department has determined the taxpayer should use separate accounting in accordance with the above-mentioned, statute." (Complaint and exhibits thereto) Respondent had not notified Petitioner between 1972 and 1975 of its apparent change in position with respect to the required method of accounting. At a conference held on February 19, 1976, between Petitioner's representatives and Mr. William T. Lutschak who represented the Respondent, Petitioner protested the asserted deficiency and requested that the Respondent adhere to its former determination that the "three-factor method" be applied in computing the tax. Petitioner's protest was denied orally at the conference and such denial w-s confirmed by Mr. Swindal's letter of February 24, 1976, as follows in pertinent part: "Careful analysis of the taxpayer's Florida activity and the financial results of that activity clearly demonstrate that the amount of income set forth in the auditor's report for the years at issue are attributable to taxpayer's Florida business and that F.S. 214.73(1), rather than F.S. 214.71, fairly represents the extent of the taxpayer's tax base attributable to this state." (Comp. & Exh. thereto) Respondent's auditor of Petitioner's 1973 and 1974 tax returns found nothing unusual concerning the latter's business operations during the above tax periods and is of the opinion that based on formulary accounting Petitioner's returns "fulfill the letter of the law". He also acknowledged that Petitioner met the criteria of a "unitary business". He testified that he was unable to determine the amount of property used by Petitioner on its various jobs in and out of Florida while at the audit site at Petitioner's home office in Alabama and that without such information it would be impossible to determine Petitioner's tax liability under the "three-factor method" because property is one of the factors. The auditor, after making a request of Petitioner for such figures during his audit, which did not produce immediate results, did not pursue the matter because he "had to go back to Tallahassee". In fact, such information was available in Petitioner's records. Respondent changed its policy with respect to the method of accounting required of Petitioner after consideration of a textbook on the concept of separate accounting and a resulting determination that the contracting business in general is a unique industry warranting special tax treatment. (Testimony of Harnden, Puckett, Malone, Exhibit 1, Pleadings). The alleged deficiency of $12,417.60 is correctly computed and properly due and owing if "separate accounting" is validly required with respect to Petitioner's tax returns. (Stipulation).
Recommendation That Petitioner be relieved from payment of the proposed assessment based on any tax deficiency produced by the requirement of separate accounting under Section 214.73, Florida Statutes. DONE and ENTERED 21st day of July, 1976, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs Tax Division Northwood Mall Tallahassee, Florida 32303 James R. English, Esquire HENRY & BUCHANAN, P.A. P.O. Drawer 1049 Tallahassee, Florida 32302
Findings Of Fact Terrell Oil Company (TOC) was incorporated in 1986 with Grady Terrell, Jr., as president; Richard W. Gilliam and J. Anthony Belcher as board director members. As of the time of this application, Grady Terrell owned 60 percent of the stock of the company, Belcher owned 20 percent, Gilliam owned 19 percent, and Anna Alverez, company secretary, owned 1 percent. The company was started with a $6000 loan made by Grady Terrell, Jr., which sum was borrowed from C & S National Bank (Exhibit 16). Grady Terrell, Jr., is a black male and, therefore, designated as a member of a minority and/or disadvantaged class by statute. Neither Belcher nor Gilliam invested capital in TOC, but received their stock in the company for services in kind. The By-Laws of TOC provide that all times at least 51 percent of the stock in TOC shall be owned by "minority individuals" as that term is defined in state and federal statutes applicable to minority business enterprises or disadvantaged business enterprises. Several lines of credit obtained by TOC from C & S Bank were guaranteed by Grady Terrell, Jr. (Exhibits 9-12). No loans to TOC were guaranteed by anyone else. Anthony Belcher resigned from the Board of Directors of Belcher Oil Company in 1982 and thereafter served as a consultant for approximately two years. He has not been affiliated with Belcher Oil Company since that time (Exhibit 15). Grady Terrell, Jr., executed the lease for the property occupied by TOC for an office (Exhibit 6). Grady Terrell, Jr., approves all major purchases, all invoices for payment, and other bills for payment except routine monthly bills for utilities, vehicle payments, etc., at TOC. In connection with the line of credit with C & S Bank, TOC assigns most of its receivables to the bank for collection. TOC is involved with bidding on and supplying various agencies of government (federal, state and local) with petroleum supplies. To make these deliveries, TOC owns two small tank vehicles of 1500 and 2500 gallon capacities, respectively. (The record is unclear whether the 2500 gallon tank vehicle replaced the 1500 gallon truck.) When necessary to deliver larger quantities than can be hauled in TOC's trucks, a commercial carrier is utilized. In all cases, however, TOC takes ownership of the oil at the loading site. TOC entered into a lockbox agreement with Belcher Oil Company in which Belcher extended TOC a line of credit to purchase petroleum products from Belcher. An arrangement was made with the bank to establish a special account into which the customer would remit payment for product delivered and the bank would credit Belcher's account for the invoice price. This lockbox arrangement with Belcher has been inactive for several years. At one time, TOC purchased nearly all of its products from Belcher, but that is no longer true. Richard W. Gilliam is the executive vice-president of Terrell. He receives no salary from TOC, but is reimbursed for out-of-pocket expenses. He has the authority to accept bids for the purchase of fuel from dealers and to execute contracts with purchasers. Gilliam has operated other businesses in the past and has considerably more experience in business matters than does Grady Terrell, Jr. However, no evidence was presented upon which a finding can be made that Gilliam is the person actually running TOC, and Grady Terrell, Jr., is but a figurehead. It is a fact that Grady Terrell, Jr., is legally in charge of, and has the authority to, fully direct the operations of TOC. In addition to the tank truck(s), TOC has leased a service station where three 3000 gallon tanks are located in which TOC can store inventory if desired. Grady Terrell, Jr., also executed this lease. TOC has been certified as a DBE by several governmental agencies, including the Defense Logistics Agency who contracts with TOC to deliver petroleum products to ships in Miami; and certification has been denied by more than two agencies to which applications were made. No evidence was presented that TOC failed to submit all information requested by DOT.
Recommendation It is recommended that Terrell Oil Company, Inc., be certified as a Disadvantaged Business Enterprise. DONE and ENTERED this 17th day of May, 1990, in Tallahassee, Florida. K. N. AYERS Hearing Officer Division of Administrative Hearings The Desoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 17th day of May, 1990. COPIES FURNISHED: John L. Chamblee, Jr., Esquire 202 Cardy Street Tampa, FL 33601 Vernon L. Whittier, Jr., Esquire Department of Transportation 605 Suwannee Street Tallahassee, FL 32399-0458 Ben G. Watts Secretary Department of Transportation Haydon Burns Building 605 Suwannee Street Tallahassee, FL 32399-0458 Attn: Eleanor F. Turner, MS 58 Robert Scanlan Interim General Counsel Department of Transportation 562 Haydon Burns Building 605 Suwannee Street Tallahassee, FL 32399-0458
The Issue Whether or not Pro Grading, Inc., may be certified by the Department of Transportation as a Disadvantaged Business Enterprise, pursuant to Chapter 14-78 F.A.C.
Findings Of Fact On August 18, 1988, Bonnie Stephens (female), as principal and 100% stockholder of Petitioner Pro Grading, Inc., a grading and grassing corporation, applied to Respondent Department of Transportation (DOT) for certification as a disadvantaged business enterprise (DBE). The agency's grounds for the denial of that certification application are based upon Rules 14-78.005(7)(c) and (e), F.A.C., and were set forth as follows in its February 22, 1989, denial letter: (c) The ownership and control exercised by socially and economically disadvantaged individuals shall be real, substantial, and continuing, and shall go beyond mere pro forma ownership of the firm, as reflected in its ownership documents. The socially and economically disadvantaged owners shall enjoy the customary incidence of ownership and shall share in the risks and profits commensurate with their ownership interests, as demonstrated by an examination of the substance rather than form of financial and managerial arrangements (e) The DBE shall be one in which the socially and economically disadvantaged owner shall also possess the power to direct or cause the direction of the management, policies, and operations of the firm and to make day-to-day as well as major business decisions concerning the firm's management, policy, and operation. By stipulation, the parties agreed that the basis for the denial specified by letter is sufficiently broad so as to include evaluation of the contribution of capital by Bonnie Stephen to Pro Grading, Inc., at the time of the application and investigation. In addition to this consideration, the undersigned has considered contributions through the date of formal hearing for the reasons set out infra. Except for the foregoing, it was stipulated that the Petitioner/applicant currently meets all other requirements established by statute or rule for DBE certification by DOT. Upon the testimony of Pete Davis, DBE Certification Coordinator, DOT Minority Programs Office, and Chairman of the DOT DBE Certification Committee which initially reviewed the application and recommended its denial, a factor given significant weight against certification by the committee was the members' belief that Pro Grading, Inc., was listed with the federal Internal Revenue Service and with the Securities and Exchange Commission as a "Subsection S" corporation and that such an organizational framework would permit all corporate income to pass through the corporation to its principal, Bonnie Stephens, and thus, to her husband, Ronnie Stephens (male). However, this corporate status was categorically denied by Bonnie Stephens at formal hearing, and no documentary evidence was admitted which would tend to establish "Subsection S" status of the corporation/applicant. Ronnie Stephens had done grading and sodding since 1976, however, he never incorporated a business. He had operated under the name, "Pro Grading" for two years before July 1, 1987. On that date, the business was incorporated, and all interest in the business was transferred to Bonnie Stephens. When Ronnie Stephens ran the business, it was basically a two-man operation, with Mr. Stephens managing, directing his single employee, Edgar Freytes, and actually doing much of the field work himself. At the time he met Bonnie, Ronnie Stephens had a substantial tax lien against himself, personally, due to another business he had owned previously. This lien inhibited his being able to meet "Pro Grading's" cash flow needs, inhibited his securing loans, and inhibited "Pro Grading" from securing certain types of contracts which are let at bid. During its last year of business under Mr. Stephens' control, "Pro Grading" grossed approximately $87,000. Bonnie Stephens' employment background prior to meeting Ronnie Stephens in May 1986 was as a dental assistant and dental office manager. After meeting and beginning to date Ronnie, the future Mrs. Stephens assisted Mr. Stephens informally on nights and weekends with bookkeeping for his unincorporated business, "Pro Grading." Somewhat later, she began doing part-time work for the company in an administrative capacity, and in January 1987, she quit her full- time job with a local dental professional association and began working full- time (40 hours per week) in all aspects of Mr. Stephens' business, including field work. By this method, she gained experience in the work done by the grading, sodding, grassing, and seeding trades. On or about July 1, 1987, the transfer of the business from Ronnie to Bonnie took place. The liabilities of Pro Grading, Inc., under Ronnie were offset by approximately the same amount of receivables, leaving net assets of approximately $27,000 which were acquired by Bonnie as part of the business without Bonnie having to make an outlay of that amount of cash to Ronnie or to the corporation account. At the time of the transfer, there was no other recorded arm's length payoff by mortgage, promissory note, or other payment from Bonnie to Ronnie, then her husband, for this $27,000 difference. Both Mr. and Mrs. Stephens testified that the corporate transfer occurred after their marriage, was not in contemplation thereof, and neither of them thought it necessary for Mrs. Stephens to pay the $27,000 since they were married and since they jointly and severally considered the "trade-off" of the debts for the receivables to be fair, even with the $27,000 net (profit) to Mrs. Stephens. Mr. and Mrs. Stephens' joint and mutual expressed purpose for the incorporation and transfer of ownership via stock was that the tax lien against Mr. Stephens impaired his being able to run the business successfully, while Mrs. Stephens had clearly demonstrated the business sense to run the corporation, was willing to take on the responsibility and stress of running the business herself, and had established the credit rating necessary to keep the corporation afloat. At formal hearing, Mrs. Stephens also indicated that she had felt that since she had invested so much of herself in the business and intended to invest more time and money in it, she had wanted "everything on paper" to protect her investment if the marriage failed. Her viewpoint evidences independence and control. At the time that Mrs. Stephens made the August 18, 1988, application to DOT for DBE status on behalf of Pro Grading, Inc., she had been sole owner (100% stockholder) of the corporation, Pro Grading, Inc., for a little over one year. In that period, the gross receipts of the corporation had increased to $230,000 from the last full year that Mr. Stephens had run the predecessor business through the first full year of Mrs. Stephens' administration. The number of employees had increased from two to six, at least two of whom are close relatives of Mrs. Stephens. The assets had reached a value of $135,000 above those transferred in 1987. Although no documentary evidence was presented to show any contribution of capital by Mrs. Stephens at the date of transfer of the stock or thereafter, Bonnie Stephens' testimony is unrefuted that she has, since acquiring the corporation in her own name, invested approximately $29,000 of her own money in the corporation. Although Mr. Davis conjectured, on the basis of a corporate income tax return he had reviewed, that the $29,000 had been loaned to the corporation by Bonnie Stephens and may have been subsequently repaid by corporate assets prior to the 1987 tax return, the scenario painted by this testimony also was not corroborated by the introduction of the corporate tax return. Contrariwise, Bonnie Stephens testified that her $29,000 investment in the corporation after her July 1, 1987, acquisition of all the stock/business assets was assembled by her personally from an $8,000 profit-sharing distribution from her prior job with the dental professional association; $1,000 from her personal checking account; and $20,000 from a local bank credit line obtained in the name of Pro Grading, Inc., by her putting a $10,000 second mortgage on a home owned solely by herself in her own name. Mrs. Stephens candidly acknowledged that her former accountant may have listed these foregoing items as loans from her personally to the corporation on the corporate tax return and further acknowledged that if he had, then she had indeed ratified the corporate return when she signed it. However, she maintained she had fired the former accountant over this and other matters and that these amounts had never been intended by her as loans but as investments in the company that was now solely hers. Also, according to the affidavit of Doug Perryman, Ford tractor salesman in Ocala, Florida, payment for all equipment sold to Pro Grading, Inc., is guaranteed by Bonnie Stephens only. Testimony reflects several substantial purchases of machinery have been made and guaranteed by her. See, infra. Mr. Davis enunciated a Department of Transportation policy of viewing all "loans" made by a minority applicant principal as other than investment and of considering any "loans" between a minority owner and her corporate entity as a liability of the corporation and not as equity that may be considered as demonstrating "contribution of capital" by the minority owner/stockholder. This policy has never been formally promulgated by the agency as a rule, and is, therefore, subject to being proved up in each formal hearing. At formal hearing, DOT demonstrated no basis in general accounting practices, by statute, or by rule for this non-rule policy, and in this situation, where the credit line is in the name of the Petitioner corporation backed by the 100% minority stockholder's personal residence, the policy is capricious and unfair in its application. Regardless of whether Mrs. Stephens' $29,000 represents a "loan" or an "investment," it is a "risk" of personal money or credit by the minority principal. The promulgated rules contemplate consideration of "risks." (See Conclusions of Law). Mr. Davis also expressed the DOT policy that only capitalization as of the date of purchase/acquisition of the corporate stock should be considered. That policy is also subject to being proved-up on a case-by-case basis. In this instance, such a policy was not demonstrated to be equally applied in every case. However, it was demonstrated that the policy is without a clear rule or statutory basis. The agency's expressed purpose for such a policy is so that, since certified DBEs will bid on DOT contracts, the agency may be certain that there is adequate initial corporate capitalization to ensure that the minority business will succeed financially and will complete all contracts it undertakes. It is appropriate for the agency to be concerned with such matters, but in Mrs. Stephens' situation, the agency appears to have applied capitalization as of the date of purchase/acquisition of the corporate stock as a false indicator of potential success. Clearly, the difference in gross yearly income of the corporation under Mr. Stephens' management ($87,000) and under Mrs. Stephens' management ($230,000), the tripling of the employee roster, and the increase by $135,000 in assets above those held by Ronnie Stephens on July 1, 1987, demonstrate considerable success and expertise of the new minority principal, Mrs. Stephens, regardless of her initial minimal capitalization. Without something more from the agency, it is appropriate to consider the capital risked by the minority principal subsequent to incorporation but prior to application for DBE status and/or prior to formal hearing. DOT's committee analysis also placed great emphasis on the expertise of the applicant at the time of the application. Although the agency reviewed a variety of documents, most of which are not in evidence here, there was no suggestion that the agency had made an on-site inspection of Pro Grading, Inc.'s operation which disclosed some tangible lack of expertise or control in Mrs. Stephens. No case law, other reasoning pursuant to statute or rule, or persuasive equitable argument was offered to exclude the expertise evidenced by Mrs. Stephens as of the date of formal hearing. Mr. Davis' testimony that DOT does not normally equate clerical work, bookkeeping, business office management, and billing in a dentist's office with the administrative, executive, and authority/control necessary for running a grassing and sodding business is accepted as reasonable, but it is noted that there are some minimal similarities. Moreover, Mrs. Stephens already had approximately one year's association with the grading and sodding business as of the date she assumed control. Prior to assuming control, she had handled almost all of "Pro Grading's" office, clerical, and bookkeeping types of work for Mr. Stephens. Specifically, she had dealt with credit lending institutions, reviewed tax matters, and learned how to bid contracts. She had far less field experience at that point than Mr. Stephens did, but she had acquired some such expertise, beginning in January 1987. After acquiring the company on July 1, 1987, she has increasingly worked in the field. Bonnie Stephens' "hands on" experience in the field increased further over the full year before the DBE application was filed. Now, after nearly two years, that expertise has been further enhanced. Mrs. Stephens currently works approximately 70 hours per week in the business and has done so since July 1987. Her testimony on this score is supported and unrefuted. Under Mrs. Stephens' administration and control, the corporation currently offers not only grading and sodding, as it did during Mr. Stephens' management/ownership, but also handles increasing percentages of grassing and seeding work. By a practical demonstration measuring project bluelines for quoting prices and for estimating the different types of work for preparation of bids and/or for post- job billing Bonnie Stephens demonstrated administrative and field expertise. Through a comprehensive explanation of specific contracts won or jobs undertaken and completed by the company while under her management and control, she exhibited comprehensive knowledge and expertise with regard to the purchase and operation of specialized machinery, including but not limited to crimpers, seeders, spreaders, cultipackers, offset disks, hayblowers, and box blades, which machinery had been either utilized or purchased by her for the corporation. Accordingly, she exhibited substantial specialized expertise in the grading, sodding, grassing, and seeding trades. Although due to the nature of her trade, particularly with regard to the broad geographical area served by the corporation, some types of managerial authority have had to be delegated by Mrs. Stephens to other corporate employees, including her husband, Ronnie Stephens, but the final authority for all major corporate decisions rests with Bonnie Stephens. Ronnie Stephens, Edgar Freytes, and Billy Huey supervise most jobs in the field. Each job supervisor has more autonomy the further from the main office the job is, but they stay in regular communication with Bonnie Stephens by telephone. Any job done in the Ocala area is also overseen by Bonnie Stephens, regardless of which of the foregoing men supervises in the field. Edgar Freytes was Ronnie Stephens' sole employee prior to incorporation of the business under Mrs. Stephens' control. Mr. Freytes and Mr. Stephens now have the same authority to hire and fire on job-sites as site foremen in any other business, but neither may fire each other. Presumably, this is a change from when Mr. Stephens, as owner, could have fired Mr. Freytes, his sole employee, at will, and evidences Mrs. Stephens' independence and control. Mr. Freytes' work is now largely in the Ocala area, and with regard to field work, he works more closely with Mrs. Stephens than do Ronnie Stephens or Billy Huey. Billy Huey is Bonnie Stephens' brother and the chief mechanic for the company. His emphasis on mechanical work somewhat limits the time he supervises grassing and sodding in the field. He is paid at the rate of $9.00 per hour. Bonnie's mother is also employed by her as an office worker at $200 per week. Bonnie's husband, Ronnie Stephens, is paid $300 per week; he gets no other bonuses. Mr. Freytes makes $10.00 per hour, and his income varies with the hours he works as does that of the brother, Billy Huey. Lesser skilled employees earn at the rate of $5.00 per hour. Mrs. Stephens signs all checks for the corporation. As to her exclusive and independent control of employees and her husband's influence on her corporate decisions Mrs. Stephens has personally fired one employee in the field and has refused to fire her mother when Mr. Stephens asked her to do so. This also evidences Mrs. Stephens' independent control. Mrs. Stephens took some "draws" during the first year of Pro Grading, Inc.'s operation, but she now pays herself a regular $3,000 per month salary. Joseph Ronk, a former full-time salesman for Pro Grading, Inc., testified on behalf of the applicant and is found to be substantially credible, particularly in light of the fact that as of the date of formal hearing, he was no longer financially dependent upon Pro Grading, Inc., or upon Mr. and/or Mrs. Stephens. As of the date of formal hearing, Mr. Ronk no longer worked exclusively for Pro Grading, Inc., based in Ocala, but was employed full-time for Lowe's Building supplies in Lakeland, Florida, and only solicited jobs for Pro Grading, Inc., as sideline commission work. Upon Mr. Ronk's testimony and that of other witnesses, it is determined that Mrs. Stephens established a price list for corporate services, and she is the only one who may vary it. Within the parameters of that price list, Mr. Ronk's duties were, when he was employed exclusively by Pro Grading, Inc., to negotiate jobs with persons or companies wanting to employ Pro Grading, Inc. Although Mr. Ronk had considerable authority within the price range established by Mrs. Stephens, and although his testimony was couched in excessively self-complimentary terms, it clearly appears that Mr. Ronk was always required to keep in regular contact with Mrs. Stephens by beeper and by telephone. It was she who calculated the bid items by telephone on most occasions and she then and now who calculates Mr. Ronk's sales commission and signs his commission checks. Sometimes, though, Mr. Ronk filled out and signed bids on behalf of Pro Grading, Inc., and in those situations, the corporation always honored Mr. Ronk's commitments as its agent, whether or not he secured Bonnie Stephens' prior approval. Usually, Bonnie Stephens would sign the actual contract. Sometimes Mr. Ronk signed contracts, but Mr. Ronk volunteered that he always got Mrs. Stephens' signature on "big jobs," an imprecise, undefined term. Before his change of status, Mr. Ronk's dealings on behalf of Pro Grading, Inc., resulted in some friction between the corporation and its customers (See infra). As a result, Mrs. Stephens now does proportionately more of the sales negotiating. According to the affidavit of Rick Scott, Boyce Company's job supervisor on the City of Inglis waterlines, all his dealings with Pro Grading, Inc., except for the initial contact made by Joe Ronk, has been with Bonnie Stephens. According to the affidavit of Glen Benson, Branch Manager of Volt Co., a pipe and telephone cable installation business, that company's executives have declined to deal with Pro Grading, Inc., through Mr. Ronk, and Mr. Benson now deals exclusively with Bonnie Stephens. According to the affidavit of Vivian Swanson, current accountant-bookkeeper for Pro Grading, Inc., Mrs. Swanson was hired by Bonnie Stephens and all business affairs with regard to Mrs. Swanson's professional independent employment contract with Pro Grading, Inc., are handled directly with Bonnie Stephens. Mrs. Stephens' instructions to Mrs. Swanson have been to keep all corporate economic affairs confidential between themselves. Such an instruction strongly militates against any finding of "cloaked control" of the corporation by Mrs. Stephens' husband. Consequently, the duties delegated by Mrs. Stephens to subordinates do not reflect an absence of control by her, a pass-through control by her husband, or any inability in Mrs. Stephens to perform the day-to-day tasks of running the company. Mrs. Stephens exhibits the type of real, actual, and independent executive and administrative control normally associated with the head of any corporation of this size and type. She also enjoys the incidences of such control and of sole ownership. Bonnie Stephens possesses the power, knowledge, and independent control to direct or cause the direction of the management, policies, and operations of the firm. She makes day-to-day as well as major business decisions concerning the firm's management, policy, and operation. Her control is real and substantial and cannot legitimately be characterized as a "paper- tiger."
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that the Department of Transportation enter a final order certifying Petitioner as a Disadvantaged Business Enterprise. DONE and RECOMMENDED this 4th day of August, 1989, at Tallahassee, Florida. ELLA JANE P. DAVIS, 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 4th day of August, 1989. APPENDIX TO RECOMMENDED ORDER, DOAH CASE NO. 89-1495 The following constitute specific rulings upon the parties' respective proposed findings of fact (PFOF) pursuant to 5120.59(2) F.S. Petitioner's Proposed Findings of Fact Beginning on page one: 1, 8. Rejected, constitute potential conclusions of law, not proposed facts. 2,7. Covered in introductory material. 3,4,5,6. Accepted Beginning on page two: 1. Rejected as unnecessary. 2,4. Accepted as modified to conform to the record. 3. The proposed facts are accepted; but the argument of counsel and potential conclusions of law are rejected as not proposed facts. Beginning on page three: Unnumbered Paragraph -- Accepted in substance but further analyzed. 5,6,7. Except as accepted within the RO's FOF, rejected as proposed conclusions of law, not proposed facts. Accepted in substance but modified to reflect more accurately the evidence of record. What is otherwise rejected is rejected as mere argument of counsel or as proposed potential conclusions of law, not proposed facts. Rejected as cumulative, not a proposal of facts, unnecessary. Respondent's Proposed Findings of Fact: 1,2,3,4,5,6,7,9,10. Except as subordinate or unnecessary, accepted, but with modifications to more accurately reflect the evidence of record. 8,11. Rejected as an incorrect characterization of, or as contrary to, the evidence. COPIES FURNISHED: Jean A. Bice, Esquire Patillo & McKeever Post Office Box 1450 Ocala, Florida 32678 Ruth Dillard, Esquire Department of Transportation Haydon Burns Building MS 58 Tallahassee, Florida 32399-0458 Kaye N. Henderson, Secretary Haydon Burns Building 605 Suwannee Street Tallahassee, Florida 32399-0450
Findings Of Fact Union Trucking is a Florida corporation engaged in the business of trucking. Its net worth is less than $2,000,000.00 In DOAH Case NO. 87-4007, the Department sent Petitioner a letter dated August 6, 1987, denying Petitioner's request for certification as a minority business enterprise pursuant to the Department's Rule 14-78.005, Florida Administrative Code. The reason stated in the letter was that Petitioner was not actually under the control of a minority person. On August 25, 1987, Petitioner timely requested a hearing and the case was sent to the Division Of Administrative Hearings on September 11, 1987. By Notice of Hearing dated September 23, 1987, hearing was scheduled for November 16, 1987 and later continued until February 10, 1988. Rule 14-78.002, Florida Administrative Code, was amended on September 21, 1987. The amendment effectively removed DOT's reason-for denial of Petitioner's certification. However, on February 11, 1988, well after the rule change came into effect, DOT formally decided to certify Petitioner. Petitioner was therefore forced to proceed for several months in preparation for an action which Respondent admits it had no basis for after the rule change took effect. Respondent's initial decision occurred on August 6, 1987, when Respondent notified Petitioner of its denial of minority business status. At some point in time, Respondent had filed its proposed rule change. Petitioner failed to demonstrate the time of the proposed change. Depending on the facts surrounding the rule change as to its likelihood of adoption at the time Respondent initiated this action, no findings regarding substantial justification can be made at the time of the agency's initial action on August Most certainly after September 21, 1987, the date the MBE rule was amended, Respondent lacked any substantial justification to continue to litigate this matter. The Final Order of the Department recognized the earlier certification of Petitioner and dismissed the action. However, the Final Order of Respondent did not dispose of the attorney's fees issue which had also been raised during the principal action. The order, therefore, did not dispose of substantially all the issues raised in the principal action. Additionally, there was no settlement of this case since a written settlement agreement was drafted and signed by Petitioner, but refused by Respondent. Respondent's unilateral certification is not enough to force a settlement on Petitioner, especially since Respondent elected to enter a Final Order in this case. Petitioner, therefore, became a prevailing party when Respondent entered its Final Order on April 18, 1988. Section 57.111(4)(b)(2) , Florida Statutes. The application and affidavit which initiated this action were filed on May 23, 1988. The application substantially meets the requirements of Section 57.111, Florida Statutes, and Rule 22I-6.035, Florida Administrative Code, in that it fairly put Respondent on notice of Petitioner's claim. The application and affidavit were timely, having been filed within 60 days after the date on which Petitioner became a prevailing small business party. According to the affidavit of Frank M. Gafford, Petitioner incurred legal fees of $3,572.86. These fees and costs are found to be reasonable. The Department does not dispute the reasonableness of the fees in this case.
The Issue The issue is whether Petitioner owes the taxes, interest, and penalties assessed by the Department of Revenue based upon its audit of Petitioner for the period of August 1, 1996, through July 31, 2001.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following findings are made: Petitioner is a Florida corporation engaged in the business of selling and installing floor covering materials, such as carpet and tile. Petitioner's business is located in Hillsborough County, Tampa, Florida. Petitioner sales fall into two basic categories: "cash and carry sales" and "installation sales." The "cash and carry sales" are retail sales of floor covering materials to customers that come into Petitioner's store. These sales do not involve any installation work by Petitioner. The "installation sales" are sales in which Petitioner installs the floor covering material in the customer's home or business. These sales are performed pursuant to a lump-sum contract which incorporates the price of the installation and the price of the floor covering materials being installed. Petitioner purchases the floor covering materials from suppliers and distributors. Those purchases become part of the inventory from which Petitioner makes its "installation sales." Petitioner also makes general purchases of goods and services necessary for the day-to-day operation of its business. These purchases include items such as cleaning supplies and vehicle repairs. Petitioner made several fixed-assets purchases during the audit period for use in its business. It purchased a word processor in August 1996, and it purchased equipment and fixtures in December 1996. On those occasions that Petitioner collected sales tax from its customers on the "cash and carry sales" or paid sales tax on its inventory purchases and general purchases, it remitted or reported those amounts to the Department. However, as discussed below, Petitioner did not collect the full amount of sales tax due on each sale, nor did it pay the full amount of sales tax due on each purchase. The Department is the state agency responsible for administering Florida's sales tax laws. The Department is authorized to conduct audits of taxpayers to determine their compliance with the sales tax laws. By letter dated September 10, 2001, the Department notified Petitioner of its intent to conduct a sales tax audit of Petitioner's records for the period of August 1, 1996, through July 31, 2001. The audit was conducted by David Coleman, a tax auditor with seven years of experience with the Department. Petitioner designated its certified public accountant, P.J. Testa, as its representative for purposes of the Department's audit. That designation was memorialized through a power of attorney form executed by Petitioner on March 5, 2002. Mr. Coleman communicated with Mr. Testa throughout the course of the audit. Mr. Coleman conducted the audit using a sampling methodology agreed to by Mr. Testa on behalf of Petitioner. Pursuant to that methodology, Mr. Coleman conducted a comprehensive review of Petitioner's year-2000 purchase and sales invoices and extrapolated the results of that review to the other years in the audit period. The sampling methodology was used because of the volume of records and transactions during the audit period and because of the unavailability of all of the records for the audit period. The year 2000 was chosen as the sample period because Petitioner's records for the other years in the audit period were incomplete or unavailable. Mr. Coleman's audit of the year-2000 invoices focused on three broad types of transactions. First, he reviewed invoices of Petitioner's retail "cash and carry sales." Second, he reviewed the invoices through which Petitioner purchased the floor covering materials that it later sold as part of its "installation sales." Third, he reviewed the invoices through which Petitioner made general purchases of tangible personal property used in the day-to-day operation of its business. The sampling methodology was used for the audit of Petitioner's "cash and carry sales," the inventory purchases related to the "installation sales," and the general purchases. The methodology was not used for the audit of Petitioner's fixed-asset purchases; Mr. Coleman reviewed all of the available records for the fixed-asset purchases during each year of the audit period. Mr. Coleman's audit of Petitioner's retail "cash and carry sales" identified 29 invoices during year-2000 on which no sales tax or less than the full sales tax was paid by the customer. Those invoices amounted to $17,451.30, on which $1,178.11 in total sales tax was due, but only $552.97 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $625.14 for the retail sales during the sample period. Mr. Coleman's audit of Petitioner's purchases of floor covering that was later sold in the "installation sales" identified a considerable number of purchases during year-2000 on which no sales tax or less than the full sales tax was paid by Petitioner to the supplier or distributor of the materials. Those purchases amounted to $123,398.52, but only $123,397.80 of that amount was taxable. On the taxable amount, $8,330.07 in total sales tax was due, but only $6,810.68 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $1,519.41 for Petitioner's inventory purchases during the sample period. Mr. Coleman's audit of Petitioner's "general purchases" identified 10 sales during year-2000 on which sales tax was not paid. Those invoices amounted to $2,914.76, on which $196.77 in sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $196.77 for the general purchases during the sample period. Mr. Coleman's audit of Petitioner's fixed-asset purchases identified only two transactions during the entire audit period on which Petitioner did not pay the full sales tax. Those transactions amounted to $5,078.92, on which $330.14 in total sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $330.14 for the fixed-asset purchases during the audit period. The tax deficiencies calculated by Mr. Coleman for year-2000 for each category described above take into account any sales tax collected by Petitioner from its customers or paid by Petitioner to its vendors. After Mr. Coleman computed the tax deficiencies based upon his audit of the year-2000 records, he calculated a "percentage of error" for each category of sales/purchases. The percentage of error is the ratio used to extrapolate the results of the audit of the year-2000 records over the remainder of the audit period. No percentage of error was calculated for the fixed-asset purchases because Mr. Coleman reviewed the available records for those purchases over the entire audit period, not just year-2000. The percentage of error was calculated by dividing the sales tax deficiency identified in a particular category for the year-2000 by the total sales/purchases in that category for the year-2000. For the year-2000, Petitioner had retail sales of $1,143,182.45; general purchases of $21,254.88; and inventory purchases of $1,214,016.24. As a result, the applicable percentages of error were 0.000547 ($625.14 divided by $1,143,182.45) for the retail sales; 0.009258 ($196.77 divided by $21,254.88) for the general purchases; and 0.001252 ($1,519.41 divided by $1,214,016.24) for the inventory purchases. The percentages of error were then multiplied by the total sales in the applicable category for the entire audit period to calculate a total tax deficiency in each category. Petitioner's total retail sales over the audit period were $4,455,373.40. Therefore, the total tax deficiency calculated for that category was $2,437.12 (i.e., $4,455,373.40 multiplied by 0.000547). Petitioner's total general purchases over the audit period were $110,741.49. Therefore, the total tax deficiency calculated for that category was $1,025.25 (i.e., $110,741.49 multiplied by 0.009258). Petitioner's total inventory sales over the audit period were $3,130,882.10. Therefore, the total tax deficiency calculated for that category was $3,919.86 (i.e., $3,130,882.10 multiplied by 0.001252). Petitioner's total tax deficiency was computed by adding the deficiencies in each category, as follows: Retail Sales $2,437.12 General Purchases 1,025.25 Inventory Purchases 3,919.86 Fixed-asset purchases 330.14 TOTAL $7,712.37 Of that total, $6,863.02 reflects the state sales tax deficiency; $313.77 reflects the indigent care surtax deficiency; and $535.58 reflects the local government infrastructure surtax deficiency. The sales tax rate in effect in Hillsborough County during the audit period was 6.75 percent. The state sales tax was six percent; the remaining 0.75 percent was for county surtaxes, namely the local government infrastructure surtax and the indigent care surtax. That rate was used by Mr. Coleman in calculating the tax deficiencies described above. On October 4, 2002, Mr. Coleman hand-delivered the Notice of Intent to Make Audit Change (NOI) to Petitioner. The NOI is the end-product of Mr. Coleman's audit. The NOI identified the total tax deficiency set forth above, as well as a penalty of $3,856.26, which is the standard 50 percent of the tax deficiency amount, and interest of $2,561.63, which is calculated at a statutory rate. The NOI included copies of Mr. Coleman's audit work- papers which showed how the taxes, penalties, and interest were calculated. The NOI also included a copy of the "Taxpayers' Bill of Rights" which informed Petitioner of the procedure by which it could protest the audit results reflected on the NOI. On October 29, 2002, the Department issued three NOPAs to Petitioner. A separate NOPA was issued for each type of tax -- i.e., sales tax, indigent care surtax, and local government infrastructure surtax. The cumulative amounts reflected on the NOPAs were the same as that reflected on the NOI, except that the interest due had been updated through the date of the NOPAs. Interest continues to accrue on assessed deficiencies at a cumulative statutory rate of $1.81 per day. The NOPAs were sent to Petitioner by certified mail, and were received by Petitioner on November 1, 2002. By letter dated November 5, 2002, Petitioner protested the full amount of the taxes assessed on the NOPAs and requested a formal administrative hearing. The letter was signed by Mr. Testa on Petitioner's behalf. The protest letter does not allege that the methodology used by Mr. Coleman was improper or that the results of the audit were factually or legally erroneous. Instead, the protest letter states that Petitioner was disputing the results of the audit because it was "following procedures set forth by an agent from a previous audit who established the manner in which [Petitioner was] to compute sales tax on the items being questioned by the current auditor." Mr. Testa made similar comments to Mr. Coleman during the audit. When Mr. Coleman requested documentation from Mr. Testa to corroborate those comments about the procedures allegedly established by the prior auditor, Mr. Testa was unable to provide any such documentation. The record of this proceeding is similarly devoid of evidence to support Petitioner's allegation on this point. The record does not contain any evidence to suggest that Petitioner ever modified or revoked Mr. Testa's authority to represent it in connection with the audit or this protest, which Mr. Testa initiated on Petitioner's behalf. Petitioner, through Mr. Testa, had due notice of the date, time, and location of the final hearing in these cases. Neither Mr. Testa, nor anyone else on Petitioner's behalf, appeared at the final hearing.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue issue a final order imposing the taxes, interest, and penalties against Petitioner in the full amounts set forth in the three Notices of Proposed Assessment dated October 28, 2002. DONE AND ENTERED this 30th day of December, 2003, 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 30th day of December, 2003.
Findings Of Fact Petitioner, Jim Neel & Associates, Inc., a Florida corporation, applied to the Department of Transportation (DOT) for certification as a Disadvantaged Business Enterprise. The majority stockholder of Jim Neel & Associates, Inc., is Jim Silver Eagle Neel. On his mother's side Jim Neel is a direct descendant of Creek Indians Who were enrolled in the 1832 Census for that Tribe. Additionally, his father's family is known to be descended from the Cherokee Tribe. In terms of blood lines it is estimated that Mr. Neel is one-quarter American Indian. However, Mr. Neel has the features of a Native American. However, Mr. Neel has actively participated in the activities of the Lower Creek Muskogee Tribe since the beginning of 1986. 1/ He is considered by the National and local Creek Indian Tribes to be a member of their group. Additionally, Petitioner has been recognized by the federal Bureau of Indian Affairs as being a member of the Creek Indian Tribe. Such recognition enables Petitioner to participate in the Eastern Creek Judgment Fund which was awarded against the federal government for treaty violations to members of the Eastern Creek Tribe. Prior to the beginning of 1986, Mr. Neel did not maintain any direct affiliation with a tribe. To the best of his knowledge, his mother did not maintain any direct affiliation with a tribe. However, the evidence did show his mother kept in contact with local Creeks on an informal basis. Additionally, when Mr. Neel was young, his mother would tell him stories about his Indian heritage, but advise him not to reveal the fact of his Indian heritage to others. When Mr. Neel was growing up it was not wise to declare one's Indian heritage due to the racial prejudice which would be inflicted on that individual. In fact, Mr. Neel did not feel he could freely declare his heritage until about ten years ago. Mr. Neel was raised on a poor rural farm in northwest Florida. His mother, due to her Indian heritage, was uneducated. She could not read or write and, therefore could not obtain above menial wages to support her family. The entire family, including Petitioner, existed under an economic as well as social disadvantage. Through sheer determination, Petitioner literally pulled himself up by his own bootstraps. Around 1948 he became an auto/truck mechanic. Around 1955 he began as a service manager for an Oldsmobile dealer. Because the wages of a mechanic were low at that time, Mr. Neel changed careers and joined the Panama City Police force. He was a city police officer for the next fifteen years. In 1972 he was employed by the Panama City Airport Authority as a security officer. He rose by promotion to become the Airport Manager from 1980 through 1987. At present he is a consultant to the Airport Authority. No evidence was presented by the Department which would be sufficient to demonstrate that Mr. Neel had not suffered social and economic disadvantage on an individual basis.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a Final Order be entered granting the application of Jim Neel and Associates, Inc. for certification as a Disadvantaged Business Enterprise. DONE and ENTERED this 19th day of April, 1989, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER 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 19th day of April, 1989.
Findings Of Fact The First Variable Rate Fund for Government Income, Inc., (hereinafter referred to as the Fund) is an open-end diversified investment company incorporated under Maryland law. The Fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management company. The Fund has an authorized capital of 2.5 billion shares of common stock with a par value of $.001 per share which may be issued in classes and are freely transferable. Each outstanding share is entitled to one vote on all matters submitted to a vote of stockholders and to a prorata share of dividends declared and of the Fund's net assets in liquidation. Shares of the Fund are issued and redeemed at their net asset value. It is the Fund's policy to maintain a constant net asset value of $1.00 per share. The net asset value is determined by subtracting liabilities from value of assets and dividing the remainder by the number of outstanding shares. The Fund's shares are sold to the public without a sales charge. The Fund is a money market fund. Its investment goals are high current income, preservation of capital and liquidity. In pursuing these goals, the Fund invests solely in debt obligations issued or guaranteed by the United States, its agencies or instrumentalities, assignments of interests in such obligations, and commitments to purchase such obligations ("U.S. Government- backed obligators"). The fund may invest in U.S. Government-backed obligations subject to repurchase agreements with recognized securities dealers and banks. Some of the U.S. Government-backed securities are supported by the full faith and credit of the U.S. Treasury; others are supported by the right of the issuer to borrow from the Treasury; still others are supported only by the credit of the instrumentality. The Portfolio of Investments of the Fund on December 31, 1982 contains the following types of investments: U.S. Treasury Bills; Student Loan Marketing Association; Certificates of Deposit; Certificates of Deposit Investment Pools with U.S. Government guarantee on the underlying certificates; Repurchase agreements collateralized by securities issued by or guaranteed by the U.S. Government; Variable rate loans guaranteed by agencies of the U.S. Government. The Portfolio of Investments of the Fund on December 31, 1981 contains the following types of investments: U.S. Treasury Bills; Federal Farm Credit Banks; Repurchase agreements substantially collateralized by securities issued or guaranteed by the U.S. Government; Certificate of Deposit Investment pools with U.S. Government guarantee on the underlying certificates; Variable rate loans guaranteed by agencies of the U.S. Government. Repurchase agreements are transactions in which a person purchases a security and simultaneously commits to resell that security to the seller at a mutually agreed upon time and price. The seller's obligation is secured by the underlying security. The resale price reflects the purchase price plus an agreed upon market rate of interest. While the underlying security may bear a maturity in excess of one year, the term of the repurchase agreement is always less than one year. In the event of the bankruptcy of a seller during the term of a repurchase agreement, a substantial legal question exists as to whether the Fund would be deemed the owners of the underlying security or would be deemed only to have a security interest in and lien upon such security. If the Fund's interest is deemed a security interest in and lien upon such security, the Fund may realize a loss or may be delayed in receiving the repurchase price due it pursuant to the agreement or in selling the underlying security. The Fund will only engage in repurchase agreements with recognized securities dealers and banks. In addition, the Fund will only engage in repurchase agreements reasonably designed to secure fully during the term of the agreement the seller's obligation to repurchase the underlying security and will monitor the market value of the underlying security during the term of the agreement. If the value of the underlying security declines, the Fund may require the seller to pledge additional securities or cash or secure the seller's obligations pursuant to the agreement. If the seller defaults on its obligation to repurchase and the value of the underlying security declines, the Fund may incur a loss and may incur expenses in selling the underlying security. Although all the securities purchased by the Fund are Government-backed as to principal or secured by such securities, some of the types of Government securities the Fund buys may be sold at a premium which is not backed by a Government guarantee. The premiums are amortized over the life of the security; however, if a security should default or be prepaid, the fund could realize as a loss the unamortized portion of such premium. Petitioners, R. W. and Joyce S. Aronson remitted $66.56 by check #235 dated April 10, 1982 in payment of Florida Intangible Tax for 1982. If it is determined that the Fund at issue herein is totally exempt from taxation, the aforesaid Petitioners are entitled to a refund in the amount of $3.96. Petitioner, Helen T. Aronson remitted $84.30 by check #138 dated February 28, 1983 in payment of Florida Intangible Tax for 1983. If it is determined that the Fund at issue herein is totally exempt from taxation, the aforesaid Petitioner is entitled to a refund in the amount of $16.73. The Department of Revenue computes intangible tax on shares of corporations on the basis of "just value" which for publicly held corporations, is market value. The Department of Revenue computed the value of the shares of the Fund on the basis of market value. A review of the Prospectus forwarded with the stipulation of facts discloses that in the Prospectus dated March 1, 1982 only $73,186,000 was invested in United States Government obligations of the total of $1,121,285,000 invested by the Fund; and that in Prospectus dated February 28, 1983, $199,387,000 was invested in United States Government obligations of the total of $1,125,500,000 invested by the Fund. Thus, approximately 6.5 percent in 1982 and 17.7 percent in 1983 of the value of the funds were invested in funds exempt from the Florida intangible tax. Six and one-half percent (6-1/2 %) of $3.96 is $0.26 and 17.7 percent of $16.73 is $2.96.
Findings Of Fact Petitioner was incorporated on November 17, 1980, and, since that time, has been primarily engaged in the base work and asphalt paving business. James L. Sauder and his wife, Annette, were the incorporators of Petitioner and continue to serve as Petitioner's two directors. From the inception of the corporation through the present time, James Sauder has been Petitioner's president while Annette Sauder has filled the offices of both secretary and treasurer of Petitioner. Additionally, at all times material hereto, James Sauder has been the registered agent for the corporation. Initially, James Sauder drew a salary of $220 a week, while Annette Sauder received no salary for her work. Thereafter, the Sauders decided to declare Petitioner a "subchapter S. corporation" for income tax purposes. At the end of Petitioner's first and second years of operation, all of the undistributed shareholders' profit of the company was drawn out by James Sauder only. Petitioner's income tax returns for both 1981 and 1982 reflect that James Sauder is the stockholder, that he owns 170 shares of Petitioner's stock, and that he devotes all of his time to the business. Petitioner's bylaws describe the duties of the officers of the corporation and provide that: The President shall be the chief executive officer of the corporation, shall have general and active management of the business and affairs of the corporation subject to the directions of the Board of Directors, and shall preside at all meetings of the shareholders and Board of Directors. The bylaws further provide, in addition to some specific duties, that the secretary and the treasurer are also required to ". . . perform such other duties as may be prescribed by the Board of Directors or the President." Accordingly, Petitioner's secretary and treasurer work under the supervision and control of the president. Petitioner's articles of incorporation authorize Petitioner to issue 250 shares of stock with a five-dollar par value. On August 20, 1980, Petitioner's stock certificate No. 1 was issued to James L. Sauder for 125 shares of Petitioner's stock. No shares were issued to Annette Sauder until March 1, 1983, when 70 shares of James Sauder's stock were transferred to her using Petitioner's stock certificate No. 2. At the same time, an additional 55 shares of stock were issued to James L. Sauder using Petitioner's stock certificate No. 3. Accordingly, James Sauder owns 110 shares of Petitioner's stock, while Annette Sauder owns only 70 shares of Petitioner's stock. The occupational license issued to Petitioner by the City of Key West, Florida, for the 1982-83 year lists James L. Sauder as the owner of Petitioner. Decisions as to hiring and firing, the purchase and/or financing of equipment and other personalty, the jobs on which bids will be submitted and the amounts of bids, the supervision of Petitioner's employees, and even actual paving work are duties performed by both James and Annette Sauder. Although operating Petitioner's business appears to be a joint effort on the part of both James and Annette Sauder, it is clear that the ultimate decision maker, as well as chief executive officer, is James Sauder. In addition to testifying primarily using the word "we," the following is illustrative of the testimony given by Annette Sauder as to whether she or her husband controls the operation of Petitioner: (Tr. 72.) Q. If your husband told you that he didn't want a piece of equipment, but you wanted it, would you go out and get it? A. Not unless I wanted a divorce, I don't think I would. On November 28, 1983, Respondent denied Petitioner's application to be certified as a Minority Business Enterprise.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered denying Petitioner's application for certification as a Minority Business Enterprise and, specifically, Women's Business Enterprise. DONE and RECOMMENDED this 23rd day of July, 1984, in Tallahassee, Leon County, Florida. LINDA M. RIGOT, 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 23rd day of July, 1984. COPIES FURNISHED: John R. Sutton, Esquire 7721 South West 62nd Avenue, First Floor South Miami, Florida 33143 Mark A. Linsky, Esquire Department of Transportation 605 Suwannee Street, MS-58 Tallahassee, Florida 32301-8064 Paul N. Pappas, Secretary Department of Transportation 605 Suwannee Street Tallahassee, Florida 32301-8064
Findings Of Fact The facts in this case are clear and uncontroverted. On or about February 5, 1975, Martin E. Kulok terminated his employment as a mortgage solicitor with ABC Investment Corporation. ABC Investment Corporation wrote and advised the Division of Finance on February 10, 1975, that Kulok had left his employ. On February 5, 1975, Kulok applied for licensure as a mortgage solicitor with Financial Resources Corporation On February 12, 1975, the Division of Finance cancelled Kulok's registration as a mortgage solicitor with ABC. On February 20, 1975, the Division of Finance issued Kulok's license as a mortgage solicitor with Financial Resources Corporation. On February 13, 1975, while unlicensed, Kulok sold what purports to be a first mortgage to Lincoln H. Evans in behalf of Financial Resources Corporation. Kulok has applied for licensure as a mortgage solicitor with Joseph Maddlone, and said application is at issue because the Division of Finance asserts that Kulok's sale to Evans while he was unlicensed between February 12 and February 20 "demonstrates deficiencies in qualities of experience, integrity, and competency" which are essential to the issuance of a mortgage solicitor's license. It is clear that in issuing licenses, the Division of Finance issues licenses to the broker, in this case Financial Resources, and that nothing is forwarded to the mortgage solicitor. Kulok was physically located in Miami, Florida and his broker's office was located in Fort Lauderdale, Florida. Kulok stated that he called his broker frequently to determine what the status of his license was. On February 13, 1975, some eight days after completing his application, his broker advised him that he could go out and sell. On February 13, 1975, Kulok's application was received by the Division of Finance. The apparent basis for requiring issuance of licenses to brokers and requiring brokers to delicense solicitors is that they are more responsible than solicitors. See Subsection 498.04(9)(10), F.S. It appears that in the instant case Financial Resources Corporation was not as responsible as many people, including Mr. Kulok and the Division, thought it was. Fortunately, the issue presented here is not Mr. Kulok's status when his application for licensure had been received but had not been granted by the Division. Under the procedures adopted by the Division of Finance the solicitor is dependent upon the good faith representations of his broker, to whom the Division also looks for control. By inquiring of and being told by his broker that he was able to sell, Kulok did what he could do to determine his status. Certainly he could have done more, but he had no basis to mistrust his broker. Under the facts presented here, there is no evidence that Kulok lacks the "experience, integrity, and competency" to be licensed as a mortgage solicitor, and that is the issue.
Recommendation Based upon the foregoing conclusions of law and findings of fact, the Hearing Officer recommends that Kulok's license be granted. DONE and ORDERED this 6th day of April, 1976. STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: James M. Barclay, Esquire Assistant General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32304 Martin B. Kulok 150 S.E. 25th Road, No. 14F Miami, Florida 33129 ================================================================= AGENCY FINAL ORDER =================================================================
