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
The Issue Whether the "Additional Payment" made by Hernando HMA, Inc., d/b/a Brooksville Regional Hospital to Hernando County pursuant to a document entitled Lease Agreement, as amended, constitutes "rent" subject to sales tax under section 212.031, Florida Statutes.1/
Findings Of Fact Hernando HMA, Inc. (HMA) is a for-profit entity which operates Brooksville Regional Hospital, Spring Hill Regional Hospital, and other entities, as successor to an entity that was in Chapter 11 bankruptcy proceedings from 1993 to 1998, Regional Healthcare, Inc. (RHI). The Department is an agency of the State of Florida that has been delegated the responsibility to collect sales and use taxes imposed by chapter 212, Florida Statutes. In 1998, as part of RHI's bankruptcy plan, HMA and the County entered into various agreements, including a lease agreement (1998 Lease), regarding the use and operation of several RHI hospital properties and improvements owned by the County, and leased back to RHI. Under the 1998 Lease and other agreements, HMA agreed to continue to operate the hospital facilities for 30 years with possession of the real property and improvements to be returned to the County at the end of the lease term. Section 1.2W. of the 1998 Lease defined "Rental Payment" as follows: "Rental Payment" means all payments due from Lessee to Lessor or otherwise required to be paid by Lessee pursuant to the terms of this lease. The 1998 Lease further provided in section 3.3 under the heading "Rent": The annual rental payment of the Leased Premises for each year of the Lease Term (the "Rental Payment") shall be in the amount of Three Hundred Thousand and 00/100 Dollars ($300,000). This Rental Payment shall be paid to Lessor by Lessee on the Commencement Date and on each anniversary date of the Commencement Date during the Lease Term. The 1998 Lease also provided that HMA, as Lessee, would pay "all taxes, if any, prior to delinquency." Under the 1998 Lease, the County agreed to lease the premises in consideration of HMA’s timely payment of rent and timely performance of the other covenants and agreements required under the lease. It was an “event of default” under the lease if HMA failed to observe and perform any covenant, condition, or agreement on its part which could be cured by a payment of money. Remedies for default under the 1998 Lease included termination of the lease by the County and exclusion of HMA from possession of the leased premises. Even though the leased premises under the 1998 Lease were not subject to ad valorem taxes because they were owned by the County, during public discussions of the proposed 1998 Lease, an issue arose about HMA's responsibility for payment of fire assessments that would have been paid if the property was not immune or exempt from ad valorem taxes. HMA agreed, by separate agreement, to pay the fire assessments and buy a new ambulance to serve the community. The fire assessment agreement was by separate document that was included as part of the closing of the 1998 Lease and other agreements involving the hospital facilities in June 1998. The 1998 Lease was dated June 1, 1998. The 1998 Lease terms included a merger clause in section 15.6 entitled “ENTIRE AGREEMENT,” which provided: This lease may not be modified, amended or otherwise changed orally, but may only be modified, amended or otherwise changed by an agreement in writing signed by both parties. This Lease Agreement and its accompanying guaranty constitute the entire agreement between the parties affecting this Lease. This Lease Agreement supersedes and cancels any and all previous negotiations, arrangements, agreements, and understandings between the parties hereto with respect to the subject matter thereof, and no such outside or prior agreements shall be used to interpret or to construe this Lease. There are no promises, covenants, representations or inducements in addition to, or at variance with any of the terms of this Lease Agreement except the Guaranty. In 2001, the County and HMA began negotiations for relocation of the Brooksville Regional Hospital which was part of the leased premises described in the 1998 Lease. During the negotiations, HMA, through its attorney, Steven Mitchell, prepared a proposed comprehensive relocation agreement in consultation with former County Attorney Bruce Snow. Section 7.3 of the proposed relocation agreement contemplated revising the 1998 Lease and suggested the following preliminarily negotiated language for rental payments under a revised 1998 Lease: Rental Payments The Lessee shall pay to Lessor on the due date therefore as set forth in the Lease Agreement, the sum of Three Hundred Thousand and no/100 Dollars ($300,000.00) per annum. The Lessee shall pay to Lessor on an annual basis, either as rent or by virtue of a payment to Hernando County of the same sum to be used by Hernando County as it deems appropriate, an amount equal to the ad valorem taxes that would have been paid on the New Facility Site as improved with the New Facility if the New Facility Site were not owned by Hernando County but owned by a for-profit entity. In the event the New Facility Site and the New Facility located thereon are subsequently required by law to pay ad valorem taxes then the obligation to pay the amount described in Section 7.3(b) herein shall immediately terminate and Lessee shall be responsible for the payment of the appropriate ad valorem tax. The proposed comprehensive relocation agreement was discussed at public meetings held by the Hernando County Board of Commissioners on September 17 and September 25, 2001. The minutes of the September 25, 2001, meeting indicate that the County Administrator advised that the proposed relocation agreement contemplated that HMA would continue to pay $300,000 annually as rent, and “would make a payment-in-lieu of taxes annually to the County . . . .” The minutes also reflect that, in responding to a question from a commissioner regarding whether there should be language in the agreement that would protect the “payment-in-lieu of taxes” provision in the event the law changed: [Former County Attorney] Snow replied that it was his recommendation that there should be a provision that to the extent that the organic law of the State provided that facilities, such as the new hospital or other hospital under the lease, were taxable for ad valorem tax purposes, that that provision of the organic law would apply to ensure that that provision superseded. He explained that the lease provision to provide for an ad valorem tax payment was only to the extent that the organic law did not otherwise compel it so that the County would be receiving ad valorem tax under either scenario. The minutes from the September 25, 2001, meeting further state: Mr. Snow replied to County Attorney Garth Coller that there had been recent Supreme Court decisions which may have a bearing on the organic law to the extent that a decision of that nature indicated that the facilities were subject to ad valorem tax, notwithstanding the ownership issue, then they were subject to ad valorem tax and the lease would need to clarify that. He suggested that if the FS or Constitution should change, even in the absence of an interpretation of the Supreme Court decision, the change would obligate the payment of ad valorem taxes pursuant to the constitutional or statutory provisions. He explained that organic law pertained to provisions of FS or the Constitution as opposed to a Court decision. Mr. Snow’s reported reference to recent “Supreme Court decisions” regarding ad valorem taxes undoubtedly was referring the decision, among others, in Sebring Airport Authority v. McIntyre, 718 So. 2d 296 (Fla. 1998). In that decision, rendered a few months after the County entered into the 1998 Lease, the Supreme Court of Florida stated with regard to municipal (as opposed to county) property: [T]here is nothing in article VII, section 3 that allows the legislature to exempt from ad valorem taxation municipally owned property or any other property that is being used primarily for a proprietary purpose or for any purpose other than a governmental, municipal or public purpose. To the extent section 196.012(6) attempts to exempt from taxation municipal property used for a proprietary purpose, the statute is unconstitutional. Id. at 298. The Sebring case did not address tax immunity of county property as distinguished from the issue of tax exemptions for the proprietary use of municipal property. The proposed “Rental Payments” language for revisions to the 1998 Lease, however, demonstrates that the drafters of the comprehensive relocation agreement were aware of the possibility that the Sebring rationale could be expanded and applied to county property. The comprehensive relocation agreement was approved by the County, and executed in late 2001. Attached as to that relocation agreement as Schedule C was an unsigned document entitled “First Amendment to Lease Agreement” that was not to be executed until the new facility was completed and transferred to the County. Subsection 3.3 of the First Amendment to Lease Agreement entitled “Rental Payments” provided: Rental Payments The Lessee shall pay to the Lessor on the due date therefore as set forth in the Lease Agreement, the sum of Three Hundred Thousand and No/100 Dollars ($300,000.00) per annum. The Lessee shall pay to the Lessor on an annual basis, either as rent or by virtue of a payment to Hernando County of an amount (“Additional Payment”) equal to the sum of the following: An amount equal to that portion of the ad valorem taxes that would have been paid to Hernando County on the Leased Premises (as modified by the substitution of the New Facility Site for the Current Hospital Site) if the Leased Premises were not owned by Hernando County but owned by a for profit entity; and An amount equal to that portion of the ad valorem taxes that would have been paid to the Spring Hill Fire and Rescue District, the Township 22 Fire District and/or any other special taxing district that may be established pursuant to law; and An amount equal to all special assessments levied by Hernando County through any Municipal Service Benefit Unit created by Hernando County pursuant to the provisions of Section 125.01, Florida Statutes; and An amount equal to all ad valorem tax levied by Hernando County through any Municipal Service Taxing Unit created by Hernando County pursuant to the provisions of Section 125.01, Florida Statutes. In no event shall the Additional Payments exceed an amount equal to a full ad valorem tax assessment on the New Facility Site as determined annually by the Hernando County Property Appraiser. In the event the Lessee and/or Lessor is required by law to pay ad valorem taxes on the Leased Premises or any portion thereof, the obligation to pay to Lessor the Additional Payment described in this Section 3.3 shall immediately terminate (and/or be adjusted, whichever is applicable), and Lessee shall be responsible for payment of the appropriate ad valorem tax. The First Amendment to Lease Agreement further provided, “[e]xcept as expressly modified herein, all other terms and conditions set forth in the [1998] Lease Agreement are hereby ratified and confirmed.” The new hospital facility was completed and transferred to the County in 2005. On November 15, 2005, the County commission approved documents related to the transfer, including the First Amendment to Lease Agreement in the precise form as attached to the relocation agreement approved in 2001. The approval was obtained on a consent agenda, and the minutes reflect no further discussion by the commission or the public on the documents that were approved. In 2009, the Hernando County School District sued the County Property Appraiser, alleging that the properties subject to the 1998 Lease as amended by the First Amendment to Lease Agreement should not be exempt from ad valorem taxation. In a 13-page Order dismissing the School District’s action, Circuit Judge Daniel B. Merritt, Jr., distinguished the cases disallowing statutory ad valorem tax exemptions for properties owned by special tax districts or cities from the sovereign immunity against ad valorem taxes enjoyed by real estate owned by the State of Florida and its counties. In his ruling, Judge Merritt noted that Florida law specifically makes leasehold interests in governmental property subject to taxation, noting: The Legislature defines leasehold interests as intangible personal property and, hence, assessed by the Florida Department of Revenue, when: (1) rent is due; (2) the property is used for commercial purposes; (3) is not used for agriculture; (4) not financed with revenue bonds, and; (5) the lease is for an initial term of less than 100 years; §§196.199(2)(b), Florida Statutes (2008), 199.023(1)(d), Florida Statutes (2005), specifically preserved in Chapter 2006-312, Laws of Florida (2006). However, see below for further analysis with regard to presumed ownership of property leased for 100 years or more as set forth in §196.199(7), Florida Statutes. Judge Merritt also discussed those instances where “leased” property might not qualify as State or county property where lessees are the “equitable owners,” such as leaseholds of 100 years or more or where properties do not revert to the State until the end of a lease term. In his order, however, Judge Merritt noted that the tax immunity of the County was a fundamental attribute of county property and held that “under the terms of the Lease Agreements the Court concludes that HMA has merely the right to use and possession and is not the beneficial owner as a matter of law Hernando County’s immune property and improvements.” Judge Merritt’s Order was affirmed on appeal. School Board of Hernando County v. Mazourek, Case No. H-27-CA-2009-549 (5th Cir. 2009), per curiam aff’d, 2010 WL 4323055 (Fla. 5th DCA 2010) In December, 2010, the Department notified the County it had been selected for a tax compliance audit under chapter 212, Florida Statutes, Sales and Use Tax. The audit period was from January 1, 2007, through December 31, 2009. The County’s personnel were cordial and receptive during the audit process and the Department’s auditor determined that the books and records kept by the County had adequate internal accounting controls in place and sufficient data integrity. Out of the approximately 19 tax registration accounts the County has with the Department, the Department’s auditor found exception with only tax account #12445797, the tax collected and remitted under its lease with HMA. In her record review, the Department’s auditor noticed invoices and worksheets from the County to HMA, titled “Payment in lieu of taxes.” In examining the First Amendment to the Lease Agreement, Section 3.3 “Rental Payments,” the Department’s auditor determined that the County was not collecting sales tax on a portion of the rent received under that section. The monthly tax return filed by the County under account # 12445797 reflected that it was collecting and remitting the sales tax calculated on the $300,000.00 annual rent payment, but was not collecting and remitting sales tax calculated on the additional payments in lieu of taxes. The Department’s auditor determined the additional payments, required under the lease and made as a condition of occupancy, constituted a taxable transaction as additional rent consideration. The amount of the additional payments, made January 2007 and March 2008, as revealed on the County’s “Payment in lieu of taxes worksheets,” was multiplied by 6.5 percent to arrive at the additional tax amount due of $78,710.17. On December 9, 2010, the Department issued a Notice of Intent to Make Audit Changes, Form DR 1215, advising the County of its audit findings, which included $78,710.17 in taxes due, $14,526.37 in accrued interest through December 9, 2010, and a $19,677.55 late payment penalty. On December 21, 2010, the Department issued its Notice of Proposed Assessment, Form DR 831, showing an assessment of $78,710.17 in tax and $14,707.51 in accrued interest, for a total of $93,417.68 through December 21, 2010, with interest accruing thereafter at the rate of $15.10 per diem. All penalty amounts were waived. At the final hearing, the County argued that the additional payments from HMA under the First Amendment to Lease Agreement were not rent, but rather separate payments to pay for County services. While the actual language used in the First Amendment to Lease Agreement appears to unambiguously indicate that the additional payments were rent, the County offered additional evidence of facts and circumstances beyond the terms of the lease itself in support of its argument that the additional payments were not rent. That evidence was admitted, without objection, and has been considered in determining the intention of the parties to the lease with regard to the additional payments. In addition to evidence that the lease drafters were aware of certain cases decided on the issue of whether the leased premises would be subject to ad valorem taxes, the County offered the testimony of Mr. Mitchell regarding the “Rental Payments” language found in the First Amendment to Lease Agreement. When asked whether there had been much negotiation over the format or wording of the First Amendment to Lease Agreement, Mr. Mitchell recalled: No, there really wasn’t other than, you know, the concept – what this amendment does is what we had agreed to pay rental payment. The rental payment was $300,000. And then, we also had agreed independently just to go ahead and pay the County for certain services that they were providing to us. And then we specified those. Those were independent payments, not part of the rental payment. Mr. Mitchell further testified: [B]asically, this property is free of ad valorem tax. That is why the school board filed their lawsuit because, of course, they were not getting any of the ad valorem taxes. So, the property is free of payment of ad valorem taxes. We’re paying our 300,000. It was very, very clear. However, HMA felt that the County was providing certain services, the fire districts and whatnot. So, independent of the rent, we paid this amount. If you read the section dealing – it’s 3.3.[2], or whatever it is, which I’ll read it to you, it talks about, at the very end – and they did it for whatever reason the property became taxable, you know, it effectively became taxable and we had to pay full ad valorem taxes on the property, then the specialties – these additional payments we called, you know, would go away and they, effectively, be part of rent. That's why it talks about it as such, and it was either additional payment and/or rent. Contrary to Mr. Mitchell’s recollection, section 3.3.2 of the First Amendment to Lease Agreement does not speak in terms of “additional payment and/or rent” but rather states that another payment would be made “either as rent or by virtue of a payment to Hernando County of an amount ('Additional Payment') . . .". Mr. Mitchell makes a valid point regarding the fact that HMA was concerned about having to pay both the additional payment and ad valorem taxes. Consistent with this concern, the lease amendment made it clear that HMA would not have to pay the additional amount if the property ever became subject to ad valorem taxes. Mr. Mitchell’s testimony in support of the County’s contention that HMA’s payment in lieu of taxes under the First Amendment to Lease Agreement was not rent, however, is unpersuasive. Considering the extrinsic evidence offered by the County, especially evidence of the parties concern that the subject County property might someday be subject to ad valorem taxes, together with the 1998 Lease, language negotiated for the proposed relocation agreement, and the actual terms of the First Amendment to Lease Agreement, it is found that the parties intended the language under the "Rental Payments" section to assure that HMA did not have to pay the additional amount twice. The extrinsic evidence offered by the County, however, was insufficient to support a finding that the parties intended to differentiate between “rent” and the “additional payment” or that, however characterized, the payment in lieu of taxes was not rent subject to assessment by the Department. If the parties had wanted to provide language that designated the payment in lieu of taxes as a payment for services instead of rent they could have, as they did in the Second Amendment to Lease Agreement entered into on September 13, 2011, just ten days prior to the final hearing in this case.2/ That Second Amendment to Lease Agreement changed the name of section 3.3 from “Rental Payments,” as found in the First Amendment, to “Rent and Additional Payment for County Services.” Pertinent subsections of the Second Amendment further provided: 3.3.2 Additional Payment for County Services. The Lessee shall pay to Lessor on an annual basis, as an additional payment (“Additional Payment”) for services provided by Hernando County [in its role as a service provider and local taxing authority], . . . * * * The Additional Payment is not intended to constitute “rent” and is not intended to create an event subject to Florida sales tax – but rather is intended to constitute a separate payment for the provision of services, payable to the local taxing authority, as provided in § 212.031(1)(c), Florida Statutes (which allow parties by contractual arrangement to distinguish between payments which are intended to be taxable and payments which are intended to be nontaxable), as this section may be amended or renumbered from time to time.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that, consistent with the Notice of Proposed Assessment dated December 21, 2010, and this Recommended Order, the Department of Revenue enter a final order finding that Petitioner owes tax and interest due totaling $93,417.68 through December 21, 2010, with interest accruing thereafter at the rate of $15.10 per diem, without penalties. DONE AND ENTERED this 30th day of December, 2011, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III 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 30th day of December, 2011.
The Issue The issue is whether petitioner, a sales tax dealer, must pay taxes, interest and penalties for collecting sales taxes on certain nontaxable transactions and then failing to remit those funds to respondent.
Findings Of Fact Based upon all of the evidence, including the pleadings, filings, and stipulation of counsel, the following findings of fact are determined: On an undisclosed date, respondent, Department of Revenue (DOR), conducted an audit of petitioner, Blackshears II Aluminum, Inc. (Blackshears), a registered sales tax dealer located in Crystal River, Florida. The audit covered the period from June 1, 1985, through March 31, 1989. As a result of that audit, on December 27, 1989, DOR issued a notice of intent to make sales and use tax audit charges. After petitioner availed itself of various informal procedures, a notice of reconsideration (notice) was issued on January 7, 1992, imposing a final assessment of $623,131.69. This action prompted Blackshears to initiate this proceeding. Although the notice addressed five issues, only issue three is relevant to this proceeding. That issue is broadly defined in the notice as "whether taxes collected on nontaxable transactions are state funds." According to the notice, the issue should be answered in the affirmative because (e)very dealer in the State of Florida is an agent for the state in that it is their responsibility to collect and remit sales tax. Blackshears collected the funds in the name of the State of Florida and has presented no refund assignments from the purchasers to permit them to apply for refunds, therefore, the State of Florida is due the funds. If the Department were to permit the use of its name to unjustly enrich Blackshears, a continuing deception would occur. The parties agree that petitioner collected sales taxes on various transactions (real property contracts) during the audit period. Whether such transactions were subject to the sales tax is in dispute, but for purposes of resolving the issue presented here, the parties have agreed that the undersigned can assume that the transactions were nontaxable. It is further agreed that even though petitioner collected the taxes from its customers, it failed to remit them to the state, and it has likewise failed to furnish proof that it refunded those moneys to its customers. Accordingly, DOR's assessment seeks to collect those taxes together with interest and substantial penalties. The parties have also agreed that the portion of the total tax assessment attributable to real property contracts is $277,406.53. As of March 29, 1993, the assessment totaled $636,570.37, after the accrual of interest and penalties. However, petitioner has paid to the state $16,180.19, for which it should receive credit. During the audit period, Rule 12A-1.014(6), Florida Administrative Code, was in effect and provided as follows: (6) Whenever a dealer credits a customer with tax on returned merchandise or for tax erroneously collected, he must refund such tax to his customer before his claim to the State for credit or refund will be approved. Under the terms of this rule, which interpreted the provisions of Chapter 212, Florida Statutes, any moneys erroneously collected by a dealer as taxes were to be remitted to the state. However, if the moneys were refunded to the customer, the dealer could then receive a refund of the moneys previously paid or a credit towards other taxes due.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent enter a final order granting its motion for partial summary adjudication and sustaining the assessment on issue three of its notice of reconsideration, plus interest and penalties, less those taxes already paid and identified in paragraph 2 of the parties' joint stipulation. DONE and ENTERED this 3rd day of May, 1993, 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 3rd day of May, 1993. COPIES FURNISHED: Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 Linda Lettera, Esquire 204 Carlton Building Tallahassee, FL 32399-0100 C. Lynne Chapman, Esquire Department of Legal Affairs The Capitol-Tax Section Tallahassee, FL 32399-1050 Harold F. X. Purnell, Esquire 315 South Calhoun Street Suite 500 Tallahassee, FL 32301
Findings Of Fact In 1972 Petitioner received $743,982 of income from state and municipal bonds. On its federal income tax return the Petitioner allocated $471,229 of this amount to the policyholders' share as required by law and $272,753 to the company's share (Phase I). The Phase II figures were $359,669 and $384,313 respectively. Respondent has added back the entire $743,982 for purposes of computing Petitioner's Florida taxable income. Petitioner added back the $272,753 (Phase I) and $384,313 (Phase II). For 1972 Petitioner accrued $350,000 of Florida taxes on its federal income tax return. In computing its deductions on its federal income tax return 36.6612 percent of this amount was deducted in the Phase I computation and 51.6564 percent in the Phase II computation. Respondent has added back all of the Florida tax accrued in computing the Florida income tax owed by Petitioner. Petitioner's position is that only the company's percentages were deductible and only these amounts should be added back. The amount of additional Florida income tax assessment proposed for 1972 by the Respondent over that paid by Petitioner is $21,234. In 1973 Petitioner received $552,408 of income from state and municipal bonds. On its federal income tax return Petitioner allocated $335,662 of this amount to policyholders' share as required by law and $216,786 to the company's share (Phase I). The Phase II figures were $248,789 and $303,619 respectively. Respondent has added back the entire $552,408 for purposes of computing Petitioner's taxable income. Petitioner added back the $216,786 (Phase I) and $303,619 (Phase II). For 1973 Petitioner accrued $475,000 of Florida taxes on its federal income tax return. In computing its deductions on its federal income tax return 39.2438 percent of this amount was deductible in Phase I and 54.9628 percent in Phase II. Respondent has added back all of the Florida tax accrued. Petitioner's position is that only the company's percentages were deductible and only these amounts should be added back. The amount of additional Florida income tax assessment proposed for 1973 by Respondent was $20,184. It was further stipulated that the sole issues here involved are: The computation of the amount of tax exempt interest which is excludable from taxable income under section 103(a) Internal Revenue Code for purposes of the Florida corporate income tax; and The computation of the amount of Florida income tax accrued which is deductible for purposes of federal income tax and added back for purposes of computing the Florida income tax.
The Issue The issues for determination are whether Petitioner paid sales and use tax on rental income from transient housing in Osceola and Polk counties, and whether Petitioner paid sales and use tax on the purchase of fixed assets in accordance with the requirements of Sections 212.03 and 212.06, Florida Statutes (1995). (Statutory references are to Florida Statutes (1995) unless otherwise stated.)
Findings Of Fact Petitioner is a Florida corporation with its principal place of business located at 3501 West Vine Street, Suite 387, Kissimmee, Florida. Petitioner primarily engages in the business of renting and managing transient property in the Orlando-Disney World area for absentee owners. Respondent is the state agency responsible for the administration of the Florida sales and use tax pursuant to Section 213.05. Respondent selected Petitioner for audit because Petitioner filed several sales and use tax returns reporting no taxable income (zero returns). Zero returns are unusual for a tourist-based business in the Orlando-Disney area. Osceola County, Florida (Osceola), also audited Petitioner for the period December 1994 through December 1999. Osceola is a political subdivision of the state and is responsible for administering and assessing the Tourist Development Tax authorized in Section 212.03 and Section 13-16, Osceola County Code of Ordinances (Code). Osceola audited Petitioner because Petitioner failed to file any tax returns with Osceola. Osceola correctly assessed Petitioner $394,378.39 for tax, penalty, and interest. The mathematical computations in the Osceola audit are correct. Osceola conducted its audit in accordance with generally accepted auditing principals. The Osceola audit revealed that Petitioner began doing business on January 1, 1995, but reported that it began doing business on both November 16, 1999, and March 12, 1998. The Osceola audit revealed that Petitioner failed to maintain required tax records, including guest registration forms; cash receipts; a general ledger; and documents necessary to verify amounts reported in tax returns. Petitioner did not reconcile its bank statements and did not maintain records necessary to verify that all receipts from guest registrations were properly entered into Petitioner's computer system of record keeping. Respondent began its audit on January 8, 2001. However, Respondent was unable to examine most of Petitioner's books and records due to a lack of cooperation from Petitioner. Respondent made several attempts to obtain Petitioner's books and records, but Petitioner provided Respondent with only consumable purchase invoices. Respondent and Osceola have an agreement to share information. Respondent relied on information obtained by Osceola in the course of the Osceola audit. Osceola provided Respondent with copies of Osceola's work papers including a spreadsheet of undeclared revenue compiled from Petitioner's books and records. Osceola also provided Respondent with a list of 102 properties managed by Petitioner during the audit period. Approximately 61 properties are located in Osceola County and 41 are located in Polk County. Respondent bases its assessment on an estimate derived from the Osceola assessment, records, and work papers. Respondent conducted its audit in accordance with applicable law. The mathematical computations in Respondent's audit are correct. Petitioner owes sales and use tax in the respective amounts of $218,152.88 and $125,680.72, due on rentals derived from transient housing in Osceola and Polk counties. Petitioner also owes sales and use tax in the amount of $2,100 from the sale of fixed assets. Interest accrues at the daily rate of $98.13.
Recommendation Based upon the findings of fact and the conclusions of law, it is RECOMMENDED that Respondent enter a Final Order assessing Petitioner for tax, penalty, and accrued interest. DONE AND ENTERED this 11th day of July, 2003, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 11th day of July, 2003. COPIES FURNISHED: Carrol Y. Cherry, Esquire Office of the Attorney General, Tax Section The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Martha F. Barrera, Esquire Office of the Attorney General, Tax Section The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 A.C.E. Property Management of Orlando, Inc. 3501 West Vine Street, Suite 387 Kissimmee, Florida 34741 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100
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 Respondent issued a Notice Of Assessment And Jeopardy Findings against Jesus Abauza, also known as Jesus I. Valdez, on May 16, 1989, (the "assessment"). The assessment was made for the tax imposed on the unlawful transportation of approximately 90 kilograms of cocaine. The tax base in the assessment is the retail value of the cocaine. The retail value of the cocaine was estimated in the amount of $1,341,000 by multiplying the weight of the cocaine by the retail price listed in the Florida Department Of Law Enforcement ("FDLE") memorandum in effect at the time for Broward and Dade counties. The price per kilogram listed in the FDLE memorandum was $14,900. The FDLE memorandum became effective on May 4, 1988, and was the current price list used by the FDLE on May 8, 1989, when Petitioner was arrested and charged with possession of a controlled substance. Tax was assessed against the tax base at the rate of 50 percent and in the amount of $670,500. A 25 percent surcharge was assessed in the amount of $335,250. The total tax assessed in the amount of $1,005,750 is the sum of the amount of tax due at the rate of 50 percent and the amount of tax due for the 25 percent surcharge. An additional 50 percent penalty was assessed in the amount of $502,875. The total tax and penalty assessed in the amount of $1,508,635 is the sum of the tax due ($1,005,750) and the penalty ($502,875). A Warrant For Collection Of Delinquent Sales and Use Tax (the "warrant") and a Corrected Warrant (the "corrected warrant") was issued against Petitioner on the same day as the assessment. The warrant and corrected warrant are identical except for the addition of Petitioner's social security number in the the top right corner of the corrected warrant and a note in the right margin of the corrected warrant stating: This CORRECTED WARRANT is being re-recorded to reflect the correct amount of tax lien as being $1,005,750.00. Interest will accrue at the rate of $330.66 per day beginning 6/2/89 thru date of satisfaction of lien. 11/26/91[.] The amount stated in the assessment, warrant, and corrected warrant as the tax due is $1,005,750. The amount stated as the penalty due in all three documents is $502,875. The amount stated as the total and grand total due in all three documents is $1,508,625. The note in the right margin of the corrected warrant, however, eliminates the 50 percent penalty by stating that the corrected amount of the "tax lien" is $1,005,750. Interest accrues on the tax due at the rate of one percent per month. The amount stated in the bottom left corner of the assessment, warrant, and corrected warrant, as the "Daily Interest Rate" is $329.86. The correct per diem amount of interest is $330.66. 5/ Interest begins accruing on the 21st day of the month following the month for which the tax is due.6 The tax was initially due in May, 1989, when the assessment was issued. Although the corrected warrant states that interest accrues from "6/2/89", interest actually began accruing on June 21, 1989. The assessment was mailed to Petitioner by certified mail, return receipt requested. Petitioner received the assessment, but the date of receipt cannot be determined from the evidence of record. 7/ Petitioner unlawfully transported approximately 90 kilograms of cocaine. Petitioner was arrested by officers in the Metropolitan Dade County Police Department (the "Police Department") on May 8, 1989, and charged with possession of cocaine. In the criminal case against him, Petitioner filed a motion to suppress the evidence seized by the Police Department based upon the alleged illegality of the police officer's investigatory stop of the car Petitioner was driving. The district court denied the motion to suppress, and Petitioner successfully appealed the trial court's ruling to the United States Court of Appeals, Eleventh Circuit. The district court's denial of the motion to suppress was reversed in United States v. Valdez, 931 F.2d 1448 (11th Cir. May 22, 1991), and the case was remanded for further proceedings. The district court granted the motion to suppress and scheduled the criminal case for trial during the two week period beginning September 23, 1991. 8/ Petitioner stipulated in the Supplemental Pretrial Stipulation that he did not admit or stipulate that any of the matters set forth in the stipulation were factually correct. The findings of fact made in this Recommended Order, however, are substantially the same as the factual account contained in the official transcript of the criminal proceedings and reported by the appellate court in Valdez as the basis for its reversal of the trial court's denial of Petitioner's motion to suppress. On the afternoon of May 8, 1989, Detective Jerry Houck and Special Agent Steven Hills were conducting the surveillance of a residence (the "residence" or "house") located in Miami, Florida from an unmarked police car. Detective Houck and Special Agent Hills were part of a Police Department narcotics investigative team led by Detective Francisco Trujillo. Detective Trujillo was not personally present at the residence but monitored the events which occurred at the residence over the police radio in his unmarked vehicle. Detective Trujillo was assisted by Officer Douglas Almaguer, a uniformed police officer for the Police Department who was in a marked patrol car. Detective Houck observed a Honda Accord automobile (the "Honda") driven by Petitioner stop in front of the residence. Petitioner got out of the car, knocked on the front door of the house, and entered the residence. Detective Houck was unable to observe the events which took place inside the house. While Petitioner remained inside the house, two men later identified as Jose and Jorge Fernandez came out of the residence. They moved two cars parked in the yard and positioned the Honda so that its trunk was in close proximity to the front door of the residence. Jose and Jorge Fernandez opened the trunk of the Honda, reentered the residence, and reappeared within the next few minutes outside the house carrying plastic garbage bags which appeared to Detective Houck to be fairly heavy. The two men placed the garbage bags with their contents in the trunk of the Honda. They reentered the residence and quickly reappeared carrying additional bags which they also placed in the trunk of the Honda. Shortly thereafter, Valdez came out of the residence, got into the Honda, and drove away. Detective Trujillo advised Officer Almaguer that: [W]e were conducting an investigation and we had a vehicle we wished for him to follow, and if that person was to commit a traffic infraction which he normally cites somebody for, we wished for him to stop the vehicle. If that occurred, and he did stop the vehicle, I wanted him to ask the occupant of the vehicle for consent to search the vehicle, and I instructed him to ask if he would consent to a search. Officer Almaguer did not recall that he had been directed by Detective Trujillo to stop the Honda only for something which constituted the kind of traffic offense for which he would ordinarily stop a driver. Over the police radio, Detective Houck provided Detective Trujillo with the description and tag number of the Honda and notified Detective Trujillo when Petitioner drove away from the house. Detective Houck left his surveillance position at the residence and followed the Honda to 122nd Avenue. At that point, Detective Trujillo identified the Honda and Detective Houck confirmed the identification. As Petitioner approached the intersection of 8th Street and 122nd Avenue, Detective Trujillo was positioned across the intersection. Officer Almaguer was directly behind Detective Trujillo in his marked patrol car. Petitioner made a right turn against a red traffic light signal and violated the right-of-way of a vehicle approaching through the green traffic light signal. The approaching vehicle slowed abruptly in order to avoid a collision with Petitioner's Honda. Neither Detective Trujillo nor Officer Almaguer were able to state the speed at which the approaching vehicle was traveling before it slowed down, and neither officer heard any screeching of the tires of the approaching vehicle. Detective Trujillo advised Officer Almaguer that Petitioner was the subject of the narcotics investigation. Officer Almaguer followed the Honda for 18 blocks from the intersection where the traffic violation had occurred and then stopped Petitioner. Detective Trujillo parked two blocks away from the point of the stop and observed Officer Almaguer conduct the stop. Officer Almaguer approached Petitioner and asked for Petitioner's driver's license and registration. Petitioner produced his driver's license but stated that the car was loaned to him by a friend. Officer Almaguer asked Petitioner if Petitioner knew why he had been stopped. Petitioner answered "yes." Officer Almaguer requested permission to search the car, and Petitioner consented. Officer Almaguer found five sealed trash bags inside the trunk of the Honda. Officer Almaguer asked Petitioner what was inside the bags. Petitioner replied that it was cocaine. Officer Almaguer arrested Petitioner, handcuffed him, and placed him in the back seat of the patrol car until Detective Trujillo arrived at the point of the stop. Officer Almaguer issued Petitioner a citation for violation of the right-of-way. Detective Trujillo then advised Petitioner of his Miranda rights. Officer Almaguer's stop of Petitioner's vehicle was unreasonably pretextual, and Petitioner's consent to search was not voluntarily given. Officer Almaguer would not have pursued Petitioner's Honda, stopped it, and issued a traffic citation, but for Detective Trujillo's instructions that the Honda was the car which the narcotics investigation team wanted stopped. Officer Almaguer ordinarily did not search a vehicle for a violation of right-of-way, or even ask its driver for consent to search the vehicle. Officer Almaguer had no reason to ask for permission to search the vehicle based solely on the traffic violation he observed. Petitioner's consent to the search was tainted by the illegal, pretextual stop and detention. The contents of the five bags seized by the Police Department when Petitioner was arrested were tested by a chemist for the Police Department. The contents of the five bags weighed approximately 90 kilograms. Samples of each kilogram from the bags were tested and found to contain cocaine. The percentage of cocaine and purity of the cocaine was not determined.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order upholding the assessment of tax and interest in the amount determined by Respondent. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 24th day of February, 1992. DANIEL MANRY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 24th day of February, 1992.
Findings Of Fact Having listened to the testimony and considered the evidence presented in this cause, it is found as follows: Petitioner is a domestic corporation. Petitioner provided medicare services to patients in the 1969-70 fiscal year. An on-site audit by the medicare auditing team was concluded in December of 1971, and petitioner received $56,131.00 of medicare reimbursements in January of 1972, for the services provided in the 1969-70 fiscal year. The petitioner did not file an amended federal income tax return for the fiscal year ending September 30, 1979. The adjusted federal income reported on petitioner's federal income tax return for the fiscal year ending September 30, 1972, included the $56,131.00 of medicare reimbursements received by petitioner in January of 1972. On petitioner's Florida income tax return for its fiscal year ending September 30, 1972, petitioner did not include the $56,131.00 figure in its adjusted federal income. On March 31, 1975, the respondent notified petitioner of a proposed deficiency in the amount of $2,100.99 arising from the petitioner's omission of the medicare reimbursements from its adjusted federal income as shown on its Florida corporate income tax return for the fiscal year ending September 30, 1972. Further correspondence ensued between the petitioner and the Corporate Income Tax Bureau of the respondent and the petitioner filed the present petition requesting a hearing on the issue. The respondent requested the Division of Administrative Hearings to conduct the hearing.
Recommendation Based upon the above findings of fact and conclusions of law, it is my recommendation that there is no legal basis for affording the petitioner any relief from the proposed deficiency and that said deficiency in the amount of $2,100.00 be sustained. Respectfully submitted and entered this 17th day of September, 1975, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303 Homer E. Ward, N.H.A. Administrator/President University Park Convalescent Center 1818 E. Fletcher Avenue Tampa, Florida 33612
The Issue At issue herein is whether or not the Respondent's certificate to practice as a certified public accountant in the State of Florida should be revoked based on conduct which will be set forth hereinafter in detail for alleged violations of Chapter 473, Florida Statutes, and the rules and regulations promulgated and adopted thereunder in Chapter 21A, Florida Administrative Code.
Findings Of Fact Based on the testimony of witnesses and their demeanor while testifying, the documentary evidence introduced at the hearing, and the entire record compiled herein, the following relevant facts are found. Mark Finkel, Respondent, is the holder of certificate No. 2327 as a certified public accountant in the State of Florida. As such, the Respondent is subject to the provisions of Chapter 473, Florida Statutes, and the rules and regulations promulgated in Chapter 21A, Florida Administrative Code. The Respondent has been so registered as a certified public accountant since 1968. During early 1973, Respondent was engaged by David E. Wells, M.D., P.A., to prepare and file individual and corporate tax returns for the entity, David E. Wells, M.D., P.A., for the three years ending June 30, 1975. Respondent's engagement stamped from a referral of Dr. Wells' former C.P.A., Tom Williams, who relocated from Florida during late 1972. At the outset of his engagement by Dr. Wells, Respondent was briefed on the nuances of Dr. Wells' cardiology practice by Tom Williams. Respondent, according to Dr. Wells, was told that his duties would include those of filing corporate and individual tax returns and proper accounting for the administration and payment of pension plan taxes. During 1973, Respondent made quarterly visits to Dr. Wells' office to review records and billing information. The record reveals that Respondent filed quarterly payroll tax returns through September of 1976 and individual income tax returns for the years ending 1973 and 1974. Respondent failed to file individual income tax returns for the year ending December, 1975, or corporate returns for the years ending June 30, 1973, through 1976, and pension tax returns for the years ending 1973 through 1976. However, Respondent represented to Dr. Wells that all necessary returns were filed with the Internal Revenue Service and the other governmental agencies charged with the collection of taxes. For the years 1973 through 1976, Dr. Wells received inquiries from the Internal Revenue Service requesting information as to why corporate tax returns had not been filed for his corporation for the three years ending June 30, 1975. Based on the correspondence received from the Internal Revenue Service, Dr. Wells attempted to communicate with Respondent to either get the necessary forms filed or to request a return of Respondent's working papers which would assist another C.P.A. in preparing and filing the pertinent returns, to no avail. In this regard, after repeated calls, Dr. Wells obtained what records Respondent had which were of little use to his newly retained accountant, Myron Kahn, a certified public accountant who, since 1959, has been licensed in Florida and North Carolina. Messr. Kahn was retained by Dr. Wells in December of 1976 and established that the Respondent had only filed an individual income tax return for Dr. Wells for the calendar year 1973, plus quarterly payroll tax returns filed which were current. (See Petitioner's Exhibits 1 and 2.) Based on the available records, Messr. Kahn reconstructed the necessary accounting data based on cash receivables and disbursement vouchers for the prior four-year period. Messr. Kahn, after diligent search, found no control sheets, financial summaries, analyses, etc., which would have been kept if the pertinent income tax returns had been filed as required. Because Messr. Kahn had to reconstruct the necessary accounting data, he spent an inordinate amount of time compiling the returns he needed to file. Evidence reveals that due to Dr. Wells' late filing of tax returns for the fiscal year ending June 30, 1974, he incurred an additional penalty of $12,600, plus approximately $2,700 in interest and for his state corporate return, a penalty of $1,700 was assessed, plus $325 for interest. For the year ending June 30, 1975, Dr. Wells paid a Federal penalty of $5,618, plus $878 in interest, and a state penalty of $1,052, plus $132 in interest. Douglas H. Thompson, Jr., the Board's Executive Director, has been a certified public accountant since April, 1968. Director Thompson is the Board's chief administrative officer and custodian of records. On approximately December 16, 1976, Director Thompson received a complaint from David E. Wells, M.D., based on Respondent's "failure to file requested corporate returns and to return certain documents."
Recommendation Based on the foregoing findings of fact and conclusions of law, and in the absence of any effort on Respondent's part to refute or otherwise mitigate the evidence presented, it is hereby, RECOMMENDED: That the Respondent's license to practice as a certified public accountant (certificate No. 2327) be REVOKED. DONE and ENTERED this 6th day of August, 1979, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675
