The Issue The issue is whether Respondent's Certificate of Registration 39-8011930243-9 should be revoked for the reasons stated in an Administrative Complaint for Revocation of Certificate of Registration (Administrative Complaint) issued by the Department of Revenue (Department) on June 5, 2014.
Findings Of Fact The Department is the state agency charged with administering and enforcing the state revenue laws, including the laws related to the imposition and collection of sales and use taxes pursuant to chapter 212. Respondent is a Florida limited liability corporation doing business as The Hyde Park Cafe at 1806 West Platt Street, Tampa, Florida. For purposes of collecting and remitting sales and use taxes, it is a dealer as defined in section 212.06(2) and is required to comply with chapter 212. Respondent holds Certificate of Registration number 39- 8011930243-9, which became effective on July 27, 2000. A certificate of registration is required in order to do business in the state and requires its holder to collect and remit sales tax pursuant to chapter 212. See § 212.05(1), Fla. Stat. Respondent is also an employing unit as defined in section 443.036(20) and is subject to the unemployment compensation tax (UCT) provisions of chapter 443, as provided in section 443.1215. Through an interagency agreement with the Department of Economic Opportunity, the Department provides collection services for UCTs. See § 443.1316(1), Fla. Stat. In doing so, the Department is considered to be administering a revenue law of the state. See § 443.1316(2), Fla. Stat. A dealer must file with the Department sales tax returns and remit the tax collected on a monthly basis. See § 212.15(1), Fla. Stat. Also, an employment unit must remit payment to the Department for UCTs due and owing on a quarterly basis. The Department is authorized to revoke a dealer's certificate of registration for failure to comply with state tax laws. See § 212.18(3)(e), Fla. Stat. If the Department files a warrant, notice of lien, or judgment lien certificate against the property of a dealer, it may also revoke a certificate of registration. See § 213.692(1), Fla. Stat. Before revoking a certificate of registration, the Department must convene an informal conference that the dealer is required to attend. See § 213.692(1)(a), Fla. Stat. At the conference, the dealer may either present evidence to refute the Department's allegations of noncompliance or enter into a compliance agreement with the Department to resolve the dealer's failure to comply with chapter 212. Id. After a compliance agreement is executed by the dealer, the Department may revoke the certificate of registration if the dealer fails to comply with its terms and conditions. See Pet'r Ex. 6, p. 2, ¶ E. If a breach occurs, the entire amount is due and payable immediately. Id. at ¶ G. An informal conference can be characterized as the Department's last administrative remedy to collect delinquent taxes before beginning revocation proceedings. A dealer can also enter into a diversion program with the State Attorney's Office to resolve liabilities, but the record shows that Respondent defaulted on that arrangement. According to the Department, collection problems with this dealer first began in 2003. Department records show that Respondent failed to remit required sales taxes for the months of January 2012, August through December 2012, January through December 2013, and January and February 2014. In addition, Respondent failed to remit UCTs for the calendar quarters ending September 2010, December 2010, March 2011, June 2011, September 2011, December 2011, March 2012, June 2012, September 2012, December 2012, and March 2013. Respondent does not dispute that it failed to timely remit and pay the foregoing taxes for the time periods listed above. For the purpose of collecting the delinquent taxes, the Department issued and filed against Respondent delinquent tax warrants, notices of lien, or judgment lien certificates in the Hillsborough County public records. See Pet'r Ex. 3. Before seeking revocation of Respondent's certificate of registration, on February 5, 2014, the Department's Tampa Service Center served on Respondent a Notice of Conference on Revocation of Certificate of Registration (Notice). See Pet'r Ex. 4. The Notice scheduled an informal conference on March 21, 2014. It listed 16 periods of sales and use tax noncompliance and 11 periods of re-employment tax noncompliance and provided the total tax liability as of that date. This number was necessarily fluid, as the taxes owed were accruing interest, penalties, and/or fees on a daily basis. The purpose of the informal conference was to give Respondent a final opportunity to make full payment of all delinquent taxes, or to demonstrate why the Department should not revoke its Certificate of Registration. As pointed out by the Department, an informal conference allows a dealer to bring up "any concerns" that it has regarding its obligations. Respondent's manager and registered agent, Christopher Scott, appeared at the conference on behalf of Respondent.1/ At the meeting, he acknowledged that the dealer had not timely paid the taxes listed in the Notice and that the money was used instead to keep the business afloat. However, Mr. Scott presented paperwork representing that sales and use tax returns and payments for the months of November 2013 through February 2014 had just been filed online, and checks in the amount of $8,101.41 and $9,493.99 were recently sent to Tallahassee. It takes 24 hours for online payments to show up in the system, and even more time for checks to be processed in Tallahassee. Accordingly, the Department agreed that Mr. Scott could have a few more days before signing a compliance agreement. This would allow the Department to verify that the payments were posted and recalculate the amount of taxes still owed. Also, before entering a compliance agreement, Respondent was required to make a down payment of around $20,000.00. Mr. Scott had insufficient cash, and a delay of a few days would hopefully allow him to secure the necessary money for a down payment. When none of the payments had posted by March 25, 2014, the Department calculated a total liability of $113,448.13, consisting of sales and use taxes and UCTs, penalties, interest, and fees. As of that date, none of the taxes listed in Finding of Fact 9 had been paid. On March 25, 2014, Respondent's controller, who did not attend the informal conference, sent an email to the Department requesting a breakdown on the new tax liability. In response to her request, the Department faxed a copy of the requested information. See Resp. Ex. 4. After getting this information, the controller continued to take the position that the Department's calculations overstate Respondent's tax liability. On March 31, 2014, Mr. Scott signed the compliance agreement. See Pet'r Ex. 6. Despite the controller testifying that she did not agree with the numbers, no question was raised by Mr. Scott when he signed the agreement. By then, the check in the amount of $8,101.41 had cleared and been credited to Respondent's account. Along with other funds, it was used towards the down payment of $20,000.00. The record does not show the status of the other payments that Mr. Scott claimed were mailed or filed online prior to the informal conference; however, on March 31, 2014, except for the one check, none had yet posted. The compliance agreement required scheduled payments for 12 months, with the final payment, a balloon payment in an undisclosed amount, being subject to renegotiation in the last month. Payments one and two were $1,500.00, while payments three through 11 were $2,900.00. The compliance agreement reflected a balance owed of $95,887.36, consisting of $60,504.34 in sales taxes and $35,347.02 in UCTs.2/ In return for the Department refraining from pursuing revocation proceedings, the compliance agreement required Respondent to "remit all past due amounts to the Department as stated in the attached payment agreement," "accurately complete and timely file all required tax returns and reports for the next 12 months," and "timely remit all taxes due for the next 12 months." Pet'r Ex. 1, p. 1. In other words, the compliance agreement addressed both delinquent taxes and current taxes that would be due during the following 12-month period, and it required that both categories of taxes be timely paid in the manner prescribed by the agreement. To summarize the salient points of the agreement, all taxes were to be timely paid; delinquent taxes were to be paid by certified check, money order, or cash and were to be mailed or hand delivered to the Tampa Service Center and not Tallahassee; and while not specifically addressed in the agreement, the dealer was instructed to pay all current obligations electronically, as required by law. Otherwise, Respondent was in violation of the compliance agreement. A Payment Agreement Schedule for past due taxes was incorporated into the compliance agreement and provided that the first payment was due April 30, 2014, payable to: Florida Department of Revenue, Tampa Service Center, 6302 East Dr. Martin Luther King, Jr. Boulevard, Suite 100, Tampa, Florida 33619. Payments 2 through 12 were to be mailed or hand delivered to the same address. This meant, with no ambiguity, that money should not be sent to Tallahassee. There is no credible evidence that these instructions were misunderstood. Unless a waiver is granted, Respondent is required by statute and rule to electronically file sales and use tax returns and UCT reports. See § 213.755, Fla. Stat.; Fla. Admin. Code R. 12-24.009 (where a taxpayer has paid its taxes in the prior state fiscal year in an amount of $20,000.00 or more, subsequent payments shall be made electronically). No waivers have been approved. In 2003, the Department notified Respondent of these requirements and Respondent complied with this directive until 2009. For reasons not disclosed, in 2009 Respondent voluntarily quit filing electronically. The record is silent on why this was allowed.3/ In any event, at the informal conference, Mr. Scott was specifically told that all current returns, reports, and taxes must be filed electronically, and not by mail, and that no money should be sent to Tallahassee. There is no credible evidence that he misunderstood these instructions. In its PRO, Respondent correctly points out that the requirement to file current returns electronically was not specifically addressed in the compliance agreement. This is because the compliance agreement does not set forth every statutory and rule requirement that applies to a dealer. If this amount of detail were required, a dealer could ignore any otherwise applicable rule or statute not found in the compliance agreement. This contention has no merit. Respondent failed to electronically file the current sales and use tax return and payment for the month of March 2014, due no later than April 21, 2014. Instead, it sent a paper check, which was returned by the bank for insufficient funds. This constituted a breach of the compliance agreement. Despite repeated instructions on how and where to pay the delinquent taxes, payment 1, due on April 30, 2014, was paid by regular check and sent to Tallahassee, rather than the Tampa office. This contravened the compliance agreement. When payment was not timely received by the Tampa Service Center, Respondent was told that a check must be delivered to the Tampa office by May 9. Respondent hand delivered a second check, this one certified, to the Tampa Service Center on May 9, 2014, or after the April 30 due date. The second check was treated as payment 1. Respondent points out that on May 7 the Tampa Service Center granted its request for an extension of time until May 9 in which to deliver the certified check. While this is true, the extension was allowed in an effort to "work with" the Respondent on the condition that the account would be brought current by that date; otherwise, revocation proceedings would begin. Even if the extra ten days is construed as a grace period for payment 1, there were other violations of the compliance agreement set forth below. Payment 2 for delinquent taxes, due on May 30, 2014, was paid by regular check and sent by mail to Tallahassee rather than the Tampa Service Center.4/ This contravened the compliance agreement. After the May 30, 2014 payment, Respondent made no further payments pursuant to the Payment Agreement Schedule. This constituted a violation of the compliance agreement. Respondent did not remit payment with its current sales and use return for the month of August 2014. This contravened the compliance agreement. Respondent did not file any current sales and use tax returns or remit payment for the months of July 2014 or September through January 2015. This contravened the compliance agreement. Beginning in March 2014, Respondent filed current reemployment tax returns and payments using the incorrect tax rate on every return. This delayed their processing and resulted in penalties being imposed. In addition, even though Respondent was repeatedly told that such returns must be filed electronically, none were filed in that manner, as required by statute and rule. This contravened the compliance agreement. In its PRO, Respondent contends the compliance agreement cannot be enforced because there was no "meeting of the minds" by the parties on all essential terms of the agreement. Specifically, it argues that the total amount of taxes owed was still in dispute -- the dealer contended that it owed $23,000.00 less than was shown in the agreement; the Payment Schedule Agreement did not specify the amount of the final balloon payment; the compliance agreement failed to state when payments are due if the due date falls on a weekend or holiday; the compliance agreement did not specify how the dealer's payments would be allocated between UCTs and sales and use taxes; and the compliance agreement failed to address the issue of filing electronically. Although some of these issues were not raised in the parties' Joint Pre-hearing Stipulation, or even addressed by testimony at hearing, they are all found to be without merit for the reasons expressed below. First, Mr. Scott did not dispute the amount of taxes owed when he signed the agreement, and he brought no evidence to the conference to support a different amount. Second, as explained to Mr. Scott at the informal conference, the precise amount of the balloon payment can only be established in the 12th month. This is because the exact amount depends on the dealer's compliance with the agreement over the preceding 11 months, and the amount of interest, penalties, and/or other fees that may have accrued during the preceding year. Third, there is no evidence that the dealer was confused when a due date for a payment fell on a weekend or holiday. Even if it was confused, reference to section 212.11(1)(e) and (f) would answer this question. Fourth, there is no statute or rule that requires the Department to specify how the delinquent payments are allocated. Moreover, neither Mr. Scott nor the controller requested that such an allocation be incorporated into the agreement before it was signed. Finally, the issue of filing electronically already has been addressed in Finding of Fact 22 and Endnote 3. At hearing, Respondent's controller testified that she was out of town when the conference was held, suggesting that Mr. Scott, who is not an accountant, was at a disadvantage when he attended the informal conference. However, Respondent had six weeks' notice before the conference, and there is no evidence that Respondent requested that the meeting be rescheduled to a more convenient day. Also, Respondent does not dispute that Mr. Scott was authorized to represent its interests at the conference, or that he could have been briefed by the controller before attending the informal conference or signing the compliance agreement. See also Endnote 1. Notably, at hearing, the controller testified that she "was involved in actually negotiating the agreement both before and after it was actually signed" even though she did not attend the conference. Tr. at 89. Respondent also contends that after the Department considered the compliance agreement to be breached, the dealer had no further obligation to make payments pursuant to the agreement or state law until the parties negotiated a new agreement. Aside from Respondent's failure to cite any authority to support this proposition, nothing in the compliance agreement comports with this assertion. To the contrary, the compliance agreement specifically provides that if a breach occurs, the entire tax liability becomes due immediately. See Pet'r Ex. 6, p. 2, ¶ G. Thus, Respondent is obligated to pay the entire tax liability, which now exceeds $200,000.00. All other arguments raised by Respondent have been carefully considered and are rejected as being without merit.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order revoking Respondent's Certificate of Registration 39- 8011930243-9. DONE AND ENTERED this 11th day of June, 2015, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER 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 11th day of June, 2015.
The Issue The issue is whether Petitioners owe the taxes, interest, and penalties assessed by the Department of Revenue based upon Petitioners’ alleged rental of their real property to a related corporation from June 2000 through August 2003.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following findings are made: In July 1997, Petitioners acquired the real property located at 640 North Semoran Boulevard in Orlando, Florida (hereafter “the Property”). The Property was acquired in Petitioners’ individual capacities, and they financed the purchase of the Property through a loan secured by a mortgage on the Property. The documents relating to the 1997 loan and mortgage were not introduced at the hearing. At the time the Property was acquired, Petitioner Paul Solano was engaged in the practice of accounting through a sole proprietorship known as P. Solano and Associates. Mr. Solano has been practicing accounting in Florida since 1969 and he is familiar with Florida's sales tax laws. The Property was treated as an asset of Mr. Solano’s sole proprietorship even though he was not using it as his place of business at the time. For example, depreciation expense related to the Property was itemized on Petitioners’ tax returns as a business expense. The mortgage payments made by Petitioners were also treated as business expenses of the sole proprietorship. In October 1999, Mr. Solano incorporated his accounting practice into an entity known as Solano & Associates Enterprises, Inc. (hereafter “the Corporation”). The sole business of the Corporation is providing accounting services. At the time of its formation, the Corporation was owned in equal 20 percent shares by Mr. Solano, his wife (Petitioner Diane Solano), their two daughters, and their son-in-law. There has been no change in the ownership of the Corporation since its inception. Mr. Solano is the president of the Corporation. The other owners/family members are also officers in the Corporation. Once the Corporation was formed, the depreciation expense related to the Property was included on the Corporation's tax returns, not Petitioners' tax return. At the time the Property was purchased, it was zoned for residential use. Between 1997 and 1999, Petitioners took the necessary steps to get the Property rezoned for commercial use so that the Corporation could conduct its accounting practice from that location. In November 1999, after the property had been rezoned, the Corporation and its owners applied for a loan from First Union National Bank (First Union) to obtain the funds necessary to renovate the existing building on the Property. Although unclear from the documentation in the record, Petitioners both testified that the 1999 loan was effectively a refinancing of the 1997 loan. The Corporation was not able to obtain a loan in its own name because it had only been in existence for a short period of time. The owners of the Corporation were not able to obtain a loan at a favorable interest rate, primarily because of the lack of credit history of Petitioners’ daughters and son-in- law. As a result, the loan was obtained by Petitioners in their individual capacities. Petitioners gave a mortgage on the Property as collateral for the 1999 loan. The mortgage document, entitled “Mortgage and Absolute Assignment of Leases” (hereafter "the 1999 mortgage"), was signed by Petitioners in their individual capacities on November 18, 1999; the Corporation was not identified in the 1999 mortgage in any way. The 1999 mortgage includes boiler-plate language referring to Petitioners’ obligation to maintain and enforce any leases on the Property and requiring the assignment of rents from any such leases to First Union. That language cannot be construed to mean that a lease actually existed at the time; in fact, the Property was still undergoing renovations at the time. The Corporation began doing business from the Property in February 2000 after the renovation work was complete and a certificate of occupancy was issued. The 1999 loan was refinanced in May 2000 with First Union. The loan amount was increased from $145,000 to $200,000 and the term of the loan was extended through a document entitled “Mortgage and Loan Modification and Extension Agreement” (hereafter "the 2000 mortgage"). The 2000 mortgage refers to the Corporation as the borrower and refers to Petitioners as the guarantors. Petitioners signed the 2000 mortgage in their individual capacities (to bind themselves as guarantors) as well as their capacities as corporate officers (to bind the Corporation as borrower). The related promissory note, dated May 5, 2000, also refers to the Corporation as the borrower, and it is signed by Petitioners in their capacity as officers of the Corporation. As part of the documentation for the refinancing in 2000, Petitioners executed an “Affidavit of Business Use” in which they attested they were the owners of the Property and that the loan proceeds would be “utilized exclusively for business or commercial purposes and not for personal use.” Petitioners also executed a “Mortgagors" Affidavit” in which they attested that they were in sole possession of the Property and that no other persons have claims or rights to possession of the property “except Solano & Associates Enterprises by virtue of a written lease which does not have an option to purposes or right of first refusal.” The monthly mortgage payment for the refinanced loan was $2,044.91. That amount was due on the fifth day of each month beginning on June 5, 2000, and it was automatically deducted from the Corporation’s bank account with First Union. In addition to making the mortgage payment for the Property, the Corporation paid the ad valorem taxes, insurance, and related expenses. The amount of those payments is not quantified in the record. Petitioners formally deeded the Property to the Corporation in October 2003. Mrs. Solano testified that the failure to do so earlier was simply an “oversight.” When the Property was formally deeded to the Corporation, Petitioners did not report any income or loss on the transaction for tax purposes. Any equity that had accumulated in the Property was simply “given” to the Corporation. The First Union mortgages were satisfied in October 2003 as part of a refinancing done by the Corporation with SunTrust bank after it became the owner of the Property.1 At that point, the Corporation had been in existence long enough to establish a credit history and obtain financing in its own name. The record does not include any documentation related to the 2003 refinancing transaction. Despite the representation in the “Mortgagors’ Affidavit” quoted above, there has never been any written or oral lease between Petitioners and the Corporation with respect to the use of the Property. Petitioners have always considered the Property to be a business asset, initially an asset of Mr. Solano’s sole proprietorship and then an asset of the Corporation. Petitioners never collected any sales tax from the Corporation on the mortgage payments made by the Corporation. Petitioners did not consider those payments to be rental payments. In late-June or early-July 2003, the Department sent a letter to Petitioners stating that the Property “appears to be subject to sales tax pursuant to Chapter 212.031, Florida Statutes.” The letter was sent as part of the Department’s “Corporation Rent Project” through which the Department compares records in various databases to identify commercial properties whose owner of record is different from the business operating at that location. Included with the letter was a questionnaire soliciting information from Petitioners regarding the Property and its use. The questionnaire was completed by Mr. Solano and returned to the Department in a timely manner. Mr. Solano marked a box on the questionnaire indicating that the Property is “[o]ccupied by a corporation in which a corporate officer is the property owner,” and he identified the Corporation as the entity occupying the Property. In response to the question as to “which of the following considerations are received by you,” Mr. Solano marked the following boxes: “The corporation remits payment for the mortgage loan”; “I do not receive rental income, but the related entity pays the mortgage payments”; and “No consideration is received from this related entity.” In response to the questions regarding the “monthly gross rental income of the property” and the “amount of real estate taxes . . . paid on the property by the lessee” for 2000 through 2003, Mr. Solano answered $0 for all periods. Terry Milligan, a tax specialist with the Department, determined based upon Mr. Solano’s responses on the questionnaire that the Corporation’s use of the Property was subject to the sales tax on rentals. Mr. Milligan advised Petitioners of that determination by letter dated July 29, 2003. The letter requested that Petitioners provide “a detailed month by month breakdown of rent (or mortgage payment) amounts, any other consideration, and property taxes that you received from the tenant (or tenant paid on your behalf) for the last thirty-six (36) months).” (Emphasis in original). Petitioners responded to Mr. Milligan’s request through a letter dated August 11, 2003. The letter explained that the reason that the title to the Property appeared under Petitioners’ name rather than the Corporation's name is “due to credit history.” More specifically, the letter stated that “[i]t was decided by the Board members, my wife and our [] children, to put it under our name since we have a long history of good credit.” Included with the letter was a bank statement showing the monthly mortgage payment of $2,044.91 and a notice of the proposed property tax assessment from Orange County for the Property, which was addressed to the Corporation. In addition to providing the requested documentation to Mr. Milligan, one of Petitioners’ daughters, Joylynn Aviles, spoke with Mr. Milligan to explain the circumstances relating to the financing and use of the Property. Ms. Aviles is the Secretary of the Corporation. Ms. Aviles also spoke with Mr. Milligan’s supervisor and an individual in the Department’s legal division. When it became apparent that the matter could not be resolved informally, Ms. Aviles requested that Mr. Milligan issue a final assessment so that Petitioners could bring a formal protest. In response, the Department issued the NOFA on September 11, 2003. The NOFA was preceded by a spreadsheet dated September 3, 2003, which showed how Mr. Milligan calculated the tax, penalties, and interest amounts set forth in the NOFA. As described in Mr. Milligan’s spreadsheet and his testimony at the hearing, the tax was computed based upon the monthly mortgage payments of $2044.91 made by the Corporation from June 2000 to August 2003. The June 2000 start-date for the assessment corresponds to the 36-month period referred to in Mr. Milligan’s July 29, 2003, letter; it also happens to correspond to the date that Corporation began making the mortgage payments. The August 2003 end-date for the assessment was used because it was the month preceding the date of the NOFA. The Department has not sought to expand the assessment to include the period between August 2003 and October 2003 when the Property was formally deeded to the Corporation. The NOFA does not include any assessment for the property taxes, insurance or other expenses paid by the Corporation on the Property. The Department has not sought to expand the assessment to include those amounts. The sales tax rate in effect in Orange County during the assessment period was six percent from June 2000 through December 2002, and it was 6.5 percent from January 2003 through August 2003. The 0.5 percent increase resulted from the imposition of a county surtax of some kind. The NOFA calculated a total tax due of $4,784.91. As shown in Mr. Milligan’s spreadsheet, that amount was calculated by multiplying the monthly mortgage payment by the tax rate in effect at the time of the payment and then totaling those monthly amounts. The NOFA calculated $465.79 in interest due on the unpaid tax through September 13, 2003. As shown in Mr. Milligan’s spreadsheet, that amount was calculated at the applicable statutory rates. Interest continues to accrue at 53 cents per day. The NOFA calculated a penalty due of $2,233.97. That amount was calculated based upon the applicable statutory rate as shown in Mr. Milligan’s spreadsheet and explained in the NOFA. In total, the NOFA imposed an assessment of $7,566.43. That amount includes the taxes, interest, and penalties described above. The NOFA informed Petitioners of the procedure by which they could protest the Department's assessment. On November 10, 2003, the Department received Petitioners' timely protest of the assessment. This proceeding followed.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue issue a final order rescinding the Notice of Final Assessment issued to Petitioners. DONE AND ENTERED this 17th day of March, 2004, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of March 2004.
Findings Of Fact The Petitioner, Integra Corporation, had a dispute with the Florida Department of Revenue with respect to sales or use tax allegedly due in the amount of $605,305.70 on lease payments made on its rental of hotels from their owners. An assessment for taxes due was processed in the normal manner by the Department of Revenue. Integra Corporation filed a Protest of the assessment, and after the Department's Notice of Decision denied the Protest, Integra filed a timely Petition for Reconsideration. Ultimately the Department issued a Notice of Reconsideration which rejected the arguments of Integra Corporation. Integra Corporation agrees that the Notice of Reconsideration was transmitted on April 24, 1990, for it alleges that fact in paragraph 3 of its Petition. The Department's final rejection of the arguments made by Integra Corporation against the assessment of sales and use tax made in the Notice of Reconsideration dated April 24, 1990, prompted Integra Corporation to mail by certified mail, return receipt #P796 304 819, to the Division of Administrative Hearings on June 21, 1990, an original Petition challenging the Department's tax assessment. That petition was captioned Integra Corporation, Petitioner v. Department of Revenue, Respondent, and was filed by the Clerk of the Division of Administrative Hearings on June 25, 1990. No copy of the original Petition was served on the Department of Revenue, or its counsel. The opening paragraph states that Integra Corporation "hereby petitions the Department of Revenue for administrative proceedings. . ." The Clerk of the Division of Administrative Hearings realized that the Petition should not have been addressed to or filed with the Division of Administrative Hearings, and on that same day forwarded the Petition to the appropriate agency, the Department of Revenue, which received the Petition on June 27, 1990.
Recommendation It is RECOMMENDED that the petition filed by Integra Corporation be dismissed as untimely. DONE and ENTERED this 10th day of September, 1990, at Tallahassee, Florida. WILLIAM R. DORSEY, JR. Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of September, 1990.
The Issue The issue to be resolved in this proceeding concerns whether the Petitioner's application for licensure as a nonresident life, health and variable annuities insurance agent should be denied on the basis of his having pled guilty and been convicted of a felony. Embodied within that general issue are the issues of whether the felony involved is one of moral turpitude and whether the conviction, and the circumstances surrounding it, demonstrate that the Petitioner lacks fitness or trustworthiness to engage in the business of insurance.
Findings Of Fact The Petitioner, Preston Hursey, Jr., filed an application for qualification in Florida as a nonresident life, health and variable annuities agent. The application was filed on November 13, 1989. On April 9, 1990, the Department of Insurance issued a letter of denial with regard to that application based upon a felony conviction of the Petitioner in the past. The Respondent is an agency of the State of Florida charged, in pertinent part, with enforcing the licensure, admission and continuing practice standards for insurance agents of all types, embodied in Chapter 626, Florida Statutes, and with regulating the admission of persons to licensure as insurance agents in the State of Florida. On August 12, 1988, an Information was filed with the United States District Court for the District of Columbia, charging the Petitioner with three felony counts involving "aiding or assisting presentation of false income tax return". That is a felony violation of Title 26 U.S.C., Sections 7206(2). On November 15, 1989, the Petitioner was found guilty of three counts of aiding or assisting presentation of false income tax return in violation of that statutory section. The actual conduct for which he was convicted occurred prior to the charges. Prior to 1984, the Petitioner worked for some years as a medical examiner for insurance companies, taking medical histories, blood pressures, pulses and the like, for purposes of establishing insurance coverage for clients of the companies. Some time in early 1984, the Petitioner approached American Dynamics Corporation, as a client, with the intent of availing himself of the financial planning services of that company with the intent of saving on income taxes. The company was apparently counseling clients as to tax shelters in which they could invest or which they could claim, as a means of' avoidance of federal income tax. The Petitioner became very interested in that tax saving procedure and sometime in 1984 became involved with the firm as one of its financial counselor employees. The firm trained him in the service they offered to taxpayers, which involved financial planning by using trusts to defer taxes, as well as other means of sheltering income from tax liability. The company and the Petitioner counseled numerous clients and assisted them in taking advantage of alleged tax shelters, including the final act of preparing their tax returns. During the course of going to hearings with his clients, when their tax returns came under question by the Internal Revenue Service, the Petitioner became aware that apparently the service would not accept the tax shelter devices being used by his company and him as a legitimate means of avoiding taxes. He then sought legal advice from a tax attorney and received an opinion from him that the tax avoidance counseling methods, devices and tax return preparation the Petitioner and his employer were engaging in were not legal, and that the Petitioner should advise anyone he knew involved in such schemes to terminate their relationship. The Petitioner acted on that advice, terminated his relationship with the company and recommended to his clients that they terminate their relationship with the company and the tax avoidance devices being used. Through hindsight and learning more about relevant tax law in the last four to five years since the conduct occurred, the Petitioner realizes that the tax shelter schemes marketed by his employer at that time and, by himself, did not make financial or legal sense. The Petitioner at that time had very little training in financial counseling or advising and very little training in the Federal income tax laws arid regulations. In retrospect, after receiving much more such training as an agent of New York Life Insurance Company since that time, he realized the significance of the error he and his former employer committed. When the tax returns were prepared by the Petitioner and others employed with the firm involved, the tax return accurately reflected the gross income of he taxpayer, the "W2 forms", and all appropriate documentation. Then, the gross income of the taxpayer was shown as reduced by the amount of funds affected by the tax shelter system marketed by the Petitioner's former employer and the Petitioner. There was a statement on the tax return itself explaining the disparity in taxable income so that basically the Internal Revenue Service had the facts and circumstances of such situations disclosed to it. It, however, deemed anyone marketing such tax shelters as engaged in marketing "abusive tax shelters", in effect, in violation of the Internal Revenue Code. Ultimately, the Petitioner was prosecuted along with others involved in the transactions and suffered a felony conviction of three counts of violation of the statute referenced above. The Petitioner has steadfastly maintained both before and after his conviction that he had no intent to violate the tax laws of the United States, but rather believed, until he sought a legal opinion from a qualified attorney, that the service he was marketing was a legal one. After he came under prosecution by the Justice Department for the violation, the Petitioner cooperated fully with the Internal Revenue Service and the Justice Department. The felony violation of which he was convicted, by guilty plea, carried a sentence of three years imprisonment, one year for each tax return involved. That sentence was reduced by the court; however, in consideration of the circumstances of the Petitioner's offense and his cooperation with the prosecuting authorities, to one month of "work release", which he served by working during the day for senior citizens organizations and returning to a confinement facility in the evening. He also was required to render 200 hours of community service, which he has completed, and three years probation. Because of his excellent attitude and behavior and his demonstrated activities designed to further his education in the insurance and securities field, his successful pursuit of the insurance and securities marketing profession in other states and his obviously-positive motivation, his probation officer has recommended that his probation be terminated early, after only two years of it would have been completed in November, 1990. The sentence was reduced because of the Petitioner's positive record in his community, the fact that he had no prior criminal history and because of widespread support by responsible members of the community and by the probation officers who reviewed his case and situation. The judge, upon sentencing, also noted that he was impressed by the fact that the Petitioner wanted to continue to work in the insurance and securities field and was the sole support of a young son whom he was supporting and caring for as an active parent. He continues to do that. The record establishes that the Petitioner's conviction was the result of a guilty plea. That plea resulted from a negotiated "plea bargain" settlement with the prosecuting authorities. The Petitioner established with unrefuted testimony, that he never had any willful intent to commit a crime or defraud the Federal government and the Internal Revenue Service. While he had a general intent to offer the tax advice involved to clients and assist them in engaging in tax shelter arrangements and in preparing the related tax returns, he had no specific intent to commit acts which he knew to be illegal when he committed them, nor which he believed amounted to fraud or deceit of the Internal Revenue Service. Although he pled guilty to a crime involving, by the language of the above--cited statute, the element of falsity, which bespeaks of deceit or fraud, the evidence shows that the Petitioner harbored no such fraudulent or deceitful intent. This is corroborated by the fact that the Petitioner and his clients disclosed all income on the tax return and simply disclosed that a portion of it was sheltered, which procedure was determined by the Internal Revenue Service to be illegal. There was no evidence of record to indicate that the Petitioner sought to conceal income or otherwise commit a false or fraudulent act in the course of his financial and tax advice to these clients, nor in the preparation of their tax returns for submittal. While the statute he is convicted of violating appears to involve the element of moral turpitude because it refers to false or fraudulent tax returns, it is a very general type of charge which can cover many types of activities or conduct. Consequently, one should consider the specific conduct involved in a given instance, such as this one, to determine whether the crime committed factually involved moral turpitude. Based upon the unrefuted evidence of record culminating in the findings of fact made above, it is clear that the Petitioner committed no conduct involving moral turpitude at the time the activity in question was engaged in for the above reasons. The Petitioner has been in no legal altercation, criminal or otherwise, before or since the instance which occurred in 1984. He has become licensed in Washington DC, Maryland and Virginia as an insurance agent and as a broker agent. He represents numerous insurance companies, including, for approximately five years, the New York Life Insurance Company and other reputable companies. He has pursued his continuing education requirements and has earned more requirements than he needs for licensure in Florida and Maryland. He is actively seeking to improve his professional standing and competence in the insurance and securities field and is highly motivated to continue doing so. A great deal of his motivation comes from the fact that he is the sole support of his young 11-year-old son. He enjoys the insurance profession because it gives him time to participate in his son's many school-related and extracurricular activities, such as football. The Petitioner's testimony, and the proven circumstances of the situation, establish without question that he is an honest, forthright person who has candidly admitted a past mistake and who has worked actively, in the approximate six years which have elapsed since the conduct was committed, to rectify that blemish on his record. His efforts to rehabilitate himself personally and professionally involved his active participation as a parent for his son in his son's school life and otherwise, and participation in church and community activities. During the time period which has elapsed since the conduct in question occurred, he has sufficiently rehabilitated himself both personally and professionally so as to justify the finding that he has demonstrated trustworthiness and fitness to engage in the business of insurance. Indeed, three other states, after having the circumstances of his conviction fully disclosed to them, have licensed him or retained him as a licensee insurance agent. The Petitioner is a navy veteran of Vietnam, having served three tours in the Vietnam war, for which service he was decorated. He had a number of security clearances, including a top secret security clearance based upon his work in the field of communications and cryptology during that war. This honorable service, the efforts he has made to improve himself personally and professionally before and since the subject conduct occurred, the fact that it was an isolated incident on his record, the fact that it did not involve any established intent to defraud or deceive on his part, the fact that he is an active, positive parental role model, community member and church member, and his general demeanor at hearing of honesty and forthrightness convinces the Hearing Officer that the isolated incident of misconduct he committed did not involve a demonstrated lack of fitness and trustworthiness to engage in the business of insurance. Quite positively, the Petitioner has demonstrated his fitness and trustworthiness to engage in that business.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is therefore, RECOMMENDED that the Petitioner's application for licensure as a nonresident life, health and variable annuities insurance agent should be granted. DONE AND ENTERED this 7th day of February, 1991, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF 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 7th day of February, 1991. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-3069 Petitioner's Proposed Findings of Fact 1-4. Accepted. 5. Rejected, as not clearly established by the evidence of record. 6-14. Accepted. Respondent's Proposed Findings of Fact 1-4. Accepted. 5. Rejected, as not clearly established by the evidence of record. COPIES FURNISHED: Mr. Tom Gallagher State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Don Dowdell, Esq. General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Preston Hursey, Jr., pro se Post Office Box 43643 Washington, DC 20010 Willis F. Melvin, Jr., Esq. Andrew Levine, Esq. Department of Insurance Division of Legal Services 412 Larson Building Tallahassee, FL 32399-0300
Findings Of Fact On September 30, 2010, Petitioner submitted an online application for a tax registration as a new business entity. Respondent began the process of creating an internal "account" for Petitioner on October 1, 2010. On October 2, 2010, Respondent's database system created a delinquency notice advising Petitioner that sales and use tax returns for calendar years 2007, 2008, and 2009 had not been received. On October 4, 2010, Respondent received an envelope from Petitioner containing sales and use tax returns for calendar years 2007, 2008, 2009, and 2010, as well as Petitioner's signed Tax Amnesty Agreement. No remittance accompanied the tax returns (or the remittance check was misplaced), so the Department's system generated a billing notice to Petitioner dated December 10, 2010, and a Notice of Final Assessment dated January 25, 2011. Petitioner advised Respondent that a check had been sent along with the tax returns. Discussions between the parties ensued, and Petitioner was asked to provide a replacement check. On or about March 11, 2011, Respondent received a replacement payment from Petitioner. Petitioner, by way of his replacement check, paid the Department the sum of one thousand eighty-nine dollars and forty-three cents ($1,089.43) in full settlement of all amounts due and owing under Petitioner's sales and use tax returns for calendar years 2007, 2008, 2009, and, although not included in the initial petitions, 2010. Respondent accepted the payment made by Petitioner in full settlement of the sales and use taxes owed for the years in question. Petitioner is not liable for any further penalties, interest, or other payments on the aforementioned tax returns.
Recommendation Based on the foregoing Findings of Fact, it is RECOMMENDED that the petitions for administrative hearing in this case be dismissed, as there are no further disputed issues of material fact. DONE AND ENTERED this 15th day of April, 2011, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN 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 15th day of April, 2011. COPIES FURNISHED: Lisa Vickers, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100 Marshall Stranburg, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Post Office Box 6668 Tallahassee, Florida 32314-6668 Patrick John McGinley, Esquire Law Office of Patrick John McGinley, P.A. 2265 Lee Road, Suite 100 Winter Park, Florida 32789 John Mika, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050
Findings Of Fact Upon consideration of the Stipulation of Facts and documentation attached thereto, the following relevant facts are found: Petitioner is registered to do business in Florida and is required to collect and remit sales tax. In January of 1982, petitioner was given written notice of respondent's intent to audit petitioner's books and records for the 1979, 1980, and 1981 fiscal years. The audit apparently occurred during March and April of 1982. On June 16, 1982, the respondent, through Tax Auditor John Felton, issued a "Notice of Intent to Make Sales and Use Tax Audit Changes." Petitioner was advised that if it bias aggrieved by the proposed audit changes, it would have until July 16, 1982, "or such additional time as may be authorized by the Department in writing" to contact the office and discuss any problems. Petitioner was further advised that if it did not avail itself of the discussion privilege, the Department would issue a proposed notice of deficiency in the amount of $6,975.68 for delinquent sales taxes, penalty and interest through June 16, 1982. By a form letter dated September 9, 1982, the Department provided the Notice of Proposed Assessment of tax, penalty and interest in the amount of $6,975.68. The form letter stated that, if there were objections to the proposed assessment, petitioner would have until November 9, 1982, or such additional time as may be authorized by the Department in writing, to contest the assessment pursuant to informal protest provisions. These provisions require a written protest postmarked within 60 days of the Proposed Assessment, or a written request within that same period of time for an extension of time to file the written protest. Mr. John Felton, a Tax Auditor for the respondent in California, visited the petitioner's office on September 22, 1982, for a post-audit meeting. Petitioner apparently informed Mr. Felton of the existence of exemption certificates but did not, at that time, have the appropriate documentation for the tax credits. Mr. Felton advised petitioner of the documentation required to support any claimed tax credits. By letter dated October 1, 1982, Mr. Felton enclosed the June 16, 1982 sales tax audit, the September 9, 1982 Notice of Proposed Assessment and advised petitioner's staff accountant as follows: "... You will note that some action must be taken with respect to the Notice of Proposed Assessment by 11/9/82. As soon as you have accumulated your docu- mentation in support of any claimed tax credits, contact me and I will have a revised proposed assessment issued. If I may be of further assistance, please call me at 714-956-4311 (preferably, since I expect to be out of my Sunnyvale office most of October) or 408-737-1405." Petitioner's General Accounting Manager attempted to telephone Mr. Felton on several occasions during the last week of October and the first week of November, 1982. These attempts were unsuccessful. Petitioner does not allege that it mailed any documentation to Mr. Felton or the Department or that it filed a timely written protest or a timely request for an extension of time to file a protest. On November 16, 1982, Mr. Felton called petitioner's staff accountant, who advised Mr. Felton that he would mail documentation supporting the tax credits on or before November 24, 1982. Having received no such documentation, Felton, by inter- office memorandum dated December 10, 1982, recommended to the respondent that the original proposed assessment dated September 9, 1982, be processed. Petitioner was notified by letter dated January 31, 1983, that the prior audit had become final and requesting petitioner to forward its remittance of $7,236.56, said amount consisting of the original assessment plus updated interest.
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.
The Issue The issue in this proceeding is whether Petitioner, Richard Ruble, is entitled to renewal of his loan originator license, pursuant to chapter 494, Florida Statutes.
Findings Of Fact The Parties Petitioner, Richard Ruble, holds a loan originator license, National Mortgage Licensing System Identification Number 209981 ("LO License"), which was issued by Respondent, Office of Financial Regulation, and is the subject of this proceeding. Respondent is the state agency charged with administering and enforcing chapter 494, including part II of that statute, which regulates loan originators. Background and Evidence Adduced at the Final Hearing Petitioner has held his LO License since approximately 2004. As required by section 494.00312(7), Florida Statutes, loan originator licenses must be annually renewed.2/ In 2005 and 2006, Petitioner earned a substantial income from his business as a loan originator for real estate mortgage loans. As a result, he incurred a substantial federal income tax liability. When the real estate market took a dramatic downturn starting in 2007, Petitioner's income also dramatically dropped. He suffered significant loss of income starting in 2007. As a consequence, he has been unable to pay his federal income taxes since 2006. As a result of Petitioner's federal income tax liability for the years of 2005 and 2006, on February 12, 2013, the Internal Revenue Service(“IRS”) recorded a Notice of Federal Tax Lien ("Tax Lien") against Petitioner's real property located at 3801 South Ocean Drive, Unit 6Z, Hollywood, Florida,3/ and in Leon County, Florida. As a consequence of the creation of the Tax Lien, information constituting "adverse credit history information," as defined in Florida Administrative Code Rule 69-40.0113(2), has been included in his credit report. The inclusion of adverse credit history in Petitioner's credit report prompted Respondent to contact Petitioner sometime after February 12, 2013, and before June 8, 2013, and request him to provide specified information about release or payment of the Tax Lien by a June 8, 2013, deadline. Petitioner, through his counsel, contacted Respondent by correspondence dated June 7, 2013, explaining the circumstances under which the Tax Lien had been created and stating that Petitioner would provide the requested information, and notifying Respondent that Petitioner's accountant would need additional time beyond the June 8, 2013, deadline to gather and provide the requested information. On July 30, 2013, Respondent proposed to deny renewal of Petitioner's LO on the basis of the Tax Lien. On August 13, 2013, Petitioner provided to Respondent the requested additional information explaining the circumstances under which the Tax Lien was created. On August 15, 2013, Respondent withdrew its notice of denial of renewal of Petitioner's LO License; this withdrawal document expressly stated: "Please consider the Notice of Denial previously issued as withdrawn and of no force and effect." Respondent renewed Petitioner's LO, effective August 15, 2013. On December 30, 2013, Petitioner applied to renew his LO license for the year 2014. On June 30, 2014, Respondent issued a notice of denial of renewal of Petitioner's LO. Petitioner timely requested a hearing challenging the proposed denial of the renewal of his LO License. However, before the final hearing in that proceeding, the parties settled the matter by executing a Settlement Stipulation, a condition of which was that Petitioner provide, by December 31, 2014, all information required by Respondent to complete review of the renewal application for his LO. To comply with this condition, on December 22, 2014, Petitioner submitted Respondent's4/ Response Pursuant to Settlement Stipulation ("Response"), consisting of an explanation of his adverse credit history due to the Tax Lien and two lines of credit he had taken out to cover his business and personal expenses after the 2007 economic downturn and his consequent loss of income. The Response was supported by extensive documentation consisting of Petitioner's personal and business federal income tax returns; correspondence from Petitioner's counsel to Respondent addressing the Tax Lien and the status of Petitioner's efforts to resolve the Tax Lien matter with the IRS; and correspondence from the IRS dated September 8, 2014, stating that due to information Petitioner had provided, it (the IRS) had refunded some taxes paid and applied them to Petitioner's 2005 tax liability, which had, in part, given rise to the Tax Lien. On December 24, 2014, a Final Order incorporating the Settlement Stipulation was issued, and the file was closed on December 29, 2014. On December 31, 2014, Petitioner filed, and Respondent deemed received, Petitioner's application to renew his LO License for the year 2015. Sometime before October 19, 2015——over nine months later——Respondent informed Petitioner that the information that he had provided was not substantively adequate to support renewal of his LO License for 2015. Thereafter, on October 19 and December 14, 2015, Petitioner, through his counsel, submitted information consisting of copies of his income tax returns filed with the IRS for years 2005 through 2010, as well as copies of his 2011, 2012, and 2013 income tax returns that were filed with the IRS by his accountant, Chris Bagnall. The last three years of tax returns (for years 2011, 2012, and 2013) were offered by Petitioner as evidence that he was working diligently with the IRS to become current with respect to his filed income tax returns. On December 28, 2015, Petitioner applied to renew his LO License for the year 2016. On February 15, 2016, Respondent issued a Notice of Intent to Deny Renewal Application for Loan Originator License Pursuant to Chapter 494, Florida Statutes (hereafter, "Notice of Intent to Deny"), proposing to deny Petitioner's application to renew his LO License for the years 2014, 2015, and 2016.5/ The Notice of Intent to Deny cited three grounds, two of which remain pertinent to this proceeding: (1) Petitioner failed to demonstrate that he possessed the general fitness and responsibility necessary to command the confidence of the community and warrant a determination that he, as the applicant, would operate honestly, fairly, and efficiently, as required by section 494.00312(4)(b) and rule 69V-40.113; and (2) a background check revealed that Petitioner's credit history contained adverse credit history information——specifically, that the IRS holds an outstanding federal income tax lien on property owned by Petitioner. At the final hearing, Respondent expressly abandoned the third ground for its proposed denial—— specifically, that Petitioner had failed to provide certain information as required under the terms of a final order of settlement (discussed in greater detail below); accordingly, that ground is no longer at issue in this proceeding.6/ At the final hearing, Petitioner presented the testimony of his accountant, Chris Bagnall, who was retained in 2013 to assist Petitioner in preparing and submitting his overdue tax returns for years 2005 through 2015, and negotiating a plan for paying his past due income taxes for these years. Bagnall explained that it is the IRS's preference to have the taxpayer make payments toward the outstanding liability, and then to issue refunds if the taxpayer has overpaid. Alternatively, if the taxpayer is not able to make payments toward resolving the outstanding tax liability, the IRS will negotiate payment plans applying the carryback rules, which allow income gains and losses to be "netted out" for purposes of determining overall tax liability. Under this approach, the IRS will not negotiate payment plans until all past due tax returns have been filed. In the meantime, interest and penalties continue to accrue on the outstanding income tax liability. Bagnall testified, credibly, that after the real estate market crash in 2008, Petitioner did not have the money to pay the income tax he owed, and he used what little money he did have to try to keep his business afloat. Because Petitioner was not in a position to make a payment toward his tax liability due to his drastically diminished income, and due to not having timely filed income tax returns for several years, he was not in a position to negotiate a plan with the IRS to pay the income taxes he owes. In the meantime, interest and penalties on Petitioner's past due taxes continued to accrue. As of the date of the final hearing, Petitioner's total liability was approximately $366,000, a significant portion of which was attributable to penalties and interest accruing on the outstanding tax liability.7/ Bagnall testified that since Petitioner retained him in 2013, he has been preparing and filing Petitioner's past due income tax returns in batches, as Petitioner has been able to garner the funds to pay for Bagnall's accounting services. As of the date of the final hearing, Bagnall recently had filed Petitioner's income tax return for 2014, and he testified, credibly, that he would be filing Petitioner's 2015 income tax return within a few days after the final hearing. Once Petitioner's 2015 return was filed, he would be current regarding the filing status of his income tax returns, so finally would be in a position to negotiate with the IRS to develop a plan to pay off his tax liability, with the ultimate aim of dissolving the Tax Lien. Petitioner acknowledged that as of the date of the final hearing, he had not voluntarily made any payments toward addressing his income tax liability. Additionally, Petitioner's tax returns show gambling losses of $8,782 in 2011, $2,100 in 2012, and $18,546 in 2013. However, as discussed above, the evidence shows that Petitioner, through Bagnall, is taking a comprehensive approach to resolving his income tax liability based in part on the use of the carryback rules to net out his overall tax liability. The evidence does not show that it would have been feasible for Petitioner to have made individual payments toward his outstanding tax liability until all of his returns had been filed and he was in a position to negotiate a repayment plan. Respondent elicited testimony from Petitioner that in the application for renewal of his LO License filed in December 2013 for the year 2014, he had failed to disclose the existence of the Tax Lien until Respondent brought to his attention that they were aware of the existence of the Tax Lien. Respondent also elicited testimony that until brought to his attention by Respondent, Petitioner had failed to disclose, in his LO License renewal application filed in December 2015 for the year 2016, that he had filed for personal bankruptcy in September 2015. Respondent elicited this testimony to establish that Petitioner exhibited a pattern of being untruthful and incomplete in his responses to the application questions, and, thus, lacks the character to warrant a determination that he would operate honestly, fairly, and efficiently, as required by rule 69V-40.0113(3)(b), for purposes of entitlement to renewal of his LO License.8/ However, the evidence does not clearly and convincingly show that Petitioner intended to be untruthful in his application responses or to hide the existence of the Tax Lien or his personal bankruptcy from Respondent. It is as plausible that Petitioner omitted this information in error. With respect to the Tax Lien, the evidence shows that Petitioner had previously disclosed the creation of the Tax Lien to Respondent in correspondence dated June 13, 2013, and had, at that time, provided an explanation regarding the events leading to its creation. It would simply be nonsensical for Petitioner to intentionally falsely deny the existence of the Tax Lien on his application when he had previously submitted that very information to Respondent. Similarly, with respect to disclosure of his personal bankruptcy, Petitioner credibly testified that the matter had been a topic of discussion with Respondent's staff for a period of months. Although Petitioner amended his 2016 LO License renewal application only shortly before the final hearing to correctly reflect that he had filed a personal bankruptcy petition within the past 10 years, the credible evidence indicates that Petitioner believed that Respondent was aware of his personal bankruptcy through previous discussions with Respondent's staff, so would have had no motivation to intentionally provide false information regarding that matter on his renewal application. No evidence was presented at the hearing showing that Petitioner has ever engaged, in the course of conducting his mortgage loan originator business, in any fraudulent, dishonest, or other conduct harmful to the consuming public. Findings of Ultimate Fact The undersigned found Petitioner to be credible and forthright in his explanation of the creation and status of the Tax Lien, his personal bankruptcy, the filing of his tax returns, and his ongoing efforts to resolve his adverse credit history issues that have affected renewal of his LO License.9/ As discussed in detail above, Petitioner's adverse credit history information is, at least in some significant measure, a result of circumstances largely beyond Petitioner's control. When the real estate market collapsed in 2008, Petitioner suffered an immediate, dramatic drop in income; at that point, he incurred the large tax liabilities with which he has been burdened ever since. As discussed above, due to Petitioner's lack of income during and after the real estate market crash, it took some time for him to obtain the accounting services he needed in order to file his overdue tax returns——an essential step in negotiating a tax payment plan with the IRS. Although Petitioner's efforts to resolve the Tax Lien with the IRS have taken some time, Petitioner finally is, or soon will be, in a position to negotiate a payment plan with the IRS to pay his tax liability and, ultimately, resolve the Tax Lien. Before now, Petitioner has not been in a position to comprehensively and systematically pay down his tax liability pursuant to a negotiated plan. Thus, at this juncture, Petitioner's lack of voluntary payments toward resolving his Tax Lien and his gambling losses have not been determined a basis for finding that Petitioner lacks the character, general fitness, and financial responsibility to entitle him to renewal of his LO License.10/ The persuasive evidence shows that Petitioner is making steady progress toward getting himself in the position, through bringing himself current in his income tax returns filings, to negotiate a payment plan with the IRS in order to comprehensively and systematically pay down his tax liability with the aim of dissolving the Tax Lien. For these reasons, the undersigned finds that Petitioner has shown that he possesses the character, general fitness, and financial responsibility to warrant a determination that he will operate honestly, fairly, and efficiently such that his LO License should be renewed for the year 2016.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent issue a final order approving renewal of Petitioner's loan originator license for the year 2016. DONE AND ENTERED this 27th day of January, 2017, in Tallahassee, Leon County, Florida. S CATHY M. SELLERS 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 27th day of January, 2017
Findings Of Fact Petitioner, Lloyd Enterprises, Inc. (Lloyd) has requested that it be awarded $22,006.00 in attorney's fees and out-of-pocket expenses of $589.31 for a total of $22,595.31. All fees and expenses listed by Lloyd were incurred in its successful appeal of the adverse decision in its Section 120.57(1) F.S. proceeding challenging the Respondent agency's tax assessment. All fees and costs claimed were incurred during appeal after the recommended and final orders were entered against Lloyd in a formal tax assessment proceeding, Lloyd Enterprises, Inc. v. Department of Revenue, DOAH Case No. 92-2348. The formal tax assessment proceeding arose pursuant to Section 72.011 and Chapter 212 F.S. concerning the balance ($57,471.43) of a greater sales and use tax assessment levied against Lloyd for its alleged failure to pay sales tax on goods and services sold to customers of concession stands on Daytona Beach for an audit period before Lloyd owned and operated the stands. Because Lloyd was unable to provide records of predecessors in interest, the agency estimated tax on the basis of Lloyd's existing records after purchasing the stands. Also, Lloyd was assessed sales taxes (approximately $6,004.38 of the assessed tax liability) for all beach concession fees it had paid to Volusia County during the audit period of 11/1/85--12/31/90, pursuant to Section 212.031, F.S. [1989]. Lloyd's petition for formal hearing before DOAH was a letter previously utilized in the parties' informal negotiations. FDOR moved for a more definite statement and time to file an answer if Lloyd were required to file a more definite statement or a more definite petition. An order dated May 19, 1992 denied the agency's request for more definite statement and provided, in pertinent part, "...As Respondent's motion has observed, an answer in this type of proceeding is not mandatory. Respondent is, however, granted 10 days from the date of this order in which to file an answer should the agency elect to do so." The agency elected to stand on its prior notices of proposed assessment. Therefore, for purposes of this proceeding, the agency's "petition," as contemplated by Section 120.575(5) F.S. is the original tax assessment. The tax assessment proceeding went to formal hearing pursuant to Section 120.57(1) F.S. without any motions to dismiss or for other summary relief filed by either party. The recommended order found in favor of the agency's assessment, with some minor arithmetical adjustments required. The final order adopted the recommended order in toto. Lloyd appealed the final order. In Lloyd Enterprises, Inc. v. Department of Revenue, 651 So. 735 (Fla. 5th DCA 1995), decided upon Lloyd Enterprises, Inc. v. Department of Revenue, DOAH Case No. 92-2348, (RO entered by the undersigned Hearing Officer on 4/01/93; FDOR's FO entered 5/24/93), Lloyd argued that Section 212.031, F.S. [1989], had been erroneously applied to the beach concession fees charged by Volusia County and that Section 212.10 [1989] was unconstitutional as applied to Lloyd in this case and that the "projection" method used by FDOR's auditors to determine the amount of taxes due was unauthorized, unreasonable, and arbitrary. FDOR argued that the transfer and annual fees charged by the County to beach concessionaires pursuant to its Unified Beach Code and Ordinance, (Volusia County Ordinance 88-32), constituted rent payments for the various beach locations. The Fifth District Court of Appeal partially agreed with Lloyd and reversed. The court did not reach Lloyd's argument that Section 212.10 F.S. is arbitrary and capricious and, therefore, unconstitutional but did agree with Lloyd that under the facts of this case and the statutory framework, the best estimate provisions of Section 212.12(5)(b), F.S. [1989], could not be invoked to impose liability upon Lloyd as a "successor" dealer. (615 So.2d 735 at 736). The appellate court ruled with regard to the first issue raised on appeal that, The hearing officer erred in deciding it was proper to impose a sales tax on the fees Volusia County charged Lloyd for the privilege of selling and renting goods and services to the public on public beaches and that these privileges constituted taxable events under Rule 12A-10.070 F.A.C. and Section 212.031 F.S.. It ruled further that, The hearing officer arrived at this ruling simply by deferring to the Department's interpretation of the rule and by noting there was no contrary case law. The hearing officer correctly pointed out that deference should be given to an agency's interpretation of its rules and the statutes it is charged to administer. However, the agency's interpretation is subject to review and is not conclusive. (651 So.2d 735 at 736). The court went on to say, We hold that, in exercising the duties imposed on it by the Unified Beach Code, the County did not enter into the business of renting, leasing, or licensing real property. Accordingly, the tax liability assessed on the basis of the concession- aire fees being a license or lease of land is reversed. (651 So.2d 735 at 737) The appellate court also stated that, At the time Lloyd purchased the concessions, neither Lloyd nor the sellers were aware of the duties imposed by Section 212.10 [1989] which imposed on a purchasing or successor dealer the sales tax liabilities of a selling dealer under certain circumstances, and Lloyd concedes it did not comply with the statute. (651 So.2d 735 at 738). The Fifth District Court of Appeal majority opinion criticized the agency for relying solely on Lloyd's own, adequate records for the more current years after Lloyd purchased the concessions which are records not listed in Section 212.12(5)(b) F.S. as usable even if that section were applicable. It further criticized the agency for making no effort to obtain or project--or estimate--sales tax liabilities of the prior concessionaires on the basis of their own records which would have been for the relevant taxable period. However, the appellate court's ultimate ruling on the second issue raised on appeal was that the agency was not entitled to invoke Section 212.12(5)(b) F.S. without showing that Lloyd was guilty of a default listed by the statute. The opinion relies on the fact that, because there was no statutory or regulatory mechanism in place by which Lloyd could have ascertained the prior owners' tax liability, Lloyd, the taxpayer, could not be in default. The court observed the longstanding and frequently reiterated precedent that, "tax laws should be construed strongly in favor of the taxpayer and against the government with all ambiguities or doubts resolved in the taxpayer's favor." The opinion stops short of finding the statute unconstitutional as written or as applied to Lloyd. The foregoing rulings by the appellate court are res judicata for purposes of determining whether or not there was any justiciable issue of law or fact raised by the agency's initial tax assessment. The recommended and final orders appealed from did not reserve jurisdiction to determine entitlement to any fees or costs. The Petitioner made no request for fees and costs to the appellate court and none were awarded. There is no order of the appellate court requiring FDOR or DOAH to award fees or costs. Petitioner makes its claim herein only pursuant to Sections 57.111 and 120.575(5), F.S. The agency has never entered a final order on remand in accord with the decision of the Fifth District Court of Appeal, but clearly, Lloyd ultimately prevailed at the appellate level. Petitioner filed its original fees and costs petition with DOAH within 60 days of the appellate court's mandate. That petition was dismissed by an order herein dated June 28, 1995. The second paragraph of the June 28, 1995 order read, "Petitioner shall have 15 days from date of this order to amend its motion (sic=petition)." The fifteenth day was July 13, 1995. The Amended Petition was served and filed with DOAH on July 14, 1995. Respondent set forth no showing of prejudice by the one day's delay.
