Findings Of Fact Petitioner, Department of Labor and Employment Security, Division of Unemployment Compensation (Division), administers the State Unemployment Compensation Program, which includes the payment of benefits to unemployed individuals and the collection of taxes or reimbursement payments from employers to finance these benefits. By law petitioner is authorized to seek reimbursement from political subdivisions for a pro-rata portion of benefits paid to their employees. If a subdivision fails to timely reimburse the State, the Division may certify the delinquent amount to the Department of Banking and Finance, and request the Comptroller to transfer funds otherwise due that entity to the Unemployment Compensation Trust Fund (Trust Fund). If a subdivision contends an employee is not entitled to unemployment benefits, it may contest a claim for benefits with a claim examiner employed by the Division. That decision may be reviewed by an appeals referee, and if either side is still aggrieved, a final administrative appeal may be heard by the full Unemployment Compensation Commission. Those decisions are then reviewed only by the First District Court of Appeal. Respondent, Board of County Commissioners of Flagler County (Board), is a political subdivision of the state, and is required by law to reimburse the Trust Fund for its pro-rate share of benefits paid to former employees. On July 10, 1984, petitioner issued to respondent a notice of intent to certify delinquency wherein it claimed that between October 1, 1979 and December 31, 1983 respondent incurred a liability to the State totaling $6,409.71. This amount included $5,704.92 in benefits paid to former employees and $703.79 for 6 percent interest on overdue payments. That precipitated the instant controversy. The amount due was later reduced to $5,204.79 by the issuance of an amended notice of intent to certify delinquency on January 11, 1985. At hearing respondent conceded it owed all claimed monies except those due for two individuals: Emma Worthington and Margaret Prather. This resolved more than 60 percent of the Division's claim leaving only around $600 in dispute. Emma Worthington was a former employee of the Clerk of the Circuit Court of Flagler County (Clerk) and was never employed by the Board of County Commissioners of Flagler County. Nonetheless, for some reason, the Clerk reported Worthington's wages to the Division under the Employer Identification Number assigned to respondent. Because of this, the Division assumed respondent was Worthington's employer. When Worthington was terminated by the Clerk's office, she requested unemployment benefits. The Clerk filed an appeal with a claims examiner contesting the payment of such benefits. The examiner ruled that such benefits were due, and this decision was affirmed by both an appeals referee and the full commission. As required by law, on an undisclosed date the Division forwarded a reimbursement notice to respondent advising that certain monies were due because of unemployment compensation payments made to Worthington. The Board did not respond to this notice but simply referred it to the Clerk's office. There is no evidence that the Division was ever formally notified by the Board that the employee was actually a Clerk employee, that the bill was forwarded to another party, or that the wrong Employer Identification number had been used. The bill was never paid. Margaret Prather was an employee of the Flagler County Supervisor of Elections (Supervisor) when she was terminated from employment. Before that, she was a Board employee. While employed by the Supervisor of Elections, Prather's wages were erroneously reported to the Division under the Employer Identification number of respondent. Because of this, the Division assumed Prather was a Board employee. After she was terminated by the Supervisor, Prather received unemployment benefits. Whether the Supervisor contested these benefits is not known. In any event, the Division sent the Board a Reimbursement Invoice on an undisclosed date requesting reimbursement for benefits paid to Prather. The Board did not respond to the Invoice but simply forwarded it to the Supervisor. Again, there is no evidence that the Board advised the Division of the erroneous use of its Employer Identification number, that the bill had been forwarded to another party, or that Prather was not an employee. To date, the bill has not been paid.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent reimburse petitioner for benefits paid to employees Worthington and Prather as set forth in the amended notice of intent to certify delinquency within thirty days from date of final order. DONE and ORDERED this 23rd day of April, 1985, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of April, 1985.
The Issue The issue is whether Petitioner, Christopher B. Scott, as the managing member of PNC, LLC (PNC), is personally liable for a penalty equal to twice the total amount of the sales and use tax owed by PNC to the State of Florida.1/
Findings Of Fact The Department is the state agency charged with administering and enforcing the laws related to the imposition and collection of sales and use taxes. PNC is a now-dissolved Florida limited liability company that did business under the name "CHEAP" at 309 South Howard Avenue, Tampa, Florida. PNC was registered as a business and filed its Articles of Organization with the Secretary of State on June 16, 2010. Until the company was dissolved by the Secretary of State in 2018 for failure to pay the 2017 annual filing fees, Mr. Scott served as its managing member and had administrative control over the collection and payment of taxes. Verna Bartlett was PNC's controller. PNC was registered with the Department as a dealer pursuant to section 212.18, Florida Statutes, and was issued Sales and Use Tax Certificate of Registration 39-8015401140-8. A certificate of registration requires the taxpayer to file sales and use tax returns and pay to the Department all taxes owed as they are received. After making numerous attempts to collect delinquent sales tax owed by PNC for tax reporting periods in 2013 and 2014, the Department filed this action seeking to impose a personal penalty assessment against Mr. Scott, the managing member of the company. Section 213.29, Florida Statutes, provides that any person who has administrative control over the collection and payment of taxes and who willfully fails to pay the tax or evades the payment of the tax shall be liable to a penalty equal to twice the amount of tax not paid. The penalty is based only on the taxes owed, and not the interest and fees that have accrued. The statute provides that if the business liability is fully paid, the personal liability assessment will be considered satisfied. On January 18, 2018, the Department issued a NAPL against Mr. Scott after PNC failed to pay the sales and use taxes owed the State for the reporting periods from February 2013 through October 2014. The outstanding taxes, exclusive of interest or penalties, total $79,325.75. The NAPL imposes a total penalty of $158,647.50, or twice the amount of sales tax owed by PNC. No payments have been made on the account since the issuance of the NAPL, and, PNC, now closed, currently has a total liability in excess of $200,000.00. During the relevant time period, Mr. Scott was personally responsible for collecting PNC's sales tax and remitting it to the Department; he had the authority to sign checks on behalf of PNC; he made financial decisions as to which creditors should be paid; he made the decision to use the sales tax collected for the business and for stipulation payments; and he made the decision not to remit the sales tax that was collected. This was confirmed by PNC's controller, Ms. Bartlett, who responded to the Department's Requests for Admissions. Mr. Scott also confirmed to a Department tax specialist that the admissions provided by Ms. Bartlett were accurate. Mr. Scott either never remitted payment or did not remit payment timely on behalf of PNC for the following reporting periods: February, April, and December 2013, and January through October 2014. Tax warrants were issued and judgment liens were recorded for the following reporting periods: February, April, and December 2013, and January, February, and April through October 2014. Resp. Ex. 5 and 6. All warrants and liens relate to reporting periods that fall within the personal liability assessment period. A Notice of Jeopardy Finding and Notice of Final Assessment (Notice of Jeopardy) dated June 18, 2014, was issued to PNC pertaining to the April 2014 reporting period. Resp. Ex. This notice was issued after Mr. Scott ceased making regular tax payments, the estimated deficiency was substantial, and the Department determined that collection of the tax would be jeopardized by further delay. A Notice of Jeopardy and Notice of Final Assessment dated August 7, 2014, also was issued to PNC pertaining to the April, May, and June 2014 reporting periods. Resp. Ex. 12. Because PNC reported more than $20,000.00 in sales tax each year, unless a waiver was obtained, Mr. Scott was required to file and pay PNC's sales tax electronically for all reporting periods within the personal liability period. See § 213.755(1), Fla. Stat.; Fla. Admin. Code R. 12-24.003. Despite having obtained no waiver, Mr. Scott never filed returns or paid PNC's sales tax electronically. And even though he never remitted a payment electronically, Mr. Scott indicated on at least six sales tax returns during the relevant time period that sales tax for the reporting period was remitted electronically. The only conclusion to draw from this action is that Mr. Scott filed or directed the filing of these returns knowing them to be false. The record shows that, dating back to 2011, Mr. Scott has a long-standing history of failing to abide by the tax laws of the state as it relates to PNC. For example, on September 15, 2011, Mr. Scott was referred for criminal investigation by the state attorney for his failure to pay taxes. Also, numerous returns were filed without a payment. This is prima facie evidence of conversion of the money due. § 212.14(3), Fla. Stat. Respondent's Exhibit 1 summarizes numerous contacts by the Department's Tampa District Office with Mr. Scott regarding collection notices, telephone calls, emails, assessment letters, warrant letters, and the like in an effort to secure compliance with tax laws. It is fair to find that Mr. Scott willfully attempted to evade or avoid paying sales and reemployment taxes during the relevant period. To prevent its Sales and Use Tax Certificate of Registration from being revoked, PNC entered into a compliance agreement on July 10, 2013, to pay past due sales tax and reemployment tax totaling $65,789.25. The agreement required PNC to: (a) accurately complete all past due tax returns and reports no later than July 10, 2013; (b) remit all past due payments in accordance with the attached schedule, which required 11 monthly payments of $4,000.00 beginning on August 10, 2013, and a final balloon payment on July 10, 2014; (c) accurately complete and file all required tax returns and reports for the next 12 months; and (d) timely remit all taxes due for the next 12 months. A $15,000.00 down payment also was required to be paid on or before July 10, 2013. An addendum to the agreement (added by Mr. Scott) provided that "[a]ll payments, including the $15,000.00 down payment, shall first be applied to Sales and Use Tax." Although the down payment was made timely, the agreement was breached the first month (August) because Mr. Scott did not make the payment electronically. However, the agreement was not voided by the Department until October 12, 2013. Therefore, any payments made on or after October 12, 2013, were not considered compliance payments and are not subject to the addendum in the agreement. A somewhat confusing aspect of this dispute concerns Mr. Scott's contention, by way of cross-examination, that contrary to the addendum, the Department incorrectly applied his $15,000.00 down payment and subsequent compliance payments to the reemployment tax account, rather than the sales tax account, and that his sales tax liability should be reduced by that amount. As noted above, the addendum governs only the payments that predate October 12, 2013, which are the down payment ($15,000.00) and the August and September payments -- $4,000.00 each month. This issue was not raised by Mr. Scott until the Department issued a NAPL on April 13, 2017. The NAPL issued on April 13, 2017, indicated that the outstanding tax owed by PNC through October 31, 2014, was $90,808.17, and the personal assessment was twice that amount. In response to Mr. Scott's request, the Department acknowledged that it incorrectly applied the down payment to the reemployment account. Also, it took a second look at the two payments made in August and September, which predate the voiding of the agreement. The August installment payment consisted of two separate checks: $3,390.00 for sales tax and $610.00 for reemployment tax, and these amounts were applied in that manner. The September payment, $4,000.00, submitted in one check, was applied in the same manner as the August payment, with $610.00 going to the reemployment tax and the remainder to sales tax. Therefore, only $1,220.00 was incorrectly applied to the reemployment tax during those two months. On July 3, 2017, the Department reapplied a total of $16,551.00 from the reemployment tax account to the sales tax account for the relevant reporting periods. Mr. Scott contends the reapplication of the $16,551.00 to sales tax should reduce the amount of sales tax due by that amount. However, section 213.75(2) dictates that if a lien or warrant has been filed against the taxpayer, as is true here, the payment shall be applied in a priority order spelled out in the statute. Thus, the Department applied that amount in the following order: against the costs to record the liens against PNC; against the administration collection processing fee, if any; against any accrued interest; against any accrued penalty; and against any tax due. Under this priority order, the penalty/interest/fees categories totaled $5,066.58, while the tax liability category totaled $11,484.42. A detailed breakdown of this allocation is found in Respondent's Exhibit 29. Therefore, the total tax liability on the 2017 NAPL ($90,808.17) is reduced by $11,484.42, resulting in a total tax liability of $79,323.75, as shown on the updated 2018 NAPL. In the same vein, in his PRO, Mr. Scott argues that he was not given credit for payments of $9,110.24, $2,688.53, $178.28, and $1,321.80, which reduce his sales tax liability to $66,024.90 and the personal assessment to $132,049.80. See Pet'r Ex. 10. However, all of these payments (some of which are bank levies) were made after the compliance agreement was voided and do not apply to the reporting periods in this case. By way of cross-examination, Mr. Scott also contends that he was never given an accounting of what PNC owes despite "multiple requests" for the same. The record shows otherwise. On April 13, 2017, the 2017 NAPL was mailed to Mr. Scott, along with a ZT09, a computer-generated form which lists, in detail, a taxpayer's outstanding taxes owed by reporting period. A second copy of a ZT09 was faxed to him the following day. In his May 3, 2017, letter protesting the 2017 NAPL, Mr. Scott alleges that payments were not applied properly. In response, the Department sent a fax to Mr. Scott on May 10, 2017, listing checks that were not honored by the bank and requesting information concerning which payments PNC contends were not applied properly. In his response on May 12, 2017, Mr. Scott did not provide the requested information. On January 17, 2018, the 2018 NAPL was mailed to Mr. Scott, along with a ZT09. Finally, on April 12, 2018, per Ms. Bartlett's request, the Department mailed a ZT09 with the outstanding amounts due. Finally, in its PRO, the Department points out that after the hearing ended, it discovered that it made an error, in Mr. Scott's favor, in calculating his sales tax liability for the relevant reporting periods. Had it correctly calculated the amount of payments made by PNC, the sales tax liability for the relevant period would be increased from $79,323.75 to $84,444.35, which in turn would increase the personal assessment. However, the Department consents to the lower tax and assessed penalty amount, as reflected on the 2018 NAPL.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order determining that Petitioner, Christopher B. Scott, is liable to the Department for a penalty of $158,647.50. DONE AND ENTERED this 22nd day of April, 2019, 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 22nd day of April, 2019.
The Issue Whether Respondent committed the violations alleged in the "Administrative Complaint for Revocation of Certificate of Registration" (Administrative Complaint) filed with DOAH on September 13, 2011, and, if so, the action that should be taken.
Findings Of Fact Petitioner is the agency of the State of Florida responsible for administering the revenue laws of the State of Florida, including the imposition and collection of the state's sales and use taxes pursuant to chapter 212, Florida Statutes, and the state's corporate income taxes pursuant to chapter 220. Petitioner provides unemployment compensation tax collection services under contract with the Agency for Workforce Innovation through an interagency agreement pursuant to section 443.1316. Respondent is an active for-profit corporation with its principal address at 4401 Annette Street, West Palm Beach, Florida 33409. Respondent is a "dealer" as that term is defined by section 212.06(2), and holds certificate of registration number 60-8014787127-3. Respondent failed to timely file sale tax returns for the months of February and June 2011. Petitioner assessed Respondent an estimated tax liability of $2,000 for the months of February 2011 and June 2011. Respondent filed returns but failed to timely remit payment for the sale and use tax in the amount of $24,529.84 due and owing for the months of June, September, and December 2008; March, June, September, and December 2009; January through December 2010; and January, April, and May 2011. Due to its failure to timely file and/or remit taxes due, Respondent is liable for interest in the sum of $2,505.56, penalty in the sum of $2,526.36, and fees in the sum of $2,687.47, as of July 1, 2011. Respondent is an employing unit as defined in subsection 443.036(2), and is subject to the unemployment compensation tax provisions of chapter 443, as provided in section 443.1215. Respondent failed to timely file unemployment compensation tax reports for the calendar quarters ending June 30, September 30, and December 31, 2009; March 31, June 30, September 30, and December 31, 2010; and March 31 and June 30, 2011. As a result, Petitioner assessed Respondent an estimated unemployment compensation tax liability of $4,500.00 as of July 1, 2011. Due to its failure to timely file the unemployment compensation tax reports, Respondent is liable for interest thereon in the sum of $490.06, penalty in the sum of $450.00, and fees in the sum of $443.31, as of July 1, 2011. Respondent issued Petitioner worthless checks for the unemployment taxes due for the calendar quarters ending June 30, 2006; December 31, 2008; and March 31, 2009. As a result, Respondent still owes Petitioner unemployment compensation taxes in the sum of $425.34, interest in the sum of $119.09, and fees in the sum of $111.70. Respondent is required to file with Petitioner corporate income tax returns each year pursuant to the provisions of chapter 220. Respondent failed to timely file corporate income tax returns and/or pay the tax due to Petitioner for the tax years 2008, 2009, and 2010. Due to its failure to timely file corporate income tax returns and/or pay the tax due, Respondent is liable for penalties in the sum of $450.00 and fees in the sum $25.00, as of July 1, 2011. Petitioner has issued and filed against Respondent delinquent tax warrants, notices of liens, or judgment lien certificates in the public records for the collection of delinquent sales and use tax, delinquent unemployment compensation tax, and delinquent corporate income tax. Petitioner served upon Respondent a Notice of Conference on Revocation of Registration via mail on May 23, 2011, advising Respondent of a conference to be held June 22, 2011. No one appeared on behalf of Respondent at the conference scheduled on June 22.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order that revokes Respondent's certificate of registration. DONE AND ENTERED this 31st day of January, 2012, in Tallahassee, Leon County, Florida. S CLAUDE B. ARRINGTON 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 31st day of January, 2012. COPIES FURNISHED: Nancy Terrel, Acting General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Post Office Box 6668 Tallahassee, Florida 32314-6668 Lisa Vickers, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100 Joseph Mellichamp, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399 Michael Lawrence Cohen, Esquire Michael L. Cohen Law Offices 1803 South Australian Avenue West Palm Beach, Florida 33409 Carrol Y. Cherry, Esquire Office of the Attorney General Revenue Litagation Bureau The Capitol, Plaza Level 01 Tallahassee, Florida 32399
The Issue The issues are as follows: (a) whether Respondent failed to file surcharge tax reports and to remit surcharge tax in the amount of $55,478.84 for the audit period January 1, 1994, through July 28, 1999; (b) whether Respondent failed to file surcharge tax reports from August 1, 1999, and continuing to the present; (c) whether Respondent failed to pay penalties and interest in the amount of $29,325.62 for the period beginning August 1, 1999, through December 31, 1999; and, if so, (d) whether Petitioner should revoke Respondent's alcoholic beverage license.
Findings Of Fact Petitioner is the state agency charged with enforcing regulations related to alcoholic beverage licenses in Florida. At all times material to this proceeding, Respondent was licensed to sell alcoholic beverages for consumption on the premises of its establishment in Jacksonville, Florida. Respondent held License No. 26-0058. Alcoholic beverage licensees may elect one of two ways to calculate and pay the required surcharge tax on alcoholic beverages for consumption on the premises. First, the licensee may calculate, report, and pay the tax using the "sales method" based on retail sales records. Second, the licensee may calculate, report, and pay the tax using the "purchase method" based on wholesale records such as invoices from wholesale distributors. In this case, Respondent elected to calculate, report, and pay its surcharge tax using the "purchase method." Licensees who are authorized to sell alcoholic beverages for consumption on the premises are required to submit surcharge tax reports and to pay the tax for each month by the 15th day of the following month. Respondent submitted reports and paid the tax for the months of January and February 1999. The next time that Respondent submitted a report and paid the tax was for the month of November 1999. For a licensee who uses the "purchase method," Petitioner conducts an audit by comparing the licensee's sales history and payment history. The sales history is based on invoices for the purchase of alcoholic beverages from wholesale distributors who report their sales to each licensee every month. The payment history is based on the monthly surcharge tax reports filed by the licensee. Petitioner conducted a surcharge tax audit of Respondent's business for the period beginning January 1, 1994, and ending July 28, 1999. The audit began on August 1, 1999, and ended on August 17, 1999. The audit established that Respondent owed $31,809.72 in surcharge tax, penalties, and interest for the audit period. The Final Surcharge Audit Report established that Respondent would owe $55,478.84 in surcharge tax, penalties, and interest if Respondent did not pay the former amount within 30 days. Respondent did not make the required payment. Petitioner conducted a periodic surcharge tax audit for the period beginning on August 1, 1999, and ending on December 31, 2001. The audit was conducted on April 30, 2002, and ended on June 4, 2002. The second audit established that Respondent owed an additional statutory tax, penalties, and interest in the amount of $29,325.62. Respondent's corporate representative testified that Respondent stopped filing the surcharge tax reports after the initial audit because there was a discrepancy between Respondent's records (invoices for alcoholic beverages purchased and delivered) and the records that Petitioner relied upon to conduct the audit (wholesale distributors' invoices for alcoholic beverages sold to Respondent). Respondent did not present any documentation to support this testimony, which is not credited. Additionally, there is no competent evidence that Respondent's auditor advised Respondent to stop filing the reports until the discrepancy was resolved. Respondent's corporate representative also testified that Respondent gave away some alcoholic beverages to customers. According to the corporate representative, this occurred when Respondent charged the customers one fee at the door and allowed them to drink free of charge. Respondent did not present any documentation to support this testimony, which is not credited. Finally, the corporate representative agreed that Respondent owed the assessed surcharge tax. However, he objected to paying the statutorily assessed penalties and interest because they were more than Respondent would have owed if it had paid the tax when it was due. Respondent's argument in this regard is without merit.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Petitioner enter a final order finding that Respondent owes $84,804.46 in tax, interest, and penalties and revoking its license to sell alcoholic beverages for consumption on the premises. DONE AND ENTERED this 20th day of November, 2002, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 20th day of November, 2002. COPIES FURNISHED: Sherrie Barnes, Esquire Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202 Captain Cynthia C. Britt Division of Alcoholic Beverages and Tobacco Department of Business and Professional Regulation 7960 Arlington Expressway Suite 600 Jacksonville, Florida 32211 Charles E. Scantling Corporate Representative Wackos, Inc., d/b/a Wackos 3484 Charmont Drive Jacksonville, Florida 32277 Peter Williams, Director Division of Alcoholic Beverages and Tobacco Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Hardy L. Roberts, III, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202
Findings Of Fact In the original corporate income tax report submitted by Florida Power Corporation for the 1973 tax year the tax was computed using the federal income tax base. This included various depreciation methods and schedules in which accelerated depreciation had been claimed for federal tax purposes by Petitioner in years prior to 1972 and the initiation of the Florida Corporate Income Tax Law. By using accelerated depreciation schedules authorized by the federal tax laws, higher depreciation is allowed in the early years of an asset's useful life, leaving a lesser amount of depreciation to be charged off for tax purposes in the latter years of an asset's life. Essentially, Petitioner here contends that depreciable assets acquired prior to the effective date of the Florida Corporate Income Tax law were depreciated on accelerated schedules for federal tax purposes, but upon the effective date of the Florida Corporate Income Tax Law had value in excess of that shown on the federal tax schedule. By requiring taxpayers to use the same depreciation schedules for Florida taxes that are required for federal taxes Petitioner contends it is being penalized for the accelerated depreciation taken before the Florida income tax became constitutional. As an example of Petitioner's position it may be assumed that a depreciable asset was acquired for $100,000 with a useful life of 10 years, three years before the Florida Income Tax Law was passed. Also assume that during this three-year period from acquisition a double declining balance depreciation was taken for computing federal income taxes. Depreciation taken for the first year would be $20,000, for the second year $16,000 and for the third year $12,800, leaving a basis for further depreciation of $41,200 for this asset with seven years useful life remaining. For federal tax purposes Petitioner takes depreciation each year based upon initial cost less accumulated depreciation. Because this value decreased rapidly for the first three years in the assumed example and the excess depreciation thereby generated was not usable in reducing Florida taxes, Petitioner contends it is discriminated against in being required to, in effect, use the book value for federal tax purposes in computing its Florida income tax. Petitioner presented additional examples of reported income for federal income tax purposes which it claims should be exempt from Florida Income Tax. The specific deductions from which the $619,697 refund was computed were not broken down to show how much resulted from the accelerated depreciation schedules which commences prior to January 1, 1972, and how much was derived from these additional examples, some of which were given simply as an example of deferring income for tax purposes. Prior to January 1, 1972, Petitioner purchased some of its bonds prior to maturity and at a discount. As an example if Petitioner purchases $1,000,000 face value of these bonds for $800,000, it has realized a $200,000 gain which it must report as income for federal income tax purposes. These same federal tax rules allow Petitioner to elect to pay the income tax in the year received or spread it equally over the succeeding ten year period. Petitioner elected to spread the income over the succeeding ten year period and each year add $20,000 to its reported income for federal income tax purposes. Since the income was realized before January 1, 1972, Petitioner contends this is not subject to federal tax purposes. With respect to overhead during construction of depreciable assets the taxpayer is allowed to charge these costs off as an expense in the year incurred or capitalize these expenses. If the taxpayer elects to capitalize these expenses they are added to the cost of the constructed asset and recovered as depreciation as the asset is used. Petitioner elected to charge these expenses in the year incurred rather than capitalize them. Had they been capitalized originally, Petitioner would, in 1973, have been entitled to recover these costs in its depreciation of the asset. In its amended return it seeks to treat these costs as if they had been capitalized rather than expenses prior to January 1, 1972. Although apparently not involved in the amended return, Petitioner also presented an example where changes in accounting procedures can result in a gain to the taxpayer which is treated as income to the taxpayer, which he may elect to spread over future years in equal increments until the total gain has been reported.
The Issue The issues in this case are whether Respondent, Customs Logistics Services, Inc., failed to secure the payment of workers' compensation coverage for its employees in violation of chapter 440, Florida Statutes, and if so, the penalty that should be imposed.
Findings Of Fact The Parties Petitioner is the state agency charged with enforcing the requirement in chapter 440 that employers in Florida secure workers' compensation coverage for their employees. At all times relevant to this proceeding, Respondent was a corporation registered to do business in Florida. Respondent is a family-owned-and-operated customs brokerage service with its principal office located at 6940 Northwest 12th Street, Miami, Florida 33126. At the time of the inspection giving rise to this proceeding, Respondent employed seven or eight employees.2/ The Compliance Inspection On September 29, 2014, Petitioner's compliance inspector, Hector Fluriach, conducted an onsite inspection at Respondent's principal office to determine whether Respondent was in compliance with the workers' compensation coverage requirements established in chapter 440. At that time, Respondent's co-owners, Astrid Escalona and Carlos Henoa, told Fluriach that Respondent employed six employees and two corporate officers, and also paid two family members who did not work at the principal office. Upon inquiry, Escalona and Henoa informed Fluriach that Respondent did not have workers' compensation insurance coverage for its employees. Using Petitioner's Coverage and Compliance Automated System ("CCAS") and the National Council for Compensation Insurance ("NCCI") insurance coverage verification system, Fluriach confirmed that Respondent had not obtained workers' compensation insurance coverage for its employees, and that it was not in compliance with chapter 440 during certain periods within the two years preceding the inspection. Under the NCCI basic occupational classification system and Scopes Manual, six of Respondent's employees are classified as clerical (Code 8810), and one is classified as a driver (Code 7380). None of Respondent's employees is classified as employed within the construction industry. As a private entity employing four or more employees in a non-construction industry occupation, Respondent was required under chapter 440 to provide workers' compensation coverage for its employees. Respondent's corporate officers were eligible under section 440.05 to elect to be exempt from the workers' compensation coverage requirements of chapter 440; however, none had elected to be exempt. Fluriach issued Stop-Work Order No. 14-329-D5 ("Stop- Work Order"), personally served it on Respondent, and explained it to Escalona. The Stop-Work Order included an Order of Penalty Assessment, ordering assessment of a penalty against Respondent in an amount equal to two times the amount Respondent would have paid in workers' compensation coverage premiums when applying the approved manual rates to Respondent's payroll during the periods for which it had failed to secure workers' compensation coverage during the preceding two years (for convenience, hereafter referred to as the "look-back period"). Fluriach also served a business records request, requesting Respondent to provide specified business records3/ for Petitioner's use in determining the penalty. In a series of submittals, Respondent provided the requested business records to Petitioner. The evidence showed that during the two-year look- back period, Respondent did not have workers' compensation coverage for its employees during a substantial portion of the period in which it employed four or more employees, and none of its corporate officers were exempt from the workers' compensation coverage requirement. As such, Respondent violated chapter 440 and, therefore, is subject to penalty under that statute. Petitioner's Computation of Penalty Amount To calculate the applicable penalty, Petitioner must determine, from a review of the employer's business records, the employer's gross payroll for the two-year look-back period. For days during the look-back period for which records are not provided, Petitioner imputes the gross payroll based on the average weekly wage for the state of Florida. Here, the look-back period for purposes of calculating the applicable penalty commenced on September 30, 2012, and ended on September 29, 2014, the day on which the compliance inspection was conducted. Respondent's business records revealed that Respondent had fewer than four employees between January 1 and March 31, 2013, so Respondent was not required to have workers' compensation coverage for that period. Thus, Petitioner did not assess a penalty against Respondent for that period. For the rest of the look-back period, Respondent employed four or more employees, so was required to obtain workers' compensation coverage for those employees for that portion of the period. Respondent provided business records sufficient for Petitioner to determine Respondent's gross payroll for all but September 30, 2012. For that day, Petitioner imputed Respondent's gross payroll using Florida's statewide average weekly wage. On the basis of Respondent's business records submittals, Petitioner's auditor, Eric Ruzzo, recalculated the penalty to be assessed against Respondent. Petitioner issued an Amended Order of Penalty Assessment on October 17, 2014, imposing a total penalty of $5,617.04. On November 7, 2014, following receipt of additional records, Petitioner issued a Second Amended Order of Penalty Assessment, reducing the penalty to $3,982.52. Finally, after receiving more records, Petitioner issued a Third Amended Order of Penalty Assessment on January 12, 2015, further reducing the penalty to $3,205.70. Each of these penalty assessments was served on Respondent. Petitioner seeks to impose a $3,205.70 penalty against Respondent in this proceeding. In calculating the penalty, Ruzzo examined three-month (i.e., quarterly) periods within the two-year look-back period. Ruzzo identified the occupational class code applicable to each of Respondent's employees. As stated above, all but one of Respondent's employees were classified as clerical, and one of Respondent's employees was classified as a driver. For each employee, Ruzzo determined the gross payroll paid to that employee for the specific quarter in which Respondent was non-compliant during the look-back period, divided the employee's gross payroll by 100 pursuant to Petitioner's calculation methodology, then multiplied that amount by the numeric rate set by NCCI for that employee's specific occupational class code. This calculation yielded the workers' compensation coverage premium for that specific employee for the specific quarter for which Respondent was non- compliant during the look-back period. The premium amount then was multiplied by two, as required by statute, to yield the penalty to be imposed for failure to provide workers' compensation coverage for that specific employee. As previously noted, Respondent did not provide gross payroll records covering September 30, 2012; thus, for that day, Ruzzo imputed the gross payroll for each of Respondent's employees using the statewide average weekly wage as defined in section 440.12(2)4/ multiplied by two. Ruzzo then performed the same computations to yield the penalty amount to be imposed for Respondent's failure to provide workers' compensation on September 30, 2012. Ruzzo then added each penalty amount determined for each employee using actual gross payroll and imputed payroll, to yield the total penalty amount of $5,286.70. Because Respondent had not previously been issued a stop-work order, pursuant to section 440.107(7)(d)1., Petitioner applied a credit toward the penalty in the amount of the initial premium Respondent paid for workers' compensation coverage. Here, the premium payment amount for which Respondent received credit was $2,081.00. This was subtracted from the calculated penalty of $5,286.70, yielding a total penalty of $3,205.70. Respondent's Defense At the final hearing, Escalona testified that she and the other co-owners of Respondent always have attempted to fully comply with every law applicable to Respondent's business, and have never had compliance problems. She testified that neither she nor the other co-owners of Respondent realized that Respondent was required to have workers' compensation coverage for its employees, and they did not intentionally violate the law. Petitioner apparently mailed a memorandum regarding verifying workers' compensation coverage requirements to businesses in the area before it conducted compliance inspections. The memorandum was dated October 8, 2014, and Escalona testified Respondent received it on October 13, 2014, approximately two weeks after the compliance inspection that Fluriach conducted. Escalona asserted that had Respondent received the memorandum before the compliance inspection was conducted, she would have called Petitioner to determine if Respondent needed to obtain workers' compensation coverage, would have asked how to obtain it, and would have obtained coverage for its employees and exemptions for its corporate officers. Escalona testified that the $3,205.70 penalty is a substantial amount that Respondent, a small family-owned business, cannot afford to pay. Findings of Ultimate Fact Petitioner has shown, by clear and convincing evidence, that Respondent violated chapter 440, as charged in the Stop-Work Order, by failing to secure workers' compensation coverage for its employees. Petitioner has shown, by clear and convincing evidence, that the $3,205.70 penalty proposed to be assessed against Respondent pursuant to the Third Amended Penalty Assessment is the correct amount of the penalty to be assessed in this proceeding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: The Department of Financial Services, Division of Workers' Compensation, enter a final order determining that Respondent, Customs Logistics Services, Inc., violated the requirement in chapter 440 to secure workers' compensation coverage and imposing a total penalty of $3,205.70. DONE AND ENTERED this 11th day of August, 2015, 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 11th day of August, 2015.
The Issue The issues are whether Respondent appropriately issued a "Stop Work" Order; whether certain employees were exempt from workers' compensation coverage; whether Respondent correctly calculated the assessed penalty; and whether Petitioner was given three days to produce certain records.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following facts were established by clear and convincing evidence: Respondent is the state agency responsible for enforcing the statutory requirement that employers secure the payment of workers' compensation for the benefit of their employees. Petitioner, Liberty Towing and Recovery, Inc., a Florida corporation, was engaged in business operations from September 7, 2004, through September 7, 2007. A Stop Work Order was issued to Petitioner on September 7, 2007, and an Amended Order of Penalty Assessment (with a penalty worksheet) was served on Respondent on September 10, 2007. In September 2007, Hector Beauchamp received information that Petitioner was possibly in violation of the coverage requirements of Chapter 440, Florida Statutes. Mr. Beauchamp researched the matter by reviewing Petitioner's Unemployment Compensation Tax records on the Florida Department of Revenue website; its corporate filings on the Florida Department of State, Division of Corporations', database; and his own agency's database known as the Coverage and Compliance Automated System, or the acronym, "CCAS." From the aforementioned records, he determined that Petitioner had at least four employees from September 2004, through September 2007, that Farrell Samuels and Warren Samuels were listed as Petitioner's corporate officers, that Petitioner did not have workers' compensation insurance coverage, and that no one in the company had workers' compensation coverage exemption. On September 7, 2007, Mr. Beauchamp visited Petitioner's place of business in DeBary, Florida. There he spoke with Warren Samuels, who identified himself as Petitioner's vice president. Mr. Beauchamp verified that neither Warren Samuels nor Farrell Samuels, the corporate president, had a valid workers' compensation exemption from September 7, 2004, through September 7, 2007; that no other employee of Petitioner had a workers' compensation exemption while employed from September 7, 2004, through September 7, 2007; and that Petitioner did not have workers' compensation insurance coverage for its employees during that time. Before leaving Petitioner's office on that day, Mr. Beauchamp served upon Mr. Samuels a Stop Work Order, which directed Petitioner to cease all business operations. Mr. Beauchamp also served a Request for Production of Business Records on Mr. Samuels, requiring the production within five business days. The request for business records asked for, among other things, payroll documents and certificates of exemption from workers' compensation coverage. In response to the request, Petitioner provided certain business records consisting of, among other things, Federal Income Tax Returns for 2004, 2005, and 2006; employee W-2 forms for 2005; a list of wages paid for seven employees for the final quarter of 2005; a spreadsheet purporting to show wages paid to nine employees in 2006; and a payroll report showing wages paid to four employees in 2007. After reviewing these records on September 10, 2007, Mr. Beauchamp determined them to be less complete than the quarterly wage reports he had retrieved from the Unemployment Compensation Tax database. He used the Unemployment Compensation Tax figures to calculate a penalty, using Respondent's Penalty Calculation Worksheet (Penalty Worksheet) and arrived at a total penalty of $66,762.01. He served an Amended Order of Penalty Assessment for that amount personally upon Mr. Warren Samuels at 2:53 p.m., on September 10, 2007. (The initial penalty assessment was served with the Stop Work Order and references a penalty "in an amount equal to 1.5 times," the cost of appropriate insurance.) In accordance with standard procedure, as dictated by appropriate Florida Statutes, Mr. Beauchamp first calculated the payroll for each employee for the last three months of 2004, all of 2005, all of 2006, and the first nine months of 2007. The payroll for each employee for each year was then divided by 100 and multiplied by an "approved manual rate." The product of 1/100th of the payroll and the approved manual rate provided the amount that would have been paid in premiums for that employee for that year, i.e., the evaded (unpaid) premium. The evaded premium is then multiplied by the statutorily-mandated penalty multiplier of 1.5 to determine the penalty for each employee for each period of non-compliance. All these calculations were reflected in Respondent's Penalty Worksheet that was delivered to Petitioner. Remuneration was paid to Farrell Samuels in 2007, and remuneration was paid to Warren Samuels in 2004, 2005, 2006 and 2007. Payment to these corporate officers was included in the penalty calculation. The Unemployment Compensation Tax records revealed that for each quarter between September 7, 2004, and September 7, 2007, Petitioner had at least four employees. Petitioner provided no workers' compensation coverage at any time during September 7, 2004, through September 7, 2007. Respondent correctly identified the classification code for each of Petitioner's employees it listed in its Penalty Worksheet. The approved manual rates listed on the Penalty Worksheet of the Amended Order of Penalty Assessment were correct for the years in question. The payroll amounts listed on the Penalty Worksheet of the Amended Order of Penalty Assessment were correct for the relevant periods. There was no computation error on the Penalty Worksheet attached to the Amended Order of Penalty Assessment. The records Petitioner provided were incomplete, but those records confirmed that Petitioner had at least four employees during the relevant time.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law it is RECOMMENDED that Respondent, Department of Financial Services, Division of Workers' Compensation, enter a final order: Finding that Petitioner, Liberty Towing and Recovery Services, Inc., failed to secure the payment of workers' compensation for its employees, in violation of Subsections 440.10(1)(a) and 440.38(1), Florida Statutes; and Assessing a penalty against Petitioner in the amount of $66,762.01, which is equal to 1.5 times the evaded premium based on the Unemployment Compensation Tax records and the applicable approved manual rate and classification code. DONE AND ENTERED this 16th day of May, 2008, in Tallahassee, Leon County, Florida. S JEFF B. CLARK 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 16th day of May, 2008. COPIES FURNISHED: Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300 Daniel Sumner, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Thomas H. Duffy, Esquire Department of Financial Services 200 East Gaines Street, Sixth Floor Tallahassee, Florida 32399-4229 John Douglas Daw, Esquire 2250 Lucien Way, Suite 100 Maitland, Florida 32751
Findings Of Fact State of Florida, Department of Labor and Employment Security, Unemployment Appeals Commission ("Commission") is an agency affected by the petition in this matter. It exists within the Department of Labor and Employment Security ("Department"), and receives its property, personnel, and appropriations from the Department. The Commission and the Department are agencies as defined in Section 120.52(1), Florida Statutes. Petitioner, Juan Alfonso, Social Security Number 034-44-0611, resides at 20082 N.W. 43 Court, Carol City, Dade County, Florida. Petitioner is a party in proceedings before the Commission to obtain unemployment compensation benefits. His case was Referee Decision Docket No. 80-901OU, and is now on appeal by Petitioner to the Unemployment Appeals Commission, UCA Docket No. 80-2199. Petitioner was denied unemployment compensation benefits by a claims examiner of the Department, who issued two claims determinations on or about May 1, 1980. The Claims Examiner is not employed by the Commission, but by the Department. Exhibits B and C attached hereto are true and correct copies of the determinations issued by the claims examiner on or about May 1, 1980. Petitioner timely appealed both decisions of the Claims Examiner. A hearing was noticed on Petitioner's appeal. Notice of the hearing was given pursuant to Form UCA-2 and Rule 38E- 5.15(2), Florida Administrative Code. Rule 38E-5.15(2), Florida Administrative Code, a rule of the Commission. Form UCA-2 is issued by the Department. Exhibit A, consisting of two pages, attached hereto, is a true and correct copy of the front and back of the notice of hearing given Petitioner in the hearing regarding his appeal from the Claims Examiner's determination. Petitioner was given no other written notice of hearing. Hearing was held before an appeals referee, an employee of the Department, on June 11, 1980, pursuant to the notice attached as Exhibit A. Petitioner appeared at the hearing on June 11, 1980, without counsel. Petitioner has standing to bring this Rule Challenge. Exhibit D attached hereto, consisting of four pages, is a true and correct copy of the Referee's decision issued as a result of the hearing held on June 11, 1980, in Docket No. 80-9010U. Petitioner timely appealed that decision to the Commission. Petitioner's appeal is currently pending before the Commission in UCA Docket No. 80-2199. Petitioner's case has not yet been decided by the Commission. Petitioner is not receiving unemployment compensation benefits at this time, due to the adverse decision of the appeals referee resulting from the June 11 hearing. When a claimant such as Petitioner files a claim with the Department for unemployment compensation benefits, he completes Claim for Benefits LES form UCA-3, which requests the name of the last employer and the reason for separation. Upon completion of the form, his last employer is furnished LES form UCA-4, which contains the reasons for the separation contained on LES form UCA- The employer is requested by the Department to provide information regarding the reason for his job separation, whether the claimant has refused an offer of work, and whether the employer would re-employ the claimant. Upon receipt of the employer's response, a fact finding interview is conducted by a claims interviewer employed by the Department, who inquires into the subject of the termination, offers of work, and work search. The interviewer verbally advises the claimant of the employer's statement. The claimant provides his response. A summary of the interview is recorded on LES form UCA-64. During or after the interview, the claims interviewer contacts the employer by telephone and advises the employer verbally of the claimant's statements made on the fact finding report. The employer provides his statement to the interviewer. A summary of the telephone interview is recorded on the Fact Finding Report. If the employer raises a new matter not raised in his initial response, the claimant is verbally advised of such matters. The claimant provides a statement in response. A summary of the claimant's response is recorded on a Fact Finding Report. A claims determination is then rendered. If the determination is favorable to the claimant, the employer may appeal. If the determination is adverse to the claimant, the claimant may appeal. Notice of hearing of the appeal is given pursuant to Rule 38E-5.15(2). If the party resides in Florida, the notice of hearing is provided on form UCA- 2. The majority of unemployment compensation claimants' are not represented by counsel at any stage of the proceedings; however, Respondent does not concede that whether a claimant is represented by counsel is relevant to the subject matter of the rule challenge hearing. A claimant who has been determined by a claims examiner to have voluntarily quit his job without good attributable to the employer can be found by an appeals referee to have been discharged for misconduct connected with work. A claimant who has been determined by a claims examiner to have been discharged can be found by an appeals referee to have voluntarily quit his job without good cause attributable to the employer. Respondent does not concede that LES Form UCA-2 is a rule. LES Form UCA-2 has not been adopted pursuant to Chapter 120, Florida Statutes. In adopting Rule 38E-5.15(2), the Commission did not seek modification of the model rules as described in Section 120.54(10), Florida Statutes. SUPPLEMENTAL STIPULATION The parties stipulate as follows regarding the hearing held before the appeals referee on June 11, 1980, in Referee Docket No. 80-9010U, regarding Petitioner's claim for unemployment compensation benefits: Several times during the hearing, the petitioner asked for clarification of which job was being referred to. Petitioner stated that he did not understand the paper from the unemployment office. Petitioner stated that he did not understand what job he was supposed to have quit, or what location he was supposed to be dissatisfied with. Petitioner had difficulty answering questions about tardiness, stating he could not remember. The employer raised the issue of misconduct for the first time at the hearing.
Findings Of Fact The parties stipulated to findings of fact set forth in paragraphs 1-5, below. Zurich is an insurer domiciled in the State of New York. Zurich is authorized to do insurance business in the State of Florida. Zurich pays insurance premium taxes to the State of Florida. As a foreign insurer doing business in Florida, Zurich is subject to the provisions of Florida's retaliatory tax, Section 624.5091, Florida Statutes. Respondent Department of Revenue (Revenue) is the state agency charged with the duty to implement and enforce Section 624.5091, Florida Statutes. Zurich's interests are substantially affected by Revenue's Rule 12B- 8.016(3)(a)(4), Florida Administrative Code, by virtue of the tax assessment made against Zurich pursuant to the rule. OTHER FACTS Prior to 1989, the Department of Insurance administered insurance taxation. Now, Revenue has that responsibility. Section 213.05, Florida Statutes, directs Revenue to administer provisions of Sections 624.509 through 624.514, Florida Statutes. Section 213.06(1), Florida Statutes, authorizes Revenue to promulgate rules to implement those responsibilities. Rule 12B-8.016 was first promulgated by Revenue in December of 1989 to implement statutory authority of Section 624.429 (currently renumbered as 624.5091). This statute authorized retaliatory taxation against non-domiciled insurers in the amount by which their state of domicile would tax Florida insurers in excess of Florida's comparable tax. The statute provides in pertinent part: When by or pursuant to the laws of any other state or foreign country any taxes, licenses, and other fees, in the aggregate, and any fines, penalties, deposit requirements, or other material obligations, prohibitions, or restrictions are or would be imposed upon Florida insurers or upon the agents or representatives of such insurers, which are in excess of such taxes, licenses, and other fees, in the aggregate, or other obligations, prohibitions, or restrictions directly imposed upon similar insurers, or upon the agents or representatives of such insurers, of such other state or country under the statutes of this state, so long as such laws of such other state or country continue in force or are so applied, the same taxes, licenses, and other fees, in the aggregate, or fines, penalties, deposit requirements, or other material obligations, prohibitions, or restrictions of whatever kind shall be imposed by the department upon the insurers, or upon the agents or representatives of such insurers, of such other state or country doing business or seeking to do business in this state. As it existed in 1989 and currently, the statute contains an exclusionary provision expressly excluding from the retaliatory tax any special purpose assessments in connection with insurance other than property insurance. This exclusionary provision is part of Subsection 3 of the current statute, 624.5091, and reads as follows: (3)This section does not apply as to personal income taxes, nor as to sales or use taxes, nor as to ad valorem taxes on real or personal property, nor as to reimbursement premiums paid to the Florida Hurricane Catastrophe Fund, nor as to emergency assessments paid to the Florida Hurricane Catastrophe Fund, nor as to special purpose obligations or assessments imposed in connection with particular kinds of insurance other than property insurance, except that deductions, from premium taxes or other taxes otherwise payable, allowed on account of real estate or personal property taxes paid shall be taken into consideration by the department in determining the propriety and extent of retaliatory action under this section. The parties concede that Revenue's Rule 12B-8.016 accurately tracts the first part of the retaliatory taxation statute. But a subpart of the Rule, 12B- 8.016(3)(a)(4), is challenged by Zurich in this proceeding because that subpart provides for inclusion of the assessment for administration of workers compensation in Florida and comparable assessments in other states. The rule subpart states: (3)(a) Other items which shall be included in the retaliatory calculations are: * * * 4. The workers compensation administrative assessment imposed by s. 440.51, F.S., as well as comparable assessments in other states. The State of Florida imposes assessment on workers compensation carriers such as Zurich in accordance with authority contained in Section 440.51, Florida Statutes, which is entitled "Expenses of Administration." Section 440.51 provides for the pro-rata assessment of all insurers and self- insurers of workers compensation to cover expenses of administering the workers compensation program. The assessment is a "special fund" that does not involve appropriated funds or general state revenues. Zurich's home state of New York imposes a comparable assessment. In accordance with Rule 12B-8.016(3)(a)(4), Florida Administrative Code, Revenue includes calculations for the Worker's Compensation Board Administrative Fund in the state of New York in Zurich's retaliatory tax calculation. In drafting the rule in 1989, Revenue relied upon Attorney General Opinion 057-173, which advised that Florida's Worker's Compensation Administrative Assessment should be considered a "tax" for purposes of retaliatory tax calculation. On this basis, Revenue's rule requires that such assessments be considered as "taxes" and included in the retaliatory tax calculation. However, following the issuance of Attorney General Opinion 057-173, the Florida legislature in 1959 enacted the present Subsection 624.5091(3), Florida Statutes, specifically excluding the consideration of "special purpose obligations or assessments imposed in connection with particular kinds of insurance other than property insurance" in retaliatory tax calculations. Following the 1959 enactment of the exclusionary language contained in Subsection 624.5091(3), Florida Statutes, the Department of Insurance did not include comparable worker compensation assessments of other states. The Department of Insurance administered insurance taxation until 1989. Department of Insurance forms introduced into evidence for 1986 showed that the Florida assessment, pursuant to Section 440.51 Florida Statutes, was treated as a deduction against Florida's premium tax and added back in on the Florida side of the retaliatory tax calculation. But the assessment was not included in a manner to inflate the calculation of the domiciliary state's comparative tax base. When Revenue assumed administration of insurance taxation in 1989, a proposed rule and an emergency rule were promulgated. Neither provided for inclusion of foreign states' special purpose administrative assessments in retaliatory tax calculation. In the course of the promulgation process, the determination to treat the worker compensation administrative assessment as a tax became a part of the rule. The purpose of Florida's retaliatory statute is to influence other states' legislative discretion to lower the tax burden on Florida insurers doing business in those other states. The items to be compared for retaliatory purposes are determined by the legislature and not by Revenue, Revenue auditors, or other states.
