The Issue Whether the Elizabeth Puhn Irrevocable Trust is entitled to a refund of intangible personal property taxes paid to the State of Florida for the tax years 1993, 1994, and 1995.
Findings Of Fact Pursuant to the affidavits submitted into evidence in this case and on the entire record of this proceeding, the following findings of fact are made: The Department of Revenue ("Department") is the state agency responsible for administering and enforcing the collection of the intangible personal property tax in Florida. Section 199.202, Florida Statutes (1997). Shy Lurie is a co-trustee of the Elizabeth Irene Puhn Irrevocable Trust dated December 16, 1981 (hereinafter the "Trust"). Nicholas M. Daniels was a co-trustee of the Trust for the 1993, 1994, and 1995 tax years. Shy Lurie was a resident of North Carolina for the tax years in question. Nicholas M. Daniels was a resident of Miami, Florida, for the tax years in question. Trustees and Domicile The settlor of the Trust is Elizabeth B. Lurie. The co-trustees of the Trust at the inception of the Trust were Shy Lurie and Nicholas M. Daniels. The settlor, the co-trustees, and the beneficiary, Elizabeth Irene Puhn, were all residents of Miami, Florida, at the inception of the Trust. Nicholas M. Daniels was and continues to be an attorney licensed to practice law in the State of Florida for the tax years in question and thereafter. On December 20, 1996, Mr. Daniels resigned as a co-trustee effective as of such date, and Mr. Michael Smith, a resident of North Carolina, was appointed as a co-trustee effective as of December 20, 1996. Terms of the Trust The Trust provides for the income to be accumulated until the beneficiary, Elizabeth Irene Puhn, attains the age of thirty and during that period the income may be disbursed to the beneficiary in the co-trustees' discretion for certain specified expenses of the beneficiary. After the beneficiary attains the age of thirty, she is entitled to all net income from the Trust. The Trust shall terminate when the beneficiary reaches the age of forty, at which time the Trust's assets will be distributed to Elizabeth Irene Puhn or, if she is then deceased, then pursuant to the alternate dispositive provisions set forth in the Trust. The beneficiary currently resides in Durham, North Carolina. The beneficiary has been a resident of Durham, North Carolina, for approximately five (5) years, which included the tax years in question. Article VI of the Trust instrument provides that the trustees are granted the power and authority to do any of the enumerated powers specified in the Trust in the trustee's unrestricted judgment and discretion which the trustees deem advisable for the better management and preservation of the trust estate. Books, Records, and Custody of Assets All Trust books and records for the tax years in question were located at and all business was transacted at Shy Lurie's office in North Carolina. For the tax years in question, neither the Trust assets nor the Trust's books and records were located in the State of Florida. On February 5, 1985, Shy Lurie and Nicholas M. Daniels entered into an investment management agreement with Montag & Caldwell, Inc., an Atlanta, Georgia, management company. Such agreement provided that supervision and management of the marketable securities portion of the trust estate is vested with Montag & Caldwell, Inc., and that the agreement may be terminated upon thirty (30) days notice by either party. The balance of the trust estate consists of stock in a closely held family business which has been under the sole control and custody of Shy Lurie for the taxable years in question. On January 17, 1985, Shy Lurie and Nicholas M. Daniels, as co-trustees, entered into a Custodial Agreement (hereinafter "Custodial Agreement") with the National Bank of Georgia (hereinafter the "Bank"), a national bank with its office and principal place of business in Atlanta, Georgia. In April 1986, the Custodial Agreement was taken over by NationsBank of Asheville, North Carolina. Such Custodial Agreement provides, in pertinent part, that the operation of the said account will involve instructions directed to or from time to time by Montag & Caldwell, Inc. The Custodial Agreement provides in paragraph 14, section 4, that the Bank is authorized to furnish the State of Georgia intangible tax section with a statement of the securities. The Custodial Agreement in paragraph 7 provides that where permissible all securities shall be registered in the name of the Bank's nominee and the custodian has the authority to make information returns and otherwise to furnish any information regarding this account to any local, state, or federal governmental authority upon the valid demand therefor. The Custodial Agreement cannot be assigned without the unanimous consent of the co-trustees and the investment advisor, Montag & Caldwell, Inc. Payment of Intangible Tax Shy Lurie, as a co-trustee, paid the State of Florida intangible tax in the amount of $12,457.00 for the 1993 tax year. Shy Lurie, as a co-trustee, paid the State of Florida intangible tax in the amount of $14,404.00 for the 1994 tax year. Shy Lurie, as a co-trustee, paid the State of Florida intangible tax in the amount $16,128.00 for the 1995 tax year. Shy Lurie, as a co-trustee, filed an Application for Refund from the State of Florida Department of Revenue (form DR-26) on or about February 29, 1996. On April 18, 1996, the Florida Department of Revenue responded with a Notice of Intent (form DR-1200R) indicating a proposed denial for all three claims. After additional information was submitted to the Department, the refund claims were granted in part and denied in part. On or about May 13, 1996, the Department notified Shy Lurie and the other co-trustee that a partial refund of fifty percent (50%) was granted for each tax year. Shy Lurie, through his attorney, on or about June 18, 1996, submitted a Memorandum of Law and additional documents to the Department. On or about July 19, 1996, after reviewing the Memorandum of Law and accompanying documents the Department issued a Notice of the Proposed Denial of Refund for the following tax years and for the following amounts: For tax year 1993 (DTA Number 9601056A and Source Number 96064010) in the amount of $6,228.50; For tax year 1994 (DTA Number 9601056B and source Number 96064011) in the amount of $7,202.00; and For tax year 1995 (DTA Number 9601056C and Source Number 96064012) in amount of $8,064.00. Shy Lurie, through his attorney, contested the denial of the refund and on or about August 5, 1996, Shy Lurie, through his attorney, filed a written protest with both the Bureau of Hearings and Appeals and the Bureau of Audit Standards. On December 16, 1996, Mr. Nicholas M. Daniels, attorney for the Trust, attended an informal conference with members of the Department, in an effort to settle this matter. The Department issued a Notice of Decision of Refund Denial for all three claims by a letter inadvertently dated January 7, 1996 (the year should have been 1997). Shy Lurie, through his attorney, filed a Petition for Formal Hearing pursuant to Chapter 120, Florida Statutes, on or about February 24, 1997.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue issue a final order dismissing the Petition for Formal Hearing filed by the Petitioners in this case and denying all relief requested by the Petitioners therein. DONE AND ENTERED this 18th day of September, 1998, in Tallahassee, Leon County, Florida. PATRICIA HART MALONO Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 18th day of September, 1998.
The Issue The issue in this case is whether the Respondent's certificates of registration should be revoked for an alleged failure to file tax returns and to remit taxes to the Petitioner.
Findings Of Fact The Petitioner is the state agency responsible for collection of sales and use taxes in Florida, pursuant to chapter 212, Florida Statutes (2011).1/ The Respondent is a Florida company doing business at 7810 U.S. Highway 19, Port Richey, Florida, and is a "dealer" as defined at section 212.06(2). The Respondent holds two certificates of registration issued by the Petitioner (Certificate No. 61-8012297146-3 and Certificate No. 61-8012297147-0) and is statutorily required to file tax returns and remit taxes to the Petitioner. As set forth herein, the Respondent has failed to file tax returns or has filed returns that were not accompanied by the appropriate tax payments. During the time the Respondent has held the certificates, the Petitioner has filed 15 separate warrants against the Respondent related to unpaid taxes, fees, penalties, and interest. The Petitioner is authorized to cancel a dealer's certificate of registration for failure of a dealer to comply with state tax laws. Prior to such cancellation, the Petitioner is required by statute to convene a conference with a dealer. On June 24, 2011, the Petitioner issued a Notice of Conference on Revocation of Certificate of Registration (Notice). The conference was scheduled for July 27, 2011. The Respondent received the Notice and attended the conference. Certificate of Registration No. 61-8012297146-3 The Respondent failed to file tax returns related to Certificate No. 61-8012297146-3 for the period of August through December 2001. The Petitioner assessed estimated taxes of $587.50, fees of $110.95, and a penalty of $285.00. As of the date of the Notice, the accrued interest due was $633.79. Additionally, the Respondent failed to remit taxes of $5,623.63 related to Certificate No. 61-8012297146-3 that were due according to his filed tax returns. Based thereon, the Respondent assessed fees of $994.58 and a penalty of $2,478.26. As of the date of the Notice, the accrued interest due was $4,702.27. As of the date of the Notice, the Respondent's total unpaid obligation on Certificate No. 61-8012297146-3 was $15,415.98, including taxes of $6,211.13, fees of $1,105.53, penalties of $2,763.26, and accrued interest of $5,336.06. Certificate of Registration No. 61-8012297147-0 The Respondent failed to file tax returns related to Certificate No. 61-8012297147-0 for the months of June 2000, September 2000, May 2001, and August 2001. The Petitioner assessed estimated taxes of $619.00 and fees of $202.00. As of the date of the Notice, the accrued interest due was $782.56. Additionally, the Respondent failed to remit taxes related to Certificate No. 61-8012297147-0 of $4,332.48 that were due according to his filed tax returns. Based thereon, the Respondent assessed fees of $771.71 and a penalty of $1,576.87. As of the date of the Notice, the accrued interest due was $4,725.27. As of the date of the Notice, the Respondent's total unpaid obligation related to Certificate No. 61-8012297147-0 was $13,009.89, including taxes of $4,951.48, fees of $973.71, penalties of $1,576.87, and accrued interest of $5,507.83. The Audit A separate audit of the Respondent's business records for the period of February 2004 through January 2007 resulted in an additional assessment totaling $9,314.07, including taxes of $5,048.23, fees of $661.76, and a penalty of $252.42. As of the date of the Notice, the accrued interest due was $3,351.66. At the July 27, 2011, conference, the parties negotiated a compliance agreement under which the Respondent would have retained the certificates of registration. The agreement required the Respondent to make an initial deposit of $2,000.00 by August 15, 2011, and then to make periodic payments towards satisfying the unpaid obligation. The Respondent failed to pay the $2,000.00 deposit, and the Petitioner subsequently filed the Complaint at issue in this proceeding. As of the date that the Complaint was filed, the Respondent owed a total of $37,797.66 to the State of Florida, including taxes of $15,004.34, estimated taxes of $1,206.50, fees of $2,741.00, penalties of $4,592.55, and accrued interest of $14,253.27.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue issue a final order revoking the certificates of registration held by the Respondent. DONE AND ENTERED this 1st day of May, 2012, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of May, 2012.
Findings Of Fact American Beryllium Company, Inc. is a subsidiary of Loral Corporation. On March 16, 1981, American Beryllium Company, Inc. filed a separate company form DR-601-C for Florida Intangible Tax Return reflecting a tax liability of 52,483.00 and paid this amount accordingly upon this date. The above form and check were processed by the Department of Revenue on April 9, 1981. On April 29, 1981, the Loral Corporation filed a separate company 1981 form DR-601-C reflecting a tax liability of $45.70 and paid this amount accordingly upon this date. The above form and check were processed by the Department of Revenue on May 4, 1981. On April 27, 1984, Loral Corporation and American Beryllium Company, Inc., filed a consolidated and amended 1981 form DR-601-C reflecting a tax liability of $35.07. Also, on April 27, 1984, Loral Corporation and American Beryllium Company, Inc., filed a 1981 form DR-26 refund claim exclusive of interest and penalties in the amount of $2,443.63, which is $85.07 less than the $2,528.70 total amount of taxes reported and paid in 1981. The above refund claim was received by the Department of Revenue on May 1, 1984. The Office of the Comptroller denied Petitioner's refund request in the amount of $2,443.63. The Office of the Comptroller authorized and paid a refund in the amount of $45.70 to the Loral Corporation which it paid as taxes owed on April 29, 1981. This leaves a remaining balance of $2,397.93 paid by American Beryllium Company, Inc. as tax it paid on March 16, 1981.
The Issue The issues to be resolved in this case are what amount of federal income tax expense is properly included as an expense in Premier's excessive profits filings for the years 2005-2007, and in light of that deduction, how much Petitioner must refund as excessive profits pursuant to section 627.215, Florida Statutes (2009)?
Findings Of Fact Premier is a foreign insurer authorized to write workers' compensation insurance in the State of Florida. As a workers' compensation insurer, Premier is subject to the jurisdiction of the Office. Premier began writing workers' compensation insurance coverage in Florida on January 1, 2005. The Office is a subdivision of the Financial Services Commission responsible for the administration of the Insurance Code, including section 627.215. Section 627.215(1)(a) requires that insurer groups writing workers' compensation insurance file with the Office on a form prescribed by the Commission, the calendar-year earned premium; accident-year incurred losses and loss adjustment expenses; the administrative and selling expenses incurred in or allocated to Florida for the calendar year; and policyholder dividends applicable to the calendar year. Insurer groups writing types of insurance other than workers' compensation insurance are also governed by section 627.215. Its purpose is to determine whether insurers have realized an excessive profit and if so, to provide a mechanism for determining the profit and ordering its return to consumers. Insurer groups are also required to file a schedule of Florida loss and loss adjustment experience for each of the three years prior to the most recent accident year. Section 627.215(2) provides that "[t]he incurred losses and loss adjustment expenses shall be valued as of December 31 of the first year following the latest accident year to be reported, developed to an ultimate basis, and at two 12-month intervals thereafter, each developed to an ultimate basis, so that a total of three evaluations will be provided for each accident year." Section 627.215 contains definitions that are critical to understanding the method for determining excess profits. Those definitions are as follows: "Underwriting gain or loss" is computed as follows: "the sum of the accident-year incurred losses and loss adjustment expenses as of December 31 of the year, developed to an ultimate basis, plus the administrative and selling expenses incurred in the calendar year, plus policyholder dividends applicable to the calendar year, shall be subtracted from the calendar-year earned premium." § 627.215(4). While the sum of the accident-year losses and loss adjustment expenses are required by the statute to be developed to an ultimate basis, the administrative and selling expenses are not. "Anticipated underwriting profit" means "the sum of the dollar amounts obtained by multiplying, for each rate filing of the insurer group in effect during such period, the earned premium applicable to such rate filing during such period by the percentage factor included in such rate filing for profit and contingencies, such percentage factor having been determined with due recognition to investment income from funds generated by Florida business, except that the anticipated underwriting profit . . . shall be calculated using a profit and contingencies factor that is not less than zero." § 627.215(8). Section 627.215 requires that the underwriting gain or loss be compared to the anticipated underwriting profit, which, as previously stated, is tied to the applicable rate filing for the insurer. Rate filings represent a forecast of expected results, while the excess profits filing is based on actual expenses for the same timeframe. The actual calculation for determining whether an insurer has reaped excess profits is included in section 627.215(7)(a): Beginning with the July 1, 1991, report for workers' compensation insurance, employer's liability insurance, and commercial casualty insurance, an excessive profit has been realized if the net aggregate underwriting gain for all these lines combined is greater than the net aggregate anticipated underwriting profit for these lines plus 5 percent of earned premiums for the 3 most recent calendar years for which data is filed under this section. . . Should the Office determine, using this calculation, that an excess profit has been realized, the Office is required to order a return of those excess profits after affording the insurer group an opportunity for hearing pursuant to chapter 120. OIR B1-15 (Form F) is a form that the Office has adopted in Florida Administrative Code Rule 69O-189.007, which was promulgated pursuant to the authority in section 627.215. The information submitted by an insurer group on Form F is used by the Office to calculate the amount of excessive profits, if any, that a company has realized for the three calendar-accident years reported. The terms "loss adjustment expenses," and "administrative and selling expenses," are not defined by statute. Nor are they defined in rule 69O-189.007 or the instructions for Form F. Form F's first page includes section four, under which calendar-year administrative and selling expenses are listed. Section four has five subparts: A) commissions and brokerage expenses; B) other acquisition, field supervision, and collection expense; C) general expenses incurred; D) taxes, licenses, and fees incurred; and E) other expenses not included above. No guidance is provided in section 627.215, in rule 60O-189.007, or in the instructions for Form F, to identify what expenses may properly be included in the Form F filing. There is no indication in any of these three sources, or in any other document identified by the Office, that identifies whether federal income taxes are to be included or excluded from expenses to be reported in a Form F filing. While the form clearly references taxes, licenses, and fees incurred under section 4(D), the instructions do not delineate what types of taxes, licenses, and fees should be included. The instructions simply state: "for each of the expenses in item 4, please provide an explanation of the methodology used in deriving the expenses, including supporting data." On or about June 30, 2009, Premier filed its original Form F Filing with the Office pursuant to section 627.215 and rule 69O-189.007. Rule 69O-189.007 requires that a Form F be filed each year on or before July 1. On March 19, 2010, the Office issued a Notice of Intent, directing Premier to return $7,673,945.00 in "excessive profits" pursuant to section 627.215. Premier filed a petition challenging the Office's determination with respect to the amount to be refunded, based in part on its position that federal income tax expense is appropriately included as an expense for calculation of excess profits. The parties attempted to resolve their differences over the next year or so. As part of their exchange of information, Premier subsequently filed three amendments to its Form F filing on December 11, 2009; on June 21, 2010; and on January 13, 2012. In each of its amended filings, Premier included the federal income tax expense attributable to underwriting profit it earned during the 2005-2007 period. These expenses were included under section 4(E). As reflected in the Preliminary Statement, Premier filed a challenge to the Office's policy of not allowing federal income taxes to be used as an expense for excess profits filings as an unadopted rule. On July 5, 2012, a Final Order was issued in Case No. 12-1201, finding that the Office's Policy regarding the inability to deduct federal income taxes as an expense for excess profits filings met the definition of a rule and had not been adopted as a rule, in violation of section 120.54(a). The Final Order in Case No. 12-1201 directed the Office to discontinue immediately all reliance upon the statement or any substantially similar statement as a basis for agency action. At this point, the parties have resolved their differences with respect to all of the calculations related to the determination of excess profits, with one exception. The sole issue remaining is the amount, if any, that should be deducted as an administrative expense for payment of federal income tax. The parties have also stipulated that, before any adjustment to federal income tax is made, Premier's underwriting profit for 2005 was $2,923,157 and for 2006 was $2,119,115. For 2008, Premier suffered an underwriting loss of $785,170. Premier's federal income tax rate for all three years was 35%. The maximum amount of underwriting profit that a company can retain is the net aggregate anticipated profit, plus five percent of earned premiums for the calendar years reported on workers' compensation business. For the 2005-2007 reporting years, Premier's maximum underwriting profit is stipulated to be $1,189,892. Anything over this amount is considered excessive profits which must be returned to policyholders. The parties also agree that, prior to any deduction for federal income tax paid by Premier, the amount of excess profit earned by Petitioner and subject to return to policyholders is $3,067,220. Premier has filed a fourth amended Form F, which incorporated all of the stipulations of the parties to date. The fourth amended Form F also includes an allocation of federal income tax expense based upon the statutory allocation methodology outlined in section 220.151, Florida Statutes (2009). Section 220.151 provides the statutory method for allocating federal income tax expenses for purpose of paying Florida corporate income taxes. This section directs that insurance companies shall allocate federal taxable income based on the ratio of direct written premium the insurance company has written in Florida for the relevant period, divided by the direct written premium anywhere. Premier paid its Florida corporate income tax based upon this statutory methodology. Consistent with the methodology in section 220.151, Premier allocated its federal taxable income to the State of Florida based upon the percentage of direct premium written on risks in Florida, and reduced the amount of its federal taxable income by the amount investment income reflected on its federal tax return. Premier then multiplied the Florida portion of its taxable income by its 35% federal tax rate, resulting in the federal income tax expense allocated to Florida. For the year 2005, Premier's federal taxable income according to its tax return is $7,614,512.89. After subtracting investment income listed on the tax return of $969,051.97, the taxable income attributable to premium is $6,645,460.92. For 2006, Premier's federal taxable income according to its tax return is $6,577,534.06. After subtracting investment income of $2,011,614.86, the taxable income attributable to premium is $4,565,919.20. For 2007, Premier's federal taxable income according to its tax return was $4,359,742.88. After subtracting investment income of $2,266,291.99, the taxable income attributable to premium is $2,093,450.89. For the three years combined, the federal taxable income was $18,551,789.83. The amount of investment income subtracted was $5,246,958.82, leaving a balance of taxable income attributable to premium as $13,304,831.01. For the years 2005 through 2007, Premier paid $2,665,079.51; $2,302,136.92; and $1,525,910.01 respectively, in federal income tax. During those same years, Premier wrote 58.8388%; 51.2514%; and 29.8536%, respectively, of its direct premium in Florida. Allocating a portion of Premier's federal tax income and income tax liability to Florida, consistent with section 220.151, results in a calculation of Florida's portion of taxable underwriting income. For 2005, this amount is $3,910,109.46; for 2006, $2,340,097.51; and for 2007, $624,970.45. The total amount of federal taxable income allocated to Florida for the three-year period of $6,875,177.42. The taxable income is then multiplied by the applicable tax rate of 35%, which results in a federal income tax expense allocated to Florida of $1,368,538.46 for 2005; $819,034.13 for 2006; and $218,739.45 for 2007, totaling $2,406,312.10 for the three-year period at issue. The undersigned notes that Premier only writes workers' compensation insurance. It does not write other lines of insurance, which makes the allocation of earned premium much simpler than it would be for a company writing multiple lines of insurance. Under the methodology described above, Premier determined that $2,406,312.10 is the appropriate amount of federal income tax expense to be deducted for calendar years 2005-2007, resulting in an excess profit pursuant to section 627.215, of $660,907. Mr. Hester, a certified public accountant and president of Premier, testified that this methodology was used by Premier in determining its Florida corporate income tax liability. The methodology described above uses the amounts that Premier actually paid in taxes, and therefore reflects the actual expense experienced by Premier. It is accepted as a reasonable method. According to Mr. Watford, the Office does not determine the methodology that must be used in allocating expenses. The insurance company provides the methodology and the data to support it, and then the Office determines whether, in a given case, the methodology is appropriate. Premier points out that the Office has provided no guidance on how to allocate federal income tax expense for excess profits reporting. That no guidance has been offered is understandable, inasmuch as the Office holds firmly to the belief that no allowance for federal income tax expense should be made. Nonetheless, the Office reviewed the method provided by Premier and did not find it to be reasonable. Premier included in its Form F filing for the years 2005-2007 a deduction for the portion of Florida corporate income tax expense not related to investment income. The Office accepted the Florida corporate income tax deduction, which is calculated using the same allocation method Premier used to allocate federal income tax expense. Indeed, the Office acknowledged at hearing that it has permitted the methodology of direct written premium in Florida divided by direct written premium written everywhere for the determination of other expenses for excess profits filings, and has only rejected the methodology on one occasion. However, it has not accepted this same methodology for determining the appropriate amount of federal income tax expense and does not believe it to be a reasonable methodology. The rationale for this distinction is that, in Mr. Watford's view, federal income tax is "a totally different type of expense." Mr. Watford did not consult an accountant or certified public accountant in making the determination that the methodology used was impermissible. Mr. Watford opined that in order to determine that a proposed methodology is reasonable, the insurance company would need to have an adjustment in the profit factor, i.e., submit a new rate filing for the years in question; have a projected tax expense that did not exceed the expense he calculated, based on the effect on future tax expenses caused by the return of excess profits; and submit a methodology that was "appropriate for the insurance company." This approach is rejected. First, the rate filing is supposed to be a forecast, and the Office cited to no authority for adjusting the forecast in light of actual events. Further, Mr. Watford admitted that in this instance, the profit and contingencies factor is already at zero for the years at issue, and section 627.125 provides that no factor less than zero can be used to determine excess profits. Second, the excess profits statute specifies that the deduction for administrative and selling expenses is for those expenses incurred in Florida or allocated to Florida for the current year. Unlike incurred losses and loss adjustment expenses, administrative and selling expenses are not developed to an ultimate basis, which appears to be what the Office is attempting to require. Administrative expenses are incurred by calendar year.1/ Other than the net cost of re-insurance, the Office has not permitted any expense that is to be valued at a date that is later than the end of the calendar year(s) at issue in the excess profits filing. The future effect of these expenses would be considered in the year that effect is realized. Third, allowing whatever is "appropriate for the insurance company" is simply too nebulous a standard, to the extent it is a standard at all, to apply.2/ As noted by Mr. Hester, federal income tax liabilities are governed by the Internal Revenue Code and its attendant regulations, and not tied specifically to underwriting gain or loss.3/ Similarly, Florida corporate income tax liabilities are governed by Florida's taxing statutes. The fact that their calculation is not governed by the Florida Insurance Code does not change the fact that they are administrative expenses borne by the insurance company.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Office enter a Final Order finding that $2,406,312.10 may be deducted for federal income tax expense incurred or allocated to Florida for purposes of section 627.215, and that Premier must return $660,907.90 in excessive profits to its policyholders. DONE AND ENTERED this 19th day of December, 2012, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 19th day of December, 2012.
Findings Of Fact FMCC is a corporation organized and existing under Delaware law. FMCC maintains its principal place of business in Dearborn, Michigan. FMCC is a wholly owned subsidiary of Ford Motor Company. FMCC qualified and is authorized to do business in the State of Florida pursuant to the foreign corporation provisions of Chapter 607, Florida Statutes, and has continuously maintained a registered office and agent in this state during the audit years at issue. During the tax years 1980-1982, inclusive, FMCC and Ford filed corporate tax returns in Florida and paid the taxes due thereon under the Florida Income Tax Code; FMCC maintained 7 to 8 branch offices and employed approximately 200 people in Florida; and Ford had contractual relationships with approximately 130 to 150 authorized Ford dealers in Florida. A copy of a representative agreement between Ford and the dealers is Exhibit 3 to this Stipulation. FMCC's principal business is financing the wholesale and retail sales of vehicles manufactured by Ford Motor Company. During the audit period FMCC provided financing for the purchase of vehicles as authorized by Ford dealers from Ford Motor Company. FMCC also: provided financing for the purchase of automobiles by the public from the dealers; and engaged in commercial, industrial and real estate financing, consumer loan financing, and leasing company financing in the State of Florida as well as other states. Attached as Composite Exhibit 4 are sample documents utilized by FMCC in the above financing. The majority of the intangibles in question are accounts receivables held by FMCC and owned by Florida debtors in connection with the purchase of tangible personal property shipped to or located in the State of Florida. FMCC is the holder of security agreements executed by thousands of Florida debtors. These security agreements gave FMCC a lien on tangible personal property located in the State of Florida. The Florida Secretary of State's Office was utilized by FMCC during the assessment period to perfect and protect its liens created under these security agreements with Florida debtors by the filing of U.C.C. financing statements. None of the original notes are stored in Florida. During the assessment period, FMCC utilized or could have utilized the Florida Courts to recover sums due by Florida debtors on delinquent accounts receivable. In addition, FMCC utilizes the Florida Department of Highway Safety and Motor Vehicles to perfect its liens on motor vehicles pursuant to Chapter 319, Florida Statutes. In 1983, the Department conducted an audit of the FMCC intangible tax returns for tax years 1980 through 1982, inclusive. On June 3, 1983, the Department proposed an assessment of tax, penalty and interest in the total amount of $2,560,379.00. See Exhibit 5. FMCC filed a timely protest. On October 8, 1984, the Department issued a Notice of Decision. See Exhibit 2. On December 12, 1984, the Department acknowledged receipt of FMCC's timely November 8, 1984 Petition for Reconsideration. On February 18, 1985, the Department issued a Notice of Reconsideration. See Exhibit 6. FMCC elected to file a Petition for Formal Proceedings, which was received on April 8, 1985. On the basis of the revised audit report, the Department of Revenue imposed the intangible tax on FMCC for the tax years 1980 through 1982, inclusive, in the following categories, and in the taxable amounts listed as follows: 1/1/80 1/1/81 1/1/82 Commercial Finance Receivables-- $342,892,615 $403,061,571 $486,412,164 Retail Commercial Finance Receivables-- 218,591,180 241,993,462 228,303,569 Wholesale Simple Interest Lease Receivables-- 66,345,902 75,978,095 71,315,777 Retail Lease Finance Receivables N/A N/A N/A Capital Loan Receivables 3,112,877 2,064,698 2,419,770 Consumer Loan Receivables 10,144,531 14,122,666 18,578,699 Service Equipment Financing--Dealer I.D. 481,869 368,186 422,108 Receivables Ford Rent-A-Car Receivables 27,825,283 26,179,377 20,362,896 Ford Parts & Service Receivables -0- 10,499,401 10,800,313 (10) Accounts Receivables--Customers & Others 3,452,194 4,581,629 4,952,234 (11) Accounts Receivables--Affiliate 1,617,880 2,914,094 4,438,849 (12) C.I.R. Receivables 23,243,257 27,387,938 24,222,621 TOTAL FLORIDA RECEIVABLES------ 697,707,588 809,151,117 872,229,000 TAX AT 1 MILL---- 697,708 809,151 872,229 LESS ORIGINAL TAX PAYMENT------ 312,703 351,976 339,142 LESS PETITION PAYMENT ON AGREED CATEGORIES------ 51,069 53,567 44,586 TOTAL REMAINING TAX ASSESSED------ $333,936 $403,608 $488,501 TOTAL TAX FOR ALL YEARS----- $1,226,045 REVISED ASSESSMENT FIGURES DOES NOT INCLUDE $1,386.18 OF THE PETITION PAYMENT At the time it filed its petition for a formal hearing, FMCC agreed to and paid the 1 mill tax, but no interest or penalty, on the following amounts. The taxability of these items is no longer in dispute, only penalty and interest. 1980 1981 1982 (8) Ford Rent-A-Car 27,825,283 26,179,377 20,362,896 Receivables (12) CIR 23,243,257 27,387,938 24,222,621 Receivables Capital Loan Receivables (item 5 of paragraph 11) reflect amounts of money owed by Ford dealers to FMCC. The obligation arises from loans made to Ford dealers located in Florida to expand showroom or other facilities and for working capital. The items located as (10) Accounts Receivable - Customers and Others and (11) Accounts Receivables - Affiliates in paragraph 11 reflect only the amount of accrued interest to which FMCC is entitled on notes from non-affiliates and affiliates, respectively, from the last settlement date prior to year end until the end of each respective year. The principal amounts owed on these notes, which are not secured by realty, are included in other categories. The Department does not assess a tax for similar interest when the amount owed is secured by realty. Wholesale and retail intangibles were created and handled in 1980, 1981 and 1982 by FMCC in the manner set forth in Exhibit 7. The Department of Revenue has imposed penalties in the amount of $543,968 composed of $330,051 as the 25% delinquent penalty imposed pursuant to Fla. Stat. Section 199.052(9)(a) (1983), and $15,886 as the 15% undervalued Property penalty imposed pursuant to Section 199.052(9)(d)(1983), Florida Statutes. The Department offered abatement of the 15% omission penalty ($198,031) imposed pursuant to Fla. Stat. Section 199.052(9)(c) (1983). The closing agreement required pursuant to Fla. Stat. Section 213.21 reflecting this reduction of penalty was not signed by petitioner. FMCC's intangible tax returns have been audited on prior occasions. The manner of reporting was identical to the manner in which FMCC reported its intangibles for tax years 1980 through 1982. The 1973-1975 and the 1976-1978 audits were "no change" audits. FMCC's method of reporting receivables generated from Florida sales was challenged by the Department of Revenue. The challenge was dropped because the Department of Revenue did not have the statutory authority to assess sales of tangible personal property with an f.o.b. point other than Florida. Chapter 77-43, Laws of Florida amended Section 199.112, Fla. Stat. to allow tangible personal property (sic) [to be taxed] regardless of the f.o.b. point of sale. This amendment applied to the January 1, 1978 taxable year. There was a 1978-1980 "no change" audit. Ford Motor Company has filed refund claims for certain categories for the tax year 1981 and 1982. Ford Motor Company claims that it inadvertently paid intangible tax on accounts receivable owned by FMCC. As presented in the Notice of Decision, no refund will be made as it will be handled as a credit against taxes due by Ford Motor Company. While not an announced policy, the Department of Revenue drafted and utilized proposed rules relating to compromising penalties. These rules are not final. Attached as Exhibit 8 are the proposed rules. A copy of these rules was provided to Petitioner by letter dated July 28, 1986. In addition, while not an announced policy the Department of Revenue utilized guidelines established by the Internal Revenue Service and federal court for compromising penalties.
The Issue Whether Respondent Office of the Comptroller should refund to Petitioner taxes paid pursuant to Chapter 199 and 201, Florida Statutes.
Findings Of Fact The parties stipulated to the facts set forth in paragraphs 1 through 9 of the Petition herein, as follows: The agencies affected in this action are the Department of Revenue, Tallahassee, Florida, and the Office of the Comptroller, Tallahassee, Florida. The Petitioner is Zimmer Homes Corporation, 777 Southwest 12th Avenue, Pompano Beach, Florida. Zimmer Homes Corporation, on or about December 12, 1974, conveyed a piece of property described as follows: All of that part of the Southeast quarter of Section 10, Township 44 South, Range 42 East, of Palm Beach County, Florida, lying North of the North right-of-way (r/w) line of Forest Hill Boulevard, less the West 40 feet thereof for road right-of-way and less the East 40 feet thereof. The sellers paid the necessary excise tax on documents and intangible tax as follows: a. $11,250.00 total consideration $3,750,000.00 of Section Florida 201.02(1) Statutes b. 3,900.00 based upon note of $2,600,000.00 Section Florida 201.07 Statutes c. 1,542.00 based upon note of $1,027,906.00 Section Florida 201.07 Statutes d. 4,125.00 based upon total consider- ation of $3,750,000.00 Section Florida 201.021(1) Statutes e. 5,200.00 based upon mortgage secur- ing note of $2,600,000.00 Section Florida 199.032(2) Statutes f. 2,055.81 based upon mortgage secur- ing note of $1,027,906.00 Section Florida 199.032(2) Statutes A lawsuit was commenced for reasons not relevant to this Petition and the Circuit Court of the Fifteenth Judicial Circuit of Florida entered a Final Judgment on July 12, 1978, a copy of which is attached hereto as Exhibit "A". In the Final Judgment the Court determined that the Purchasers had a right to rescind the transaction. The Court ordered that all obligations of the parties arising out of the Purchase and Sale Agreement were cancelled and that the Purchasers were entitled to a sum of money in order to restore the parties to their original positions. (Petitioner's Exhibit 1). On March 22, 1979, pursuant to Section 215.26, Florida Statutes, Zimmer Homes Corporation applied for a refund of the excise tax on the documents in an amount as specified in Paragraphs 4(a), 4(b), 4(c) and 4(d), above. (Petitioner's Exhibit 4). On April 3, 1979, pursuant to Section 199.252, Florida Statutes, and Section 215.26, Florida Statutes, Zimmer Homes Corporation applied for a refund of the intangible tax paid in an amount as specified in Paragraphs 4(e) and 4(f) above. (Petitioner's Exhibit 4). According to a letter from the Office of the Comptroller dated April 23, 1979, a copy of which is attached hereto as Exhibit "B", the Office of the Comptroller indicated that they concurred with the findings and conclusions of the Department of Revenue in denying the refund request on the excise tax on documents as specified in paragraph 6 above. As grounds therefore, it was indicated that the refund requests were denied because the statute of limitations under Section 215.26, Florida Statutes, barred the request for refund. (Petitioner's Exhibit 3). By letter dated April 26, 1979, a copy of which is attached hereto as Exhibit "C", the Office of the Comptroller indicated that they concurred with the findings of the Department of Revenue on denying the refund for intangible taxes which had been paid as specified above. As grounds therefore it was indicated that the request was denied because the applicable statute of limitations had run. (Petitioner's Exhibit 2).
Recommendation That Petitioner's application for refund of tax paid under Chapters 199 and 201, Florida Statutes, be approved. DONE AND ENTERED this 6th day of September 1979 in Tallahassee, Florida. THOMAS C. OLDHAM 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 6th day of September 1979. COPIES FURNISHED: Richard B. Burk, Esquire Scott, Burk, Royce and Harris 450 Royal Palm Way Palm Beach, Florida 33480 Barbara Harmon, Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32301 John D. Moriarty, Esquire Department of Revenue Room 104, Carlton Building Tallahassee, Florida 32301 Honorable Gerald A. Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32301
Findings Of Fact Finding no record that Taxpayer had filed or paid intangible taxes for the years 1979 and 1980, on June 17, 1982, DOR notified Taxpayer they were reviewing Taxpayer's intangible personal property tax account for the years 1979 through 1982 (Exhibit 16). During the audit which followed Taxpayer presented copies of the 1981 and 1982 tax returns and cancelled checks evidencing payment. The audit disclosed small discrepancies in these returns and those discrepancies were satisfied by the Taxpayer and are not an issue in these proceedings. On December 15, 1982, Gateway Hospital sold its assets to Humana Corporation and in December 1983 the corporation was dissolved and a liquidating trust was established to settle accounts and distribute proceeds to the stockholders. After this date none of Taxpayer's employees were located at the Gateway Hospital address, 5115 - 58th Avenue North, St. Petersburg, Florida. One of Taxpayer's contentions on the timeliness issue is that all notices from DOR were sent to the 58th Street address and were either not received or not timely received by Taxpayer. No special notification to DOR of a change of address was submitted by Taxpayer. The 1983 intangible tax return showed Taxpayer's address as 5800 49th Street, Suite 201, St. Petersburg, Florida. However, in the petition for hearing dated March 21, 1985, Petitioner's address is shown as 5115 58th Avenue North, St. Petersburg, Florida 33709. On April 2, 1984, DOR sent Taxpayer Notice of Proposed Assessment (Exhibit 6) for tax years 1979, 1980, 1981, 1982, and 1983 in the amount of $19,786.36 with interest through February 23, 1984. This notice advised Taxpayer that this was final agency action and of its right to petition for an administrative hearing within 60 days or file an action in circuit court within 60 days, and that failure to so petition or file would render the proposed assessment final and no action could thereafter be brought to contest the assessment. This notice was sent certified mail and receipted for at the 58th Avenue North address. Alan Steinbach, the chief operating officer of the liquidating trust, testified he never received Exhibit 6. Subsequent to June 19, 1984, DOR sent Notice of Demand for Payment (Exhibit 7) to Taxpayer to the 58th Avenue North address. This document, the top part of which is identical to Exhibit 6 except interest has been computed to 6/19/84, was received by Steinbach. Steinbach contacted DOR and told Randy Miller, Executive Director, that this was the first notice of a delinquency he had received from DOR and needed additional time to show the taxes had been paid. Miller agreed to allow Taxpayer more time and communicated this to Steven J. Barger, Jr., Chief, Bureau of Audit Selection. By letter dated August 13, 1984 (Exhibit 8), Barger advised Steinbach that the collection procedure would be delayed 30 days to permit Taxpayer time to submit the information necessary to set aside the assessment. By letters dated September 11, 1984 (Exhibit 9) and October 17, 1984 (Exhibit 12), the collection procedures were further stayed until December 12, 1984. During this period Taxpayer presented evidence that the 1982 and 1983 intangible personal property taxes had been paid and all errors in those returns were corrected and the correct taxes paid. By Notice of Proposed Assessment dated 1/9/85 (Exhibit 14) an audit assessment for the tax years 1979-1983 was forwarded to Taxpayer showing the tax, penalties and interest for the tax years 1979 and 1980 through 1/3/85 in the amount of $12,296.30 were due and no taxes were due for the other years. The explanation of appeal rights attached to this audit assessment advised the Taxpayer had 60 days from the date of assessment to contest the assessment in an administrative proceeding or a judicial proceeding. On March 21, 1985, the instant petition was filed. During the period prior to January 9, 1985, Petitioner was unable to locate tax returns or cancelled checks showing payment for 1979 and 1980 although Taxpayer produced returns and cancelled checks for all of the other years from 1977 through 1983. DOR also located evidence showing intangible personal property taxes paid by Taxpayer before and after 1979 and 1980, but could find no record of returns being filed or taxes paid for the years 1979 and 1980. Upon receipt of a tax return and payment DOR photographs the return and payment check on microfilm, enters the data from the return in the computer, and forwards the tax return to the archives in the Department of State. An index for a tax year is compiled after the close of that tax year. Until this index is prepared, DOR cannot readily locate any tax return. As a result, whether or not a tax return was filed by a particular taxpayer cannot be ascertained by DOR until six to nine months after the close of the tax year. At the time Exhibit 7 was forwarded to Taxpayer, DOR could not have located the Taxpayer's 1983 return which, in fact, had been filed, as had the 1981 and 1982 returns. Taxpayer could not locate the returns or cancelled checks representing payment for the years 1979 and 1980. When asked why Taxpayer did not obtain bank records to establish payment, Steinbach responded that the corporation wrote 1000- 1500 checks per month and too many check would have to be screened. Since all payments by Taxpayer for the five years for which returns were produced were made in June, except for one year, 1983, which was paid in July, that does not appear to be an onerous task to avoid a tax liability of more than $12,000.
The Issue The issue for determination is whether interest is due upon additional tax paid by Petitioners from the date of amended returns or whether interest should accrue from the date of Petitioners’ original returns.
Findings Of Fact First Florida timely filed consolidated federal corporate income tax returns and consolidated Florida Chapter 220 tax returns for the tax years ending 12/31/86, 12/31/87, 12/31/88, 12/31/89, and 12/31/90. Barnett timely filed consolidated federal corporate income tax returns and consolidated Florida Chapter 220 tax returns for 12/31/88, 12/31/89, 12/31/90, and 12/31/91. Barnett acquired First Florida on December 7, 1992. At the time of the merger, First Florida was being audited by the Internal Revenue Service (IRS) for the tax years 1986, 1987, 1988, 1989, and 1990. Barnett subsequently agreed with the IRS to federal tax adjustments for each of the respective tax years with regard to First Florida and itself. Alternatively, it may be stated that Petitioners under- reported “federal taxable income,” on line 30 of their original federal corporate income tax returns (“original federal returns”), and correspondingly, on line 1 of their original Florida corporate income tax returns (“original Florida returns”), for the tax years at issue. As a result of an audit by the Internal Revenue Service, various adjustments were made to “federal taxable income.” These adjustments became final and were agreed upon by the Petitioners and the Internal Revenue Service. The effect of these adjustments was to increase “federal taxable income” beyond that which had been previously reported by Petitioners on line 30 of their original federal returns, and, therefore, to increase Petitioners’ federal and Florida tax liability. After the federal audit adjustments became final in 1995, Petitioners paid to the federal government the additional amount of tax determined by the Internal Revenue Service to be due. Also in 1995, Petitioners timely reported the federal audit adjustments to the State of Florida, within sixty days after the federal audit changes became final, pursuant to Section 220.23, Florida Statutes. This was done by filing Form F-1120X notifications, in order to “amend” their original Florida return filings, for each of the pertinent tax years (hereinafter, “amendatory notifications”). The amendatory notifications filed by Petitioners increased and revised the amounts which were previously reported on line 1 of the original Florida returns, for each of the pertinent tax years. The purpose of filing amendatory notifications was to remit additional taxes determined to be due to the State of Florida, as a result of the federal audit adjustments. However, Petitioners did not remit any interest to the State of Florida at the time of filing the amendatory notifications. After receipt of the amendatory notifications, Respondent issued Notices of Tax Action to Petitioner Barnett Banks, Inc., as successor in interest to First Florida Banks, Inc., informing Petitioner that additional interest was due in the following amounts: $86,234.80 for 1986, $70,901.18 for 1987, $55,883.73 for 1988, $27,620.11 for 1989, and $15,115.37 for 1990. Respondent also issued Notices of Tax Action to Petitioner Barnett Banks, Inc., and/or its subsidiaries informing Petitioner and/or its subsidiaries that additional interest was due in the following amounts: $74,658.99 for 1988, $21,463.16 for 1989, $34,930.18 for 1990, and $6,850.31 for 1991. Respondent did not assess any penalties against Petitioners, because both the original returns and the subsequent amendatory notifications were timely filed and because no finding of willful or negligent under-reporting was made by Respondent. Petitioners paid under protest the amounts of interest claimed to be due by Respondent and timely sought a refund, which was denied. This action for formal administrative review challenges Respondent’s assessment of liability for interest and related refund denial. No dispute exists concerning the mathematical computation of the assessed amount. Prior to 1993, Respondent’s policy, with regard to payment of interest under circumstances similar to those presented in these proceedings, did not require the payment of interest if the amendatory notifications were timely filed and additional tax timely paid. This finding is established by the testimony of Joan Eckert, formerly employed by Respondent during the years 1987-93 as a technical assistant and as a tax law specialist. In addition to routinely advising that interest was not payable where additional taxes were timely paid, Eckert participated in the drafting of a proposed rule that was subsequently published in 1993, further documenting and describing Respondent’s policy at that time in such situations. Published in Volume 19, No. 24, June 18, 1993, of the Florida Administrative Weekly, the proposed rule provided in pertinent part as follows: If the amended return concedes the accuracy of a federal change or correction, any deficiency in Florida corporate income, franchise, or emergency excise tax is deemed assessed on the date of filing the amended return. Therefore, no penalty or interest will be assessed if the amended return is filed not later than 60 days after the date notification is required by s. 220.23(2)(a)2., F.S. However, the proposed rule was never formerly adopted in the form and content as originally published. By May 17, 1994, Respondent’s policy solidified in another direction and Florida Administrative Code Rule 12C-1.023(6), was enacted, which provides: If the amended return concedes the accuracy of a federal change or correction, any deficiency in Florida corporate income, franchise, or emergency excise tax is deemed assessed on the date of filing the amended return. No penalty will be assessed if the amended return is filed not later than 60 days after the date notification is required by Section 220.23(2)(a)3., F.S. and subsection (5) of this rule. However, interest will be due on any deficiency from the original due date of the return through the date of payment. In this proceeding, Respondent’s representatives have deliberately elected to rely upon Respondent’s statutory authority for the instant assessment, as opposed to a duly enacted rule on the basis that the formal rule was not in effect until 1994, and the assessment was for interest on taxes that predated the rule.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that a Final Order be entered directing refunds to Petitioners of interest payments made to Respondent in these consolidated cases. DONE AND ENTERED this 10th day of June, 1998, in Tallahassee, Leon County, Florida. DON W. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 10th day of June, 1998. COPIES FURNISHED: Jeffrey M. Dikman, Esquire Department of Legal Affairs The Capitol, Tax Section Tallahassee, Florida 32399-1050 David M. Wells, Esquire Eric Bilik, Esquire McGuire, Woods, and Criser 50 North Laura Street, Suite 3300 Jacksonville, Florida 32202 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact Burger King, a Florida corporation, is a wholly owned subsidiary of the Pillsbury Company, with headquarters located in Minneapolis, Minnesota. Burger King filed its intangible tax returns and made its original tax payments on or before their respective due dates of June 30, 1972, and June 30, 1973. On May 3, 1974, DOR sent a letter to Burger King indicating that Burger King's intangible tax account was being reviewed and that DOR's records did not reflect having received the 1972 or 1973 returns. The next piece of correspondence between the parties (according to the record) occurred over two years later on June 3, 1976. At that time DOR informed Burger King that it was auditing Burger King's intangible tax account for the tax year 1973. This letter constitutes the initiation of an investigation prior to the expiration of three years from the due date for filing the 1973 return. The parties make no further reference in their correspondence to the 1972 return or the tax year 1972. However, DOR does request a copy of Burger King's balance sheet dated December 31, 1972. This request is contained in DOR's letter of September 12, 1977, which letter in its opening paragraph limits the inquiry to tax years 1973 through 1977, inclusive. In addition to its letter of June 3, 1976, DOR filed its proposed assessment for tax year 1973, on the same date, June 3, 1976. Typed at the bottom of the proposed assessment was the following statement: This proposed assessment shall become final within sixty (60) days of receipt, unless you file a protest requesting a departmental conference, or petition for a hearing under the provisions of the Administrative Procedures Act, Chapter 120, F.S. Upon receipt of these documents, Mr. Tom Howell, the property tax manager for Pillsbury Corporation asked for an extension of time to file the information requested in the June 3rd letter, which extension was granted by DOR. However, no protest or petition for hearing was filed within the sixty (60) days. Subsequently, Mr. Nicolas Joanos, a tax examiner with DOR recommended that Burger King file an amended tax return to take advantage of savings that would accrue if subsidiary corporations were consolidated on the return. While no such amended return was filed, a recomputation of tax liability based upon consolidation was made by DOR on January 6, 1977. On January 27, 1977, Burger King paid the additional tax for the years 1974, 1975, and 1976 but declined to pay the tax due for the 1973 tax year on the ground that the billing was dated past the expiration date for making a 1973 assessment. On February 23, 1977, DOR computed a new proposed assessment which included accrued interest from the prior proposed assessment. Burger King subsequently filed its request for a hearing pursuant to the provisions of Chapter 120, Florida Statutes. The intangible properties sought to be taxed by DOR for 1973 include some $11,000,000 of inter-company accounts receivable due from Burger King's parent corporation, The Pillsbury Company. DOR does not contest that Burger King overpaid its intangible tax for the tax year 1972, but opposes a refund on the procedural ground more fully explained below. During the applicable periods of time herein, Burger King never made application for a refund for the 1972 tax paid. Rather, the issue was first raised by Burger King in its amended petition dated January 29, 1978.
The Issue The issue is whether petitioner's candidacy for the office of Tax Collector would conflict or interfere with his employment as an auditor for the Department of Revenue.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioner, Robert M. Hendrick, a career service employee, is employed with respondent, Department of Revenue (DOR), as a Tax Auditor IV in its Leesburg, Florida field office. He has been employed by DOR since September 1991. In his position, petitioner primarily audits tangible personal property assessments performed by the local Property Appraiser and, on occasion, he inspects the property which is the subject of the assessment. In March 1996, the Lake County Tax Collector publicly announced that he would not run for reelection. After learning of this decision, by letter dated March 19, 1996, petitioner requested authorization from his employer to run for that office. The letter was received by DOR's Executive Director on April 1, 1996. On April 10, 1996, the Executive Director issued a letter denying the request on the ground the candidacy would conflict with petitioner's job duties. More specifically, the letter stated in relevant part that: Under section 195.002, Florida Statutes, the Department of Revenue has supervision of the tax collection and all other aspects of the administration of such taxes. Your position with the Department may require you to review or audit the activities of the office you propose to seek. Also some of your duties in supervising other officials in the administration of property taxes may be affected by your proposed candidacy. Your job requires you to review appropriate tax returns, and other records to resolve complex issues related to taxing statutes administered by the Department of Revenue. It also requires you to identify and scrutinize transactions to ascertain whether taxpayers have escaped paying property taxes. In addition, it also requires you to review and audit procedures used by counties to identify and value tangible personal property and accomplish statutory compliance, to investigate taxpayer complaints, to conduct field review with county staff as appropriate, and to provide education and assistance to county taxing officials. Because of the Department's statutory supervision of the office of tax collector, there cannot be a certification that your candidacy would involve "no interest which conflicts or activity which interferes" with your state employment within the definitions in section 110.233(4), Florida Statutes. The letter went on to say that This letter is a specific instruction to you that you should not qualify or become a candidate for office while employed in your current position. If you wish to commence your campaign by performing the pre-filing requirements, the law requires that you first resign from the Department. Failure to do so shall result in disciplinary action to dismiss you from your position in accordance with the Department's disciplinary standards and procedures, and Rule 60K-4.010, F.A.C., on the grounds that you are in violation of the Department's Code of Conduct, Section 110.233, Florida Statutes, and Rule 60K- 13.002(3), F.A.C. After receiving the above decision, by letter dated April 15, 1996, petitioner requested that the Executive Director reconsider his decision. Thereafter, on April 24, 1996, petitioner filed a request for a formal hearing to contest the agency's decision. Both the Property Appraiser and Tax Collector play a role in the property tax program in the State of Florida. The Property Appraiser generally values or assesses property subject to taxation and applies the millage rate set by the taxing authority. After the tax roll is approved by DOR, it is certified to the Tax Collector who then collects the taxes and distributes them to the appropriate taxing authorities. It is noted that ad valorem taxes make up the lion's share of taxes at the local level while tangible personal property taxes are a very small source of revenues. DOR is charged with the duties of providing oversight to the property tax program and aid and assistance to the Property Appraiser and Tax Collector. In this regard, DOR views the two offices as an integral part of the property tax program rather than two separate entities. It characterizes the program as "a stream or process where (the) lines of delineation (between the two offices) are not as distinct as they might have been ten or fifteen years ago." Because of the highly sensitive nature of the tax program, it follows that a certain degree of trust and integrity must exist between DOR (and its employees) and the local offices. Petitioner does not interface with the office of Tax Collector in any respect, and his duties do not require that he audit any of that office's records. His only duties are to audit the tangible personal property assessments performed by the Property Appraiser. These facts were not controverted. Although he has never differed with a valuation of the Property Appraiser during his five year tenure at DOR, and no such disagreement has occurred in Lake County during the last twenty-five years, petitioner could conceivably disagree with an assessment while running for office during the next few months. If the matter could not be informally settled, the tax rolls would not be certified by DOR, and litigation against DOR could be initiated by the Property Appraiser. Under those unlikely circumstances, petitioner might be called as a witness in the case, although the general practice has always been for DOR to use personnel from the Tallahassee office in litigation matters. To the very minor extent that petitioner could affect the tax rolls by disagreeing with the Property Appraiser's valuations, this could also impact the amount of money collected by the Tax Collector. DOR cites these circumstances as potentially affecting in an adverse way the level of trust and integrity between DOR and the office of Tax Collector. However, under the facts and circumstances of this case, this potential conflict is so remote and miniscule as to be wholly immaterial. The evidence also shows that in his audit role, petitioner has the "opportunity . . . to look and have access to tax returns," some of which "are of TPP (tangible personal property) nature (and) have attached to them federal tax returns" which might be used by the Property Appraiser for establishing the value of tangible personal property. Whether petitioner has ever had access to, or reviewed such, returns is not of record. In any event, to the extent this set of circumstances would pose a potential conflict with the Property Appraiser, as to the Tax Collector, it would be no more significant than the purported conflict described in finding of fact 7. Finally, DOR suggests that if petitioner was unsuccessful in his bid for office, it would likely damage the "relationship of trust" that now exists between DOR and the Tax Collector. Again, this purported conflict is so speculative as to be deemed immaterial. The parties have stipulated that, as of the date of hearing, petitioner's only option for qualifying to run for office is to pay a $6,173.00 qualifying fee no later than noon, July 19, 1996. The opportunity for submitting an appropriate number of signatures in lieu of a filing fee expired on June 24, 1996. On the few, isolated occasions during the last twenty-five years when the Lake County Tax Collector has requested information from DOR personnel, he has spoken by telephone with DOR legal counsel in Tallahassee. Those matters of inquiry, primarily relating to ad valorem taxes, do not concern any area related to petitioner's job duties. He also pointed out that his office always cooperates with the office of the Property Appraiser, especially when "corrections" must be made due to errors by that office. Even so, he described the two offices as being separate and with entirely different duties. This testimony is accepted as being the most persuasive on this issue. At least four persons have already announced that they would run for Tax Collector for Lake County. The parties have stipulated that one of those persons is a regional administrator for the Department of Highway Safety and Motor Vehicles who was not required to resign his position in order to run for office. According to the incumbent Tax Collector, that individual supervises other state employees who occasionally audit certain aspects of his office pertaining to automobile license plates and decals. Because of the time constraints in this case, and although not legally obligated to do so, respondent has voluntarily agreed to allow petitioner to take annual leave (or presumably leave without pay) commencing on the date he qualifies for local public office, or July 19, 1996, and to remain on leave until a final order is issued by the agency. At that time, if an adverse decision is rendered, petitioner must choose between resigning or withdrawing as a candidate. These terms are embodied in a letter from DOR's counsel to petitioner dated July 3, 1996. If petitioner is allowed to run for office without resigning, he has represented that he will campaign while on leave or after regular business hours. He has also represented, without contradiction, that his campaign activities will not interfere with his regular duties. If elected, he intends to resign his position with DOR.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue enter a final order granting petitioner's request that it certify to the Department of Management Services that his candidacy for the office of Lake County Tax Collector would involve no interest which conflicts, or activity which interferes, with his state employment. DONE AND ENTERED this 10th day of July, 1996, in Tallahassee, Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of July, 1996. APPENDIX TO RECOMMENDED ORDER Respondent: Partially accepted in finding of fact 1. Partially accepted in findings of fact 2 and 3. 3-5. Partially accepted in finding of fact 1. 6. Partially accepted in finding of fact 5. 7-9. Partially accepted in finding of fact 4. 10-11. Partially accepted in finding of fact 7. 12. Rejected as being irrelevant since petitioner was not an employee of DOR in 1990. 13-17. Partially accepted in finding of fact 7. 18. Rejected as being unnecessary. 19-20. Partially accepted in finding of fact 5. 21. Partially accepted in finding of fact 8. 22-23. Partially accepted in finding of fact 5. Partially accepted in finding of fact 9. Rejected as being unnecessary. Note - Where a proposed finding of fact has been partially accepted, the remainder has been rejected as being irrelevant, not supported by the evidence, unnecessary, subordinate, or a conclusion of law. COPIES FURNISHED: L. H. Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Mr. Robert M. Hendrick 5022 County Road 48 Okahumpka, Florida 34762 Peter S. Fleitman, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
