The Issue The issue is whether the Stop Work Order issued on July 27, 2007, and the Amended Order of Penalty Assessment were lawful.
Findings Of Fact The Division is a component of the Department of Financial Services. The Department is charged with the administration of portions of the "Workers' Compensation Law." Versa-Tile is a corporation headquartered in Mary Esther, Florida. Versa-Tile is engaged in flooring, which is a construction activity. Michelle Newcomer is an Insurance Analyst II with the working title of Workers' Compensation Compliance Investigator. She maintains an office in Pensacola, Florida. It is her job to travel to work sites and to verify compliance with the Workers' Compensation Law. She is authorized by the Division to issue an SWO and to calculate and assess penalties. On July 24, 2007, Ms. Newcomer was conducting compliance investigations at random sites in the Alys Beach area of Walton County, Florida. While doing so she noticed three individuals in the garage at the rear of a house at 23 Whitby. They were removing tools from a toolbox and "working." Ms. Newcomer identified the men as Adrian Womack and Kent Degallerie. The third man on the site was named "Barker." Barker asserted that he was not doing any work, but was there just to give the men a ride. He was deemed not involved in the work being accomplished at the site. Ms. Newcomer interviewed Adrian Womack and Kent Degallerie. They both told her that they were exempt officers of Versa-Tile. It is found as a fact that the 2006 For Profit Corporate Annual Report of Versa-Tile signed on April 26, 2006, and filed with the Department of State on May 1, 2006, listed Adrian Womack and Kent Degallerie as corporate officers of Versa-Tile. They were not corporate officers of Versa-Tile prior to April 26, 2006. Adrian Womack worked for Versa-Tile from July 29, 2005, until April 25, 2006, as an employee. He was not an officer and was not, and could not be, exempt. Kent Degallerie worked for Versa-Tile from May 6, 2005, until April 25, 2006, as an employee. He was not an officer and was not, and could not be, exempt. Nicholas Womack, who was not present at the Alys Beach site, is listed therein as president of Versa-Tile and has been exempt during all times pertinent. As corporate officers, Adrian Womack and Kent Degallerie could be exempt from the usual requirement that workers be covered by workers' compensation insurance even though they were also employees of Versa-Tile who were paid wages. Ms. Newcomer obtained their full names and social security numbers so that she could verify their claimed exemption. She determined from the Department's Coverage and Compliance Automated System that there were no records of exemption being obtained for them. Ms. Newcomer confirmed with an examiner in the Pensacola office that Adrian Womack and Kent Degallerie were not on the list of exempt persons. She issued a Request for Production of Business Records dated July 24, 2007. She personally served these documents on Adrian Womack and Kent Degallerie. She issued an SWO, dated July 27, 2007, and personally served it on Nicholas Womack. If a person is a ten percent owner of a corporation or limited liability company they are entitled to obtain an exemption from the Department. An exemption is obtained by completing the "Notice of Election to be Exempt" form. This form when properly completed and accompanied by certain required documents, a $50 application fee, and submitted to the Division, will cause the Division to grant an exemption. If the Department determines that a person is exempt upon receiving a properly submitted form and payment, the Department will issue a card reflecting exemption. Neither Adrian Womack nor Kent Degallerie had such a card on July 24, 2007. During all times pertinent, the Department had no record indicating it had received any payment from Nicholas Womack, Adrian Womack, or Kent Degallerie that would have been tendered on behalf of Adrian Womack or Kent Degallerie. On July 27, 2007, Ms. Newcomer met with Nicholas Womack, president of Versa-Tile in her office in Pensacola and personally served him a Request for Production of Business Records. Later, Nicholas Womack provided employment records to Ms. Newcomer. On July 30, 2007, the Department and Versa-Tile entered into an agreement that permitted Versa-Tile to go back to work. Using workers' compensation class code 5348 for employees Adrian Womack and Kent Degallerie, Ms. Newcomer correctly calculated the premium that should have been paid, if they were mere employees, as $8,455.56, and multiplied that figure by the statutory penalty of 1.5. She correctly determined the total to be $12,683.35. The parties stipulated that to the extent the figure applies, it is correct. Nicholas Womack at all times pertinent had an exemption. Adrian Womack and Kent Degallerie were granted exemptions by the Department on July 30, 2007. These were the first exemptions from workers' compensation coverage that they had ever received while in a business relationship with Versa- Tile. The Division receives from 90,000 to 96,000 construction exemption applications yearly. They also receive between 30,000 to 35,000 non-construction exemption applications annually. The applications may be provided by applicants to the Department by hand-delivery at a field office or to the Department headquarters in Tallahassee, or by mail to a field office or to the Department headquarters in Tallahassee. Errors may occur in this process because of mistakes or omissions in the applications filed by the applicant or because of data entry errors by personnel in the Department. However, the process is sufficiently simple and automated that usually, when a complete application is filed, the exemption issues, and the applicant is, thereafter, provided a card reflecting the exemption via mail. There are ten field offices in the state to which applicants may file applications for exemptions. The field office in Panama City, Florida, at least the portion that accepted exemption applications, closed in 2005. However, the forms still listed Panama City as an address to which one might mail an application for exemption. The president of Versa-Tile, Nicholas Womack, has filed for and obtained three exemptions since he created Versa- Tile. Prior to incorporating Versa-Tile, he owned another business by the name of Nicholas Womack Flooring, Inc. He previously had two officers, Michael Smith and Mitchell Smedley, working with him at Versa-Tile, but he removed them as corporate officers so that Adrian Womack and Kent Degallerie could be corporate officers. Mr. Smith's exemption was revoked April 27, 2006, by the filing of a Notice of Revocation of Election to be Exempt with the Department. This roughly coincided with the naming of Adrian Womack and Kent Degallerie as corporate officers. Department of State corporate records, as of May 1, 2006, reflected that Versa-Tile had three officers: Nicholas Womack, Adrian Womack, and Kent Degallerie. In order to obtain a certificate of exemption, Nicholas Womack filed the appropriate form with the Department, along with proof that he held a contractor's license, stock certificates, and $50.00. He followed this process on three occasions while president of Versa-Tile. The evidence of record reveals exemptions granted to Nicholas Womack on January 25, 2005, and May 18, 2006, while president of Versa-Tile. He claims not to ever have received a certificate evidencing exemption from the Department while president of Versa-Tile. Nicholas Womack testified that on only one of the occasions, when he was operating Nicholas Womack Flooring, Inc., did the Department mail him a card reflecting his exemption and stated that occurred in 2001 or 2002. Nicholas Womack understands that by not obtaining coverage under workers' compensation insurance he and the other two corporate officers of Versa-Tile would not be compensated should they be injured on the job. Nicholas Womack explained to Adrian Womack and Kent Degallerie that they were eligible for an exemption, and if they got an exemption and were injured, they would not be covered by workers' compensation insurance. Nicholas Womack testified that thereafter he helped the two men fill out the appropriate forms and ensured that all necessary attachments, including two money orders in the correct amount, were present and then mailed the applications, one in each envelope, to the Department's Panama City office. As soon as the applications were mailed, Nicholas continued allowing the men to work for Versa-Tile without waiting for the exemptions to be granted. Adrian Womack and Kent Degallerie first received exemption on July 30, 2007. Subsequent to July 30, 2007, Nicholas asked Adrian Womack if he had received an exemption card. Adrian Womack said that he had not. Adrian Womack and Kent Degallerie both stated that they had not received an exemption card after filing for exemption in July 2007. Nicholas Womack's testimony that he only received one certificate of exemption in seven years of enjoying an exempt status lacks credibility. Even considering that the Department is large and it annually processes huge amounts of paperwork, it is quite improbable that on six occasions they would fail to send Nicholas Womack a certificate. That being the case, Nicholas Womack's testimony that he mailed completed applications for Adrian Womack and Kent Degallerie to the Department's Panama City office and never received any type of response, when considered in concert with his other testimony, is not credible. It is a fact that Nicholas Womack, Adrian Womack, and Kent Degallerie were eligible for an exemption subsequent to April 26, 2006. If exempt, they were responsible for their own expenses should they suffer an injury while on the job. If they failed to get an exemption, they were likewise responsible for their own expenses should they suffer an injury while on the job. This situation is very different from that where an employer fails to obtain coverage for workers not having an ownership interest in the employer, as was the case with Versa- Tile prior to April 26, 2006.
Recommendation Based upon the forgoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Financial Services enter a final order requiring Versa-Tile and Marble, Inc., to pay a penalty of $12,683.35. DONE AND ENTERED this 25th day of January, 2008, in Tallahassee, Leon County, Florida. S HARRY L. HOOPER 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 25th day of January, 2008. COPIES FURNISHED: Kristian E. Dunn, Esquire Department of Financial Services Division of Workers' Compensation 200 East Gaines Street Tallahassee, Florida 32399-4229 Michael James Rudicell, Esquire Michael J. Rudicell, P.A. 4303 B Spanish Trail Road Pensacola, Florida 32504 Daniel Sumner, General Counsel Department of Financial Services Division of Legal Services 200 East Gaines Street Tallahassee, Florida 32399 Honorable Alex Sink Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0300
Findings Of Fact Certain hospital equipment ("Equipment") was sold in 1973 and 1974 by Hospital Contract Consultants ("Vendor") to F & E Community Developers and Jackson Realty Builders (hereinafter referred to as "Purchasers") who simultaneously leased the Equipment to Petitioner. These companies are located in Indiana. At the time of purchase, Florida sales tax ("Tax") was paid by the Purchasers and on or about March 18, 1974, the tax was remitted to the State of Florida by the Vendor. However, the Tax was paid in the name of Medical Facilities Equipment Company, a subsidiary of Vendor. In 1976, the Department of Revenue audited Petitioner and on or about April 26, 1976 assessed a tax on purchases and rental of the Equipment. On or about April 26, 1976, petitioner agreed to pay the amount of the assessment on the purchases and rentals which included the Equipment, in monthly installments of approximately Ten Thousand and no/100 Dollars ($10,000.00) each and subsequently paid such amount of assessment with the last monthly installment paid on or about November 26, 1976. On or about December, 1976, the Department of Revenue, State of Florida, checked its records and could not find the Vendor registered to file and pay sales tax with the State of Florida. Petitioner then looked to the State of Indiana for a tax refund. On or about January 4, 1977, Petitioner filed for a refund of sales tax from the State of Florida in the amount of Thirty Five Thousand One Hundred Four and 02/100 Dollars ($35,104.02). This amount was the sales tax paid to and remitted by various vendors for certain other equipment purchased in 1973 and 1974 and simultaneously leased. The amount of this refund request was granted and paid. Relying upon the facts expressed in paragraph 4 heretofore, Petitioner on or about June 2, 1977 filed with the Department of Revenue of the State of Indiana for the refund of the Tax. On or about June 7, 1979, the Department of Revenue of Indiana determined that the Vendor was registered in the State of Florida as Medical Facilities Equipment Company and therefore Petitioner should obtain the refund of the Tax form the State of Florida. So advised, Petitioner then filed the request for amended refund, which is the subject of this lawsuit, on July 16, 1979 in the amount of Seventeen Thousand Two Hundred Sixteen and 28/100 Dollars ($17,216.28). This request for refund was denied by Respondent, Office of the Comptroller, on the basis of the three year statute of non-claim set forth in section 215.26, Florida Statutes. Purchasers have assigned all rights, title and interest in sales and use tax refunds to Petitioner. During the audit of Petitioner in 1976 the lease arrangement on the equipment apparently came to light and Petitioner was advised sales tax was due on the rentals paid for the equipment. This resulted in an assessment against Petitioner of some $80,000 which was paid at the rate of $10,000 per month, with the last installment in November, 1976. The auditor advised Petitioner that a refund of sales tax on the purchase of this equipment was payable and he checked the Department's records for those companies registered as dealers in Florida. These records disclosed that sales taxes on the sale of some of this rental equipment had been remitted by the sellers of the equipment but Hospital Contract Consultants was not registered. Petitioner was advised to claim a refund of this sales tax from Indiana, the State of domicile of Hospital Contract Consultants. By letter on March 18, 1974, Amedco Inc., the parent company of wholly owned Hospital Contract Consultants, Inc. had advised the Florida Department of Revenue that Medical Facilities Equipment Company, another subsidiary, would report under ID No. 78-23-20785-79 which had previously been assigned to Hospital Contract Consultants Inc. which had erroneously applied for this registration. (Exhibit 2) Not stated in that letter but contained in Indiana Department of Revenue letter of April 18, 1979 was the information that the name of Hospital Contract Consultants had been changed to Medical Facilities Equipment Company. The request for the refund of some $17,000 submitted to Indiana in 1976 was finally denied in 1979 after research by the Indiana Department of Revenue showed the sales tax had been paid to Florida and not to Indiana.
The Issue The issue in this case is whether the Florida Renewable Energy Production Tax Credit (“Tax Credit”) application filed by Petitioner, Florida Power Development, LLC, A Florida Limited Liability Company (“Florida Power”), was eligible for consideration by Respondent, Department of Agriculture and Consumer Services, Office of Energy (“DACS” or the “Department” or “Office of Energy”).
Findings Of Fact Florida Power is a company which produces power by way of burning biomass materials, primarily wood chips, at its energy plant at 10311 Cement Plant Road, Brooksville, Florida. Most of the energy it produces is sold to Duke Energy. The plant had previously been a coal fired power plant, but Florida Power spent $196 million converting it into a renewable energy facility utilizing biomass fuel. JP Morgan is the parent company of Florida Power. The Office of Energy is the state agency responsible for overseeing the Tax Credit program authorized under section 220.193, Florida Statutes (2016).2/ The Department is empowered to review and approve (or disapprove) all Tax Credit applications which it receives. The Office of Energy is located at 600 South Calhoun Street, Suite 251, Tallahassee, Florida 32399-0001. Applications for a Tax Credit are available on the DACS website, as are the statutes and rules governing the Tax Credit program. The rules specify the date applications are due in each “production year” and set forth the process for filing the applications. Applications addressing the production year at issue in this proceeding of January 1, 2016, through June 30, 2016, were due at the Office of Energy no later than August 15, 2016. Florida Power’s application was not received by the Office of Energy until August 17, 2016, two days after the deadline. As a result, the Department deemed Florida Power’s application ineligible for consideration. Florida Power believes that circumstances surrounding the filing of its application for a Tax Credit excuse or make moot its failure to meet the deadline. Florida Power had filed applications for Tax Credits in prior production years. In 2015, its application was prepared by Tateswood, a company located in Houston, Texas. Tateswood provides management services to several power plants, including several owned by Florida Power. The application was submitted via overnight delivery, i.e., FedEx, from Houston, Texas, to the Office of Energy in Tallahassee, Florida. A senior official from Tateswood, Jeff Winkler, signed the application and had it overnighted to the Department. The application was received timely and approved by the Office of Energy.3/ Florida Power received a tax credit that year of approximately $1.49 million. Around July 28, 2016, Florida Power received the data it needed from Duke Energy to file the Tax Credit application for the 2016 production year (which was less than a full year as the Tax Credit program was expiring). Florida Power’s accountant, Lashauna Filo, also worked for Tateswood in Houston, Texas. She prepared the 2016 application for Mr. Winkler’s signature. Mr. Winkler was traveling, but he was expected to be in Brooksville prior to the application submission deadline. Ms. Filo emailed the application to the Brooksville plant on August 10, 2016, five days prior to the date it was due in Tallahassee. Mr. Winkler signed the application and gave it to Ms. Brown, plant administrator, who was given the task of submitting the application to the Office of Energy.4/ She noted verbiage on the face of the application form which says it can be submitted to the Department via “certified mail or hand delivery.” The due date of August 15 also appeared on the face of the application. Ms. Brown had not been involved with filing a Tax Credit application previously. After conferring with one of her supervisors, Dave Hermanson, she selected the first option--certified mail–-for submitting the application. She typed an envelope, filled out a Certified Receipt form, and put the application into a post office box at the Brooksville, Florida, post office. Ms. Brown did not consider literally hand-delivering the application to DACS because Tallahassee is roughly a four-hour drive from Brooksville, and it seemed there was enough time for the package to get to the Department. Ms. Brown did not understand that “hand delivery” allowed for delivery by overnight courier. Neither Florida Power nor Tateswood have attorneys on staff to provide guidance or assistance in matters such as these. Instead, Ms. Brown relied upon the advice given her by Mr. Hermanson. Unfortunately, the application did not sail smoothly through the USPS system. It was received by a Tampa USPS facility at 8:00 p.m., on August 10, was “coded” for Tallahassee, and departed that facility at 9:43 p.m., the same evening. It arrived at the Adams Street USPS facility in Tallahassee at 1:19 p.m., on August 11. However, the package had been improperly “coded” in the Tampa USPS facility to zip code 32301, rather than to zip code 32399. The 32399 zip code is used for state agencies in Tallahassee. This mis-code by the Tampa office caused the package to be erroneously sent from the Adams Street office to the downtown Tallahassee facility, rather than being processed for a “state agency” delivery. Thereafter, it went to another USPS site, the Lake Jackson facility, where it arrived on August 12. The package did not make it back to the Adams Street facility where it belonged until 5:36 a.m. on August 16-–one day after the submission deadline. The application was delivered to DACS on August 17, 2016, at 9:08 a.m., two days after the deadline. Clearly, Florida Power’s application for a Tax Credit was not timely received by the Office of Energy. However, Florida Power raises several facts which may relate to whether equitable tolling or equitable estoppel principles apply to this situation. Florida Power points out that verbiage on the face of the application itself does not specifically use the words “overnight express” as a means of submitting the application. Florida Power maintains, therefore, that it was misled into believing that physical hand-delivery or certified mail were its only options. Inasmuch as Florida Power had submitted their prior year’s application via FedEx, their claim lacks credence. Furthermore, the rule addressing application submission defines “hand delivery” as “any physical submission of an application to the Office [of Energy] from a representative of an applicant, courier, or a private delivery service.” Fla. Admin. Code R. 5O-2.003(3)(b)2. Florida Power was very familiar with the Tax Credit program, but could not say why it was not familiar with the rules governing that program. Unfortunately, certified mail, Florida Power’s delivery option for the application at issue, does not guarantee delivery by a date certain. Rather, certified mail-–which is processed exactly the same way as non-certified mail-–is merely a means for tracking a letter or package. Thus, a person who mails a letter by way of certified mail assumes the risk that the letter may not be delivered on or before a desired date. It appears that the risk is quite high. A USPS employee testified at final hearing that there are 50 to 70 complaints per day in Tallahassee concerning certified mail and several hundred certified letters may be misdirected each week. Florida Power further argues that the Department has seen several applications submitted via certified mail arrive at DACS late, i.e., after the “received by” deadline. Florida Power asserts that this fact has put DACS on notice that allowing an applicant to submit an application via certified mail constitutes a flaw in the system. The Department maintains that the use of certified mail is a valid way of tracking applications and is feasible. During the development of the rule governing submissions of the applications, no interested party voiced any objection to the use of certified mail as a delivery option. There is no evidence in the record that DACS was previously aware of the magnitude of errors by USPS so that it (DACS) should not include certified mail as an option for submitting applications. One must wonder, as does Florida Power, why there needs to be tracking of the applications at all since the operative date is the date of receipt by DACS. But the Department must deem it necessary for some reason and it is the current state of the law. Florida Power contends in its PRO that there are numerous fallacies in the Department’s rule regulating Tax Credit applications. This proceeding, however, is not a rule challenge brought pursuant to section 120.56, Florida Statutes. The validity or propriety of the rule is not in question. At issue in the instant proceeding is whether Florida Power complied with the duly promulgated and existing rule. DACS is one of the few state agencies which await delivery of its mail from the post office, rather than sending someone to retrieve it from USPS. DOAH is also one of those agencies. While awaiting delivery may delay an agency’s receipt of mail at times, it would not have affected Florida Power in this case because the package was not available for pick-up until August 16, one day after the deadline. There is no requirement in law or rule that any state agency opt to pick up its mail from USPS rather than have it delivered. Florida Power’s lament that DACS could have chosen to have its mail delivered is of no consequence. Some government agencies use the postmark on letters or packages as evidence that the item was timely mailed out; think IRS and April 15, for example. However, the DACS rule requires receipt of the application by the Department; the rule does not currently employ a “submitted by” compliance date. See Fla. Admin. Code R. 5O-2.003(b). When the Tax Credit program was originally initiated, the Department undertook regular rule development. The first rule promulgated by the Department was drafted in July 2012 and was ultimately adopted in the spring of 2013. That version of the rule stated that all applications must be “submitted” by a date certain. Upon receipt of one application after the due date, but which had been “submitted” by the applicant before the deadline, the Department decided it needed to re-think that provision. Rulemaking was recommended in order to amend the language relating to timely filing of applications. During the rulemaking process, which was duly noticed and advertised, DACS received no input from interested parties concerning the proposed amendment to the rule. The amended rule requires applications to be “received by” DACS on or before the deadline established by rule. This amendment eliminated any disputes concerning when an application was “submitted” by an applicant. The current, duly promulgated rule utilizes “received by” rather than “submitted” as the operative date. Florida Power points out that DACS has missed some of its own statutorily mandated deadlines concerning the reporting of Tax Credit information to the governor’s office. Florida Power does not cite to any authority which relieves an applicant from the requirements of a rule when an agency misses its own deadlines. So, that DACS was not timely in carrying out its own mandated duties is irrelevant to whether Florida Power satisfied its required actions. Nonetheless, the Department provided a legitimate rationale for its tardiness, though such reasons are irrelevant to the issue in this case. DACS employees utilize a checklist when reviewing Tax Credit applications. The checklist is just that, a matrix that can be checked off as each element or requirement of the application is reviewed, i.e., date of receipt, signature, application form, etc. The first question on the checklist asks whether the application “was submitted by” the requisite due date. April Groover Combs, who reviewed the Florida Power application using the checklist, simply interpreted the “was submitted by” language as “was received by.” Mrs. Combs had authored the rule and was involved in its amendments, so she understood what was required regardless of how the checklist referred to the items. Florida Power suggests that the internal checklist error somehow invalidates the Department’s actions; it does not. An internal document used by employees is not meant to provide rights to the public. It is not a rule. Thus, any errors within such a document are immaterial.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department of Agriculture and Consumer Services upholding its rejection of the Tax Credit application filed by Florida Power as ineligible for consideration. DONE AND ENTERED this 6th day of April, 2017, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of April, 2017.
The Issue Whether Respondent may levy upon property belonging to Petitioner (specially, funds in Petitioner's account, number 300126719, at Admiralty Bank), as proposed in Respondent's March 30, 2000, Notice of Intent to Levy?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following findings of fact are made: Petitioner operates a Chevron station at 4109 Northlake Boulevard in Palm Beach Gardens, Florida, at which it engages in the business of selling motor fuels at posted retail prices. Petitioner maintains a business account at Admiralty Bank. The number of its account is . Petitioner's Local Option Motor Fuel License number is 60-023068. Petitioner was delinquent in remitting to the Department "local option gas tax" payments for the period from July 1, 1995, through June 30, 1996. The Department provided Petitioner notice of Petitioner's failure to make these payments. The Department filed with the Clerk of the Circuit Court in Palm Beach County a Tax Warrant "for collection of delinquent local option gas tax[es]," in the amount of $106,904.62, plus penalties (in the amount of $59,556.47), interest (in the amount of $12,026.25), and the amount of the "filing fee" ($12.00), for a "grand total" of $178,499.34. Rafael Fanjul is the president and sole owner of Petitioner. On May 2, 1997, Mr. Fanjul, on behalf of Petitioner, entered into a Stipulation Agreement with the Department, which provided as follows: THE FLORIDA DEPARTMENT OF REVENUE AND ELF SERVICES, D/B/A PALM BEACH CHEVRON S/S THE TAXPAYER, TAX IDENTIFICATION NO. 60- 123068, HEREBY AGREE THAT THE $178,024.29 TAX LIABILITY IS DUE THE STATE OF FLORIDA. IT IS FURTHER AGREED THE SUM OF TAX, PENALTY, AND INTEREST REFERENCED ON THE WARRANT OR WARRANTS DATED 02/20/97 IS SUBJECT TO THE FOLLOWING STIPULATIONS: The taxpayer will retire the tax, penalty, and interest shown on the Tax Warrant or Warrants whose dates or dates are shown above. The taxpayer waives any and all rights to institute any further judicial or administrative proceedings under S.72.011, F.S., with respect to this liability and; The taxpayer further agrees to meet each payment term which is detailed on the Amortization Schedule and Payment Coupons provided by the Department of Revenue. IN THE EVENT THE TAXPAYER FAILS TO MEET THE PAYMENT TERMS DETAILED ON THE ENCLOSED AMORTIZATION SCHEDULE AND PAYMENT COUPONS OR FAILS TO TIMELY REMIT ALL TAXES WHICH BECOME DUE AND PAYABLE SUBSEQUENT TO THE DATE OF THIS AGREEMENT, ANY UNPAID BALANCE OF TAX, PENALTY, AND/OR INTEREST SCHEDULED PURSUANT TO THIS AGREEMENT SHALL BECOME IMMEDIATELY DUE AND PAYABLE. Mr. Fanjul had the authority to bind Petitioner to the terms set forth in the Stipulation Agreement. There has been no showing that, in so doing, he acted involuntarily or under coercion or duress. Petitioner made some, but not all of the payments, set forth on the Amortization Schedule incorporated by reference in the Stipulation Agreement. 4/ On May 1, 1998, Petitioner entered into a second Stipulation Agreement with the Department, which provided as follows: THE FLORIDA DEPARTMENT OF REVENUE AND ELF SERVICES, D/B/A PALM BEACH CHEVRON S/S 4806, THE TAXPAYER, TAX IDENTIFICATION NO. 60- 123068, HEREBY AGREE THAT THE $142,701.38 TAX LIABILITY IS DUE THE STATE OF FLORIDA. IT IS FURTHER AGREED THE SUM OF TAX, PENALTY, AND INTEREST REFERENCED ON THE WARRANT OR WARRANTS DATED 02/20/97 IS SUBJECT TO THE FOLLOWING STIPULATIONS: The taxpayer will retire the tax, penalty, and interest shown on the Tax Warrant or Warrants whose dates or dates are shown above. The taxpayer waives any and all rights to institute any further judicial or administrative proceedings under S.72.011, F.S., with respect to this liability and; The taxpayer further agrees to meet each payment term which is detailed on the Amortization Schedule and Payment Coupons provided by the Department of Revenue. IN THE EVENT THE TAXPAYER FAILS TO MEET THE PAYMENT TERMS DETAILED ON THE ENCLOSED AMORTIZATION SCHEDULE AND PAYMENT COUPONS OR FAILS TO TIMELY REMIT ALL TAXES WHICH BECOME DUE AND PAYABLE SUBSEQUENT TO THE DATE OF THIS AGREEMENT, ANY UNPAID BALANCE OF TAX, PENALTY, AND/OR INTEREST SCHEDULED PURSUANT TO THIS AGREEMENT SHALL BECOME IMMEDIATELY DUE AND PAYABLE. Mr. Fanjul had the authority to bind Petitioner to the terms set forth in the second Stipulation Agreement. There has been no showing that, in so doing, he acted involuntarily or under coercion or duress. Petitioner made some, but not all of the payments, set forth on the Amortization Schedule incorporated by reference in the second Stipulation Agreement. 5/ On August 12, 1999, Petitioner entered into a third Stipulation Agreement with the Department, which provided as follows: THE FLORIDA DEPARTMENT OF REVENUE AND ELF SERVICES, D/B/A PALM BEACH CHEVRON S/S 4806, THE TAXPAYER, TAX IDENTIFICATION NO. 60- 123068, HEREBY AGREE THAT THE $88,375.04 TAX LIABILITY IS DUE THE STATE OF FLORIDA. IT IS FURTHER AGREED THE SUM OF TAX, PENALTY, AND INTEREST REFERENCED ON THE WARRANT OR WARRANTS DATED 02/20/97 IS SUBJECT TO THE FOLLOWING STIPULATIONS: The taxpayer will retire the tax, penalty, and interest shown on the Tax Warrant or Warrants whose dates or dates are shown above. The taxpayer waives any and all rights to institute any further judicial or administrative proceedings under S.72.011, F.S., with respect to this liability and; The taxpayer further agrees to meet each payment term which is detailed on the Amortization Schedule and Payment Coupons provided by the Department of Revenue. IN THE EVENT THE TAXPAYER FAILS TO MEET THE PAYMENT TERMS DETAILED ON THE ENCLOSED AMORTIZATION SCHEDULE AND PAYMENT COUPONS OR FAILS TO TIMELY REMIT ALL TAXES WHICH BECOME DUE AND PAYABLE SUBSEQUENT TO THE DATE OF THIS AGREEMENT, ANY UNPAID BALANCE OF TAX, PENALTY, AND/OR INTEREST SCHEDULED PURSUANT TO THIS AGREEMENT SHALL BECOME IMMEDIATELY DUE AND PAYABLE. Mr. Fanjul had the authority to bind Petitioner to the terms set forth in the third Stipulation Agreement. There has been no showing that, in so doing, he acted involuntarily or under coercion or duress. The Amortization Schedule incorporated by reference in the third Stipulation Agreement required Petitioner to make 47 weekly payments of $1,000.00 each from August 12, 1999, to June 29, 2000, and to make a final payment of $28,994.57 on July 6, 2000. As of January 12, 2000, Petitioner was five payments behind. Accordingly, on that date, the Department sent a Notice of Delinquent Tax to Admiralty Bank, which read as follows: RE: ELF SERVICES INC. DBA: PALM BEACH GARDENS CHEVRON STA 48206 FEI: 65-0055086 ACCT: ST#: To Whom It May Concern: You are being notified, under the authority contained is Subsection 212.10(3), Florida Statutes, that the referenced dealer is delinquent in the payment of gas tax liabilities in the amount of $75,581.47 to the State of Florida. You may not transfer or dispose of any credits, debts, or other personal property owed to the dealer, that are to become under your control during the effective period of this notice. Any assets in your possession exceeding the dollar amount shown above may be released in the ordinary course of business. This notice shall remain in effect until the Department consents to a transfer or disposition or until sixty (60) days elapse after receipt of this notice, whichever period expires the earliest. Please furnish a list of all credits, debts, or other property owed to the dealer in your possession and the value of these assets to the Department. Chapter 212.10(3), F.S. requires this list within five (5) days. If you fail to comply with this notice, you may become liable to the State of Florida to the extent of the value of the property or amount of debts or credits disposed of or transferred. Thank you for your cooperation. If you have any questions, please contact the undersigned at the telephone number below. On or about January 18, 2000, in response to the foregoing notice, Admiralty Bank advised the Department in writing that "the balance being held" in Petitioner's account at the bank was $2,223.53. On February 10, 2000, the Department sent Admiralty Bank a Notice of Freeze, which read as follows: RE: Elf Services Inc. DBA Palm Beach Gardens Chevron FEI: 65-0055086 ACCT: ST#: Dear Custodian: You are hereby notified that pursuant to Section 213.67, Florida Statutes, the person identified above has a delinquent liability for tax, penalty, and interest of $75,581.47, which is due the State of Florida. Therefore, as of the date you receive this Notice you may not transfer, dispose, or return any credits, debts, or other personal property owned/controlled by, or owed to, this taxpayer which are in your possession or control. This Notice remains in effect until the Department of Revenue consents to a transfer, disposition, or return, or until 60 consecutive calendar days elapse from the date of receipt of this Notice of Freeze, whichever occurs first. Further, Section 213.67(2), F.S., and Rule 12-21, Florida Administrative Code, require you to advise the Department of Revenue, within 5 days of your receipt of this Notice, of any credits, debts, or other personal property owned by, or owed to, this taxpayer which are in your possession or control. You must furnish this information to the office and address listed below. Your failure to comply with this Notice of Freeze may make you liable for the amount of tax owed, up to the amount of the value of the credits, debts or personal property transferred. Thank you for your cooperation. If you have any questions please contact the undersigned at the telephone number listed below. On March 22, 2000, the Department sent to Petitioner a Notice of Intent to Levy upon Petitioner's "Bank Account # , in the amount of $2,320.07, . . . in the possession or control of Admiralty Bank" "for nonpayment of taxes, penalty and interest in the sum of $75,581.47." After receiving information from Admiralty Bank that Petitioner actually had $7,293.36 in its account at the bank, the Department, on March 30, 2000, sent Petitioner a second Notice of Intent to Levy, which was identical in all respects to the March 22, 2000, Notice of Intent to Levy except that it reflected that Petitioner's account at Admiralty Bank contained $7,293.36, instead of $2,320.07. Petitioner's account at Admiralty Bank does not contain any monies paid by a third party to Petitioner as salary or wages. The amount of the Petitioner's current outstanding delinquent "tax liability" is $75,581.47.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department enter a final order upholding its March 30, 2000, Notice of Intent to Levy and proceed with the garnishment of the funds in Petitioner's account at Admiralty Bank. DONE AND ENTERED this 25th day of October, 2000, in Tallahassee, Florida. STUART M. LERNER 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 25th day of October, 2000.
The Issue The issue for determination is whether Respondent's intended decision to award low-income housing tax credits in Miami-Dade County through Request for Applications 2013-003 to HTG Miami-Dade 5, LLC, and Allapattah Trace Apartments, Ltd., is contrary to governing statutes, the corporation’s rules or policies, or the solicitation specifications.
Findings Of Fact Overview FHFC is a public corporation created pursuant to section 420.504, Florida Statutes (2013).1/ Its purpose is to promote the public welfare by administering the governmental function of financing affordable housing in Florida. Pursuant to section 420.5099, FHFC is designated as the housing credit agency for Florida within the meaning of section 42(h)(7)(A) of the Internal Revenue Code and has the responsibility and authority to establish procedures for allocating and distributing low-income housing tax credits. The low-income housing tax credit program was enacted by Congress in 1986 to incentivize the private market to invest in affordable rental housing. Tax credits are competitively awarded to housing developers in Florida for qualified rental housing projects. Developers then sell these credits to investors to raise capital (or equity) for their projects, which reduces the debt that the developer would otherwise have to borrow. Because the debt is lower, a tax credit property can offer lower, more affordable rents. Provided the property maintains compliance with the program requirements, investors receive a dollar-for-dollar credit against their federal tax liability each year over a period of 10 years. The amount of the annual credit is based on the amount invested in the affordable housing. These are tax credits and not tax deductions. For example, a $1,000 deduction in a 15 percent tax bracket reduces taxable income by $1,000 and reduces tax liability by $150. However, a $1,000 tax credit reduces tax liability by $1,000. Developers that are awarded tax credits can use them directly. However, most sell them to raise equity capital for their projects.2/ Developers sell these credits for up-front cash. A developer typically sets up a limited partnership or limited liability company to own the apartment complex. The developer maintains a small interest but is responsible for building the project and managing (or arranging for the management) of the project. The investors have the largest ownership interest but are typically passive investors with regard to development and management.3/ Because the tax credits can be used by the investors that provide the equity for 10 years, they are very valuable. When sold to the investors, they provide equity which reduces the debt associated with the project. With lower debt, the affordable housing tax credit property can (and must) offer lower, more affordable rent. The demand for tax credits provided by the federal government far exceeds the supply. FHFC has adopted Florida Administrative Code Rule chapter 67-60, to govern the competitive solicitation process for several different programs, including the one for tax credits. Chapter 67-60 was newly enacted on August 20, 2013. It replaced prior procedures used by FHFC for the competitive process for allocating tax credits. FHFC has now adopted the bid protest provisions of section 120.57(3), Florida Statutes, as its process for allocating tax credits.4/ The Competitive Application Process Tax credits are made available annually. FHFC begins the competitive application process through the issuance of a Request for Applications.5/ In this case, that document is Request for Applications 2013-003. A copy of the RFA, including its Questions & Answers, is Joint Exhibit 1. The RFA was issued September 19, 2013 and responses were due November 12, 2013. According to the RFA, FHFC expected to award up to approximately $10,052,825 in tax credits for qualified affordable housing projects in Miami-Dade, Broward, and Palm Beach Counties. Knowing that there would be far more applications than available credits, FHFC established an order for funding in the three counties: The Applications will be considered for funding in the following funding order: first the highest scoring eligible Application located in Miami-Dade County that can meet the Funding Test, then the highest scoring eligible Application located in Broward County that can meet the Funding Test, then the highest scoring eligible Application located in Palm Beach County that can meet the Funding Test, then the highest scoring eligible unfunded Application located in Miami-Dade County that can meet the Funding Test and then the highest scoring eligible unfunded Application located in Broward County regardless of the Funding Test. If there is not enough funding available to fully fund this last Broward County Application, the Application will be entitled to receive a Binding Commitment for the unfunded balance. No further Applications will be considered for funding and any remaining funding will be distributed as approved by the Board. RFA at page 36. Applications were scored using a 27-point scale based on criteria in the RFA. RFA at page 37. This process was described in the RFA as follows: The highest scoring Applications will be determined by first sorting all eligible Applications from highest score to lowest score, with any scores that are tied separated first by the Application’s eligibility for the Development Category Funding Preference which is outlined in Section Four A.4.c.(1)(a) of the RFA (with Applications that qualify for the preference listed above Applications that do not qualify for the preference), then by the Application’s eligibility for the Per Unit Construction Funding Preference which is outlined in Section Four A.9.e. of the RFA, (with Applications that qualify for the preference listed above Applications to [sic] do not qualify for the preference), then by the Application’s Leveraging Classification (applying the multipliers outlined in Exhibit C below and having the Classification of A be the top priority), then by the Application’s eligibility for the Florida Job Creation Preference which is outlined in Exhibit C below (with Applications that qualify for the preference listed above Applications that do not qualify for the preference), and then by lottery number, resulting in the lowest lottery number receiving preference. RFA at page 36 (emphasis added). The way this process works in reality is that the developers know that they must first submit a project that meets all the eligibility criteria and does not have any significant omissions or errors.6/ Developers also strive to submit projects structured to receive all 27 points. The tiebreaker is then the luck-of-the-draw. At the time each application is filed, it is randomly assigned a lottery number7/ used to break the ties. The role of the lottery numbers is demonstrated by the following facts. One hundred and nineteen applications were filed in response to the RFA. All but six received the maximum score of 27 points. Seventy of the 119 were deemed eligible. Of those 70, 69 received the maximum score of 27 points. A copy of the RFA Sorting Order is Joint Exhibit 2.8/ As such, the lottery numbers are a big factor in deciding the winners and, concomitantly, the challengers are (1) the projects with high lottery numbers that were deemed ineligible; and (2) those with lottery numbers outside the funding range that are trying to displace those with lower lottery numbers. A copy of the final Review Committee Recommendations is Joint Exhibit 3. This document shows the developers selected, the county and the lottery number. The two Miami-Dade projects selected for funding are: HTG Miami-Dade 5, LLC d/b/a Wagner Creek - lottery number 3 Allapattah Trace Apartments, Ltd. - lottery number 6 The Petitioners/Intervenors in these consolidated proceedings are: Town Center Phase Two, LLC - lottery number 7 Pinnacle Rio, LLC - lottery number 9 APC Four Forty Four, Ltd. - deemed ineligible and with a lottery number of 10 The protests here center upon whether various applicants were correctly deemed eligible or ineligible. Applications are competitively reviewed, and so determinations as to one applicant affect other applicants’ positions. Each application, and the allegations against it, will be considered in turn. HTG’s Application APC argues that HTG should be found ineligible for allocation of tax credits because HTG failed to disclose its principals and those of its developer, as required by the RFA. The RFA at Section Four A.2.d. provides, in part, that each applicant will submit an application that identifies: d. Principals for the Applicant and for each Developer. All Applicants must provide a list, as Attachment 3 to Exhibit A, identifying the Principals for the Applicant and for each Developer, as follows: * * * (2) For a Limited Liability Company, provide a list identifying the following: (i) the Principals of the Applicant as of the Application Deadline and (ii) the Principals for each Developer as of the Application Deadline. This list must include warrant holders and/or option holders of the proposed Development. * * * This eligibility requirement may be met by providing a copy of the list of Principals that was reviewed and approved by the Corporation during the advance-review process. To assist the Applicant in compiling the listing, the Corporation has included additional information at Item 3 of Exhibit C. RFA at page 5. The RFA goes on to provide in Exhibit C 3.: 3. Principal Disclosures for Applicants and Each Developer The Corporation is providing the following charts and examples to assist the Applicant in providing the required list identifying the Principals for the Applicant and for each Developer. The term Principals is defined in Section 67-48.002, F.A.C. a. Charts: (1) For the Applicant: * * * (b) If the Applicant is a Limited Liability Company: Identify All Managers and Identify All Members and For each Manager that is a Limited Partnership: For each Manager that is a Limited Liability Company: For each Manager that is a Corporation: Identify each General Partner Identify each Manager Identify each Officer and and and Identify each Limited Partner Identify each Member Identify each Director and Identify each Shareholder and For each Member that is a Limited Partnership: For each Member that is a Limited Liability Company: For each Member that is a Corporation: Identify each General Partner Identify each Manager Identify each Officer and and and Identify each Limited Partner Identify each Member Identify each Director and Identify each Shareholder For any Manager and/or Member that is a natural person (i.e., Samuel S. Smith), no further disclosure is required. RFA at page 61. The RFA at Section Three F.3. Provides: 3. Requirements. Proposed Developments funded with Housing Credits will be subject to the requirements of the RFA, the Application requirements outlined in Rule Chapter 67-60, F.A.C., the credit underwriting and HC Program requirements outlined in Rule Chapter 67-48, F.A.C., and the Compliance requirements of Rule Chapter 67-53, F.A.C. RFA at page 3. The term “principal” is defined by rule 67-48.002(89)9/, as follows: (89) “Principal” means: (a) Any general partner of an Applicant or Developer, any limited partner of an Applicant or Developer, any manager or member of an Applicant or Developer, any officer, director or shareholder of an Applicant or Developer, * * * (c) Any officer, director, shareholder, manager, member, general partner or limited partner of any manager or member of an Applicant or Developer, and . . . . HTG received an “advance review” approval of its designation of principals on October 8, 2013. HTG submitted this stamped and approved list of principals with its application. Applicant HTG is a limited liability company, as is its developer, HTG Miami-Dade 5 Developer, LLC. In its submission of principals, HTG disclosed the names of the manager and member of the applicant and the manager and member of the developer, all of which were also LLCs. HTG also disclosed the names of the managers and members of these component LLCs. HTG did not disclose any officers of the applicant, the developer, or any of the component LLCs. Other documents submitted as part of the application indicate that Mr. Matthew Rieger is a Vice President of the applicant, HTG Miami-Dade 5, LLC, and that the component LLCs also have officers. APC contends that the rule’s definition of principal requires HTG to disclose not only the managers and members of the applicant and developer, and those of their component LLCs, but also the officers of any of these entities, if they also have officers. FHFC asserts that such disclosure is not required, arguing that the term “officer” as found in the rule’s definition of “principal” only applies to corporations. FHFC argues that there is no inconsistency between the rule and the charts of the RFA with respect to disclosure of principals. FHFC contends that the charts in the RFA, read in conjunction with the rule, indicate that officers must be disclosed only when the entity is a corporation, and that members and managers must be disclosed when the entity is a LLC. FHFC interprets rule 67-48.002(89) in a manner consistent with the charts. It does not interpret the rule to require that an LLC disclose its officers, even if it has them, but only that an LLC disclose its managers and members. Both Ms. O’Neill and Ms. Thorp testified to that effect. The examples provided in the RFA are also consistent with this interpretation. The rule certainly might have been drafted with more precision to expressly indicate that a principal is any officer, director, or shareholder if the entity is a corporation; any manager or member if the entity is an LLC; and any general partner or limited partner if the entity is a Limited Partnership. It cannot be said, however, that the Corporation’s interpretation of the RFA and its rule is impermissible. ATA’s Application Mr. Kenneth Reecy, Director of Multifamily Programs, testified that FHFC revised the “Universal Application Cycle” process that had been conducted in the past. Under the old universal cycle, most of the criteria were incorporated into the rule, and then there was a “cure” process that provided an opportunity to correct errors that didn’t necessarily have a bearing on whether a project was good enough to be funded. Under the newer process, several issues were moved out of the eligibility and scoring phase and into the credit underwriting phase.10/ Specifically relevant here, site plan issues and the availability of infrastructure, such as sewer service, were no longer examined as part of the eligibility and scoring phase set forth in the RFA. Mr. Reecy testified that these issues were complex and had been intentionally pushed to the “rigorous review” that takes place during the credit underwriting phase. In signing and submitting Exhibit A of the RFA, each applicant acknowledges and certifies that certain information will be provided to FHFC by various dates in the future. RFA at page 46. Section Four 10.b.(2)(b) provides in part that the following will be provided: Within 21 Calendar Days of the date of the invitation to enter credit underwriting: Certification of the status of site plan approval as of Application Deadline and certification that as of Application Deadline the site is appropriately zoned for the proposed Development, as outlined in Item 13 of Exhibit C of the RFA; Certification confirming the availability of the following for the entire Development site, including confirmation that these items were in place as of the Application Deadline: electricity, water, sewer service, and roads for the proposed Development, as outlined in Item 13 of Exhibit C of the RFA; Item 13 of Exhibit C goes on to provide: 13. Certification of Ability to Proceed: Within 21 Calendar Days of the date of the invitation to enter credit underwriting, the following information must be provided to the Corporation: a. Submission of the completed and executed 2013 Florida Housing Finance Corporation Local Government Verification of Status of Site Plan approval for Multifamily Developments form. * * * c. Evidence from the Local Government or service provider, as applicable, of the availability of infrastructure as of Application Deadline, as follows: * * * Sewer: Submission of the completed and executed 2013 Florida Housing Finance Corporation Verification of Availability of Infrastructure — Sewer Capacity, Package Treatment, or Septic Tank form or a letter from the service provider which is dated within 12 months of the Application Deadline, is Development specific, and specifically states that sewer service is available to the proposed Development as of the Application Deadline. The 2013 Florida Housing Finance Corporation Local Government Verification of Status of Site Plan Approval for Multifamily Developments Form (Site Plan Approval Form) and the 2013 Florida Housing Finance Corporation Verification of Availability of Infrastructure — Sewer Capacity, Package Treatment, or Septic Tank Form (Certification of Sewer Capacity Form) are incorporated by reference in the RFA. The Site Plan Approval Form requires (in the case of Miami-Dade County which does not have a preliminary or conceptual site plan approval process) that the local government confirm that the site plan was reviewed as of the application deadline. Pinnacle and APC assert that the site plan that ATA submitted to the City of Miami for review included a strip of land that is not legally owned by the current owner and will not be conveyed to ATA under the Purchase and Sale Agreement. As a result, they contend, the site plan review which was required on or before the application deadline did not occur. Pinnacle argues that ATA’s certification in its application was incorrect, that this was a mandatory requirement that was not met, and that it will be impossible for ATA to provide the Site Plan Approval Form in credit underwriting. TC similarly maintains that ATA could not “acknowledge and certify” as part of its application that it would later certify that it had “ability to proceed” because the RFA (at Section Four 10.b.(2)(b) quoted above) requires that “sewer service” be “in place” for ATA’s proposed development as of the application deadline. TC also asserts that the Certification of Sewer Capacity Form explicitly states (and that any service provider letter must, too) that no moratorium is applicable to a proposed development. ATA did not submit a Certification of Sewer Capacity Form. Miami-Dade County will not complete such forms. The “letter of availability” option was created to accommodate Miami-Dade County. The November 12, 2013, letter from Miami-Dade Water and Sewer regarding ATA’s development does not state that there is no applicable moratorium in effect. In fact, the letter affirmatively acknowledges that flow to the gravity system already connected to the property cannot be increased because there is a moratorium in effect as to the pumping station serving the abutting gravity sewer basin. The letter from the County states that, if the pumping station is still in Moratorium Status “at the time this project is ready for construction,” that a private pump station is acceptable. It is logical to conclude that this means sewer service would be available at that time and that sewer service was similarly available at the time of application deadline. The letter, therefore, implies, but does not specifically state, that “sewer service is available to the proposed development as of the application deadline.” The moratorium in effect at the application deadline was not a “general” moratorium. It applied only to the pump station serving the abutting gravity sewer basin, but it was applicable to the proposed development and precluded any increase in the flow to the gravity system connected to the property. A moratorium pertaining to sewer service applicable to ATA’s proposed development was in effect at the time that ATA’s application was submitted. Sewer capacity was otherwise available for the proposed development through use of a private pump station. ATA asserts, first, that ATA has not yet filed certification of ability to proceed or the required forms or letter, that it is not to do so until after it is invited to enter credit underwriting, that FHFC has consequently yet to make a determination as to ATA’s ability to proceed, and that therefore any issues as to site plan or sewer service are not yet ripe for consideration. As to the site plan, ATA further maintains that even if it had been required to provide evidence of ability to proceed as part of its application, the site plan submitted to the City of Miami did not represent that the alley was part of the ATA site. ATA, therefore, asserts that the site plan that was reviewed was the correct one, and that its application certification was correct. The plan of the site of ATA’s development project indicates that the site is bifurcated by a private alley, which is not dedicated as a street, avenue, or boulevard. The legal description of the development project, as submitted to the Department of Planning and Zoning of the City of Miami, included lots 2 through 7 and lots 19 and 20. It did not include the strip of land that lies between these lots (lots 2 through 7 lie to the West of the alley and lots 19 and 20 lie to the East of it.) As to sewer availability, ATA asserts that the 2011 Universal Cycle and the RFA are significantly different. ATA maintains that while the former provided that the existence of a moratorium pertaining to sewer service meant that infrastructure was unavailable, this language was removed from the RFA. ATA contends that a letter of availability need not “mimic” the Certification of Sewer Capacity Form and that the RFA allows a development to certify sewer availability by other means when a moratorium is in effect. Mr. Reecy testified that FHFC takes the certified application at face value, regardless of what other information the Corporation might have at hand. As to the site plan, he testified that even had site plan approval been a part of the scoring process, FHFC would not have found ATA’s application ineligible on that ground. He testified that the alley would not be a problem unless it was a “road” or something similar. He testified that it also could have been a problem if the measurement point to measure the distance to nearby amenities was not on the property, but he was not aware that that was the case in ATA’s application. As for sewer service, Mr. Reecy testified that a letter from the service provider does not have to say “exactly” what is on the form, but stated that it does have to give “the relevant information” to let FHFC know if sewer is “possible.” He testified that the only guidance as to what constituted sewer “availability” was contained in the criteria found on the Certification of Sewer Capacity Form. One of the four numbered requirements on the Certification of Sewer Capacity Form is that there are no moratoriums pertaining to sewer service that are applicable to the proposed development. Under the RFA, the Certification of Sewer Capacity Form could not be completed for a proposed development for which a moratorium pertaining to sewer service was in effect at the time the application was submitted. The form could not be certified by the service provider even if it was possible for such a development to obtain sewer service by other means. The text on the 2013 form is substantively identical to that on the form used during the 2011 Universal Cycle, that wording was specifically drafted to require that any moratorium on sewer infrastructure would be a disqualifying criterion, and the 2013 Certification of Sewer Capacity Form still has that effect. No challenge to the use of the form in the RFA was filed. Even though the language of the 2011 Universal Cycle which paralleled the text on the form does not appear in the RFA, that criterion remains as part of the RFA because of the incorporated Certification of Sewer Capacity Form. In any event, the site plan and sewer availability issues must await at least initial resolution by FHFC during the credit underwriting phase. The testimony of Mr. Reecy clearly indicated that FHFC interprets the RFA specifications and its rules to move consideration of site plan issues and infrastructure availability to the credit underwriting phase. It has not been shown that this is an impermissible interpretation. Town Center’s Application Pinnacle alleges that TC’s application fails to demonstrate site control, because the applicant, Town Center Phase Two, LLC, is not the buyer of the site it intends to develop. The RFA requires at Section Four A.7. that an applicant must provide a copy of a contract, deed, or lease to demonstrate site control: 7. Site Control: The Applicant must demonstrate site control by providing, as Attachment 7 to Exhibit A, the documentation required in Items a., b., and/or c., as indicated below. If the proposed Development consists of Scattered Sites, site control must be demonstrated for all of the Scattered Sites. a. Eligible Contract - For purposes of the RFA . . . the buyer MUST be the Applicant unless an assignment of the eligible contract which assigns all of the buyer's rights, title and interests in the eligible contract to the Applicant, is provided. If the owner of the subject property is not a party to the eligible contract, all documents evidencing intermediate contracts, agreements, assignments, options, or conveyances of any kind between or among the owner, the Applicant, or other parties, must be provided . . . . RFA at page 23. The Contract for Purchase and Sale of Real Property submitted as Attachment 7 to TC’s application is signed by Mr. Milo, who is identified as Vice President. The Buyer on the signature page is incorrectly listed as RUDG, LLC. No other assignment, intermediate contract, agreement, option, or conveyance was included with TC’s application to indicate that TC otherwise had site control of the property. The applicant entity, Town Center Phase Two, LLC, is correctly listed in the opening paragraph of the Contract for Purchase and Sale of Real Property as the “Buyer.” RUDG, LLC, is the 99.99 percent Member of Town Center Phase Two, LLC, and is also the sole Member and Manager of Town Center Phase Two Manager, LLC, which is the .01 percent Managing Member of Town Center Phase Two, LLC. Mr. Milo is a Vice President of RUDG, LLC, a Vice President of Town Center Phase Two Manager, LLC, and a Vice President of the applicant, Town Center Phase Two, LLC. Florida Administrative Code Rule 67-60.008, provides that the Corporation may waive minor irregularities in an otherwise valid application. The term “Minor Irregularity” is defined by rule 67- 60.002(6), as follows: (6) “Minor Irregularity” means a variation in a term or condition of an Application pursuant to this rule chapter that does not provide a competitive advantage or benefit not enjoyed by other Applicants, and does not adversely impact the interests of the Corporation or the public. Mr. Reecy testified that FHFC interpreted the rule to mean that if information requested by the RFA is reasonably available within the Application, even if it was not provided exactly in the place where it was requested, the failure to have it in the particular place it was requested is a minor irregularity. Although the information on the signature page of the Contract for Purchase and Sale of Real Property identifying the Buyer as RUDG, LLC, was a discrepancy in the application, the contract elsewhere identified Town Center Phase Two, LLC, as the Buyer, and Mr. Milo was, in fact, authorized to sign for the true Buyer. Ms. Amy Garmon’s deposition testimony indicated that because she was able to determine from other places in the application that the Buyer was the applicant, and that Mr. Milo was authorized to sign for the Buyer, she found this portion of TC’s application to be compliant, and she didn’t see that there was a “minor irregularity” that needed to be waived. However, it is determined that FHFC actually did finally determine that the error in identification constituted a minor irregularity that was waived, in accordance with Mr. Reecy’s testimony. Although it was Ms. Garmon who called attention to the irregularity, Mr. Reecy is in a position of higher authority within the FHFC and is better able to address the Corporation’s actions with respect to TC’s application. Pinnacle also asserts that TC’s finance documents fail, based upon the same signature issue. TC submitted equity proposals detailing its construction funding sources that were addressed to Mr. Milo and endorsed by him as “Vice President.” FHFC similarly concluded that Mr. Milo had authority to endorse the finance letters on behalf of TC. There is evidence to support FHFC’s findings that TC was the actual Buyer, that Mr. Milo had authority to sign the contract and the equity documents, and that the discrepancies in the documents were minor irregularities. Pinnacle’s Application The equity commitment letter from Wells Fargo Bank regarding Pinnacle’s development, as submitted to FHFC, contained only pages numbered one, two, and four of a four-page letter. It is clear that page three is actually missing and the letter was not simply incorrectly numbered, because of discontinuity in the text and in the numbering of portions of the letter. APC contends that Pinnacle’s application should have been deemed ineligible for award because of the missing page. Mr. Reecy testified that even though a page of Pinnacle’s equity commitment letter was missing, all of the RFA requirements were set forth in the remaining pages. He acknowledged that the missing page might have included unacceptable conditions for closing or information that was inconsistent with the other things in the application, but stated that FHFC determined that the missing page from Pinnacle’s equity letter was a minor irregularity. There is evidence to support FHFC’s finding that the missing page was a minor irregularity. APC’s Application The RFA provides at Section Four, A.3.c., at page 5: c. Experienced Developer(s) At least one Principal of the Developer entity, or if more than one Developer entity, at least one Principal of at least one of the Developer entities, must meet the General Developer Experience requirements in (1) and (2) below. (1) General Developer Experience: A Principal of each experienced Developer entity must have, since January 1, 1991, completed at least three (3) affordable rental housing developments, at least one (1) of which was a Housing Credit development completed since January 1, 2001. At least one (1) of the three (3) completed developments must consist of a total number of units no less than 50 percent of the total number of units in the proposed Development. For purposes of this provision, completed for each of the three (3) developments means (i) that the temporary or final certificate of occupancy has been issued for at least one (1) unit in one of the residential apartment buildings within the development, or (ii) that at least one (1) IRS Form 8609 has been issued for one of the residential apartment buildings within the development. As used in this section, an affordable rental housing development, including a Housing Credit development that contains multiple buildings, is a single development regardless of the number of buildings within the development for which an IRS Form 8609 has been issued. If the experience of a Principal for a Developer entity listed in this Application was acquired from a previous affordable housing Developer entity, the Principal must have also been a Principal of that previous Developer entity. (2) Prior General Development Experience Chart: The Applicant must provide, as Attachment 4 to Exhibit A, a prior experience chart for each Principal intending to meet the minimum general development experience reflecting the required information for the three (3) completed affordable rental housing developments, one (1) of which must be a Housing Credit development. Each prior experience chart must include the following information: Prior General Development Experience Chart Name of Principal with the Required Experience Name of Developer Entity (for the proposed Development) for which the above Party is a Principal: ___ ___________ ___ Name of Development Location (City & State) Affordable Housing Program that Provided Financing Total Number Of Units Year Completed RFA at pages 5, 6. Exhibit A to the RFA, at 3.c., further provides: General Developer Experience For each experienced Developer entity, the Applicant must provide, as Attachment 4, a prior experience chart for at least one (1) experienced Principal of that entity. The prior experience chart for the Principal must reflect the required information for the three (3) completed affordable rental housing developments, one (1) of which must be a Housing Credit development. RFA at page 41. Ms. O’Neill, a Senior Policy Analyst at FHFC and member of the Review Committee responsible for scoring the applications’ developer information section, testified at hearing. When FHFC first started scoring applications, Ms. O’Neill was not taking any action to confirm principal developer experience, but rather was taking the information provided by applicants at face value, as it had been submitted on the chart. A colleague of Ms. O’Neill’s, not serving on the Review Committee, called her attention to the fact that a development that was then going through credit underwriting (following an award during the 2011 funding cycle) had recently requested that FHFC approve a change to the developer entity. Ms. O’Neill testified that this request raised a question at FHFC as to whether Ms. Wong, listed by APC as the principal with the required experience, met the requirements. FHFC decided to confirm that Ms. Wong had the required experience for the developments listed in the RFA. Ms. O’Neill stated that she did not make any inquiry to Ms. Wong or to Atlantic Pacific Communities as to whether Ms. Wong was, in fact, a principal of St. Luke’s Development, LLC, developer of St. Luke’s Life Center, because “we’re not really supposed to do that.” Ms. O’Neill instead looked at portions of a credit underwriting report on the St. Luke’s Life Center project that were researched and shown to her by a colleague. Ms. O’Neill did not see Ms. Wong listed in that report as a principal. She did find information in FHFC files that Ms. Wong was a principal on the other two listed developments. Ms. Thorp testified that she researched several documents in FHFC’s possession and found no information indicating that Ms. Wong was a principal for the St. Luke’s development. She testified that Ms. Wong or another representative of APC was not contacted about the issue because that would have given them an unfair advantage over other applicants. Based upon the information in its files, FHFC determined that Ms. Wong did not meet the requirements for principal developer experience. FHFC then similarly reviewed the files of other applicants who had listed in-state developments as their experience, but was unable to review out-of-state experience, so out-of-state experience continued to be accepted at face value. Ms. Wong was not originally a principal in the St. Luke’s development. However, it was demonstrated at hearing through documentary evidence that Ms. Wong was later appointed an officer of St. Luke’s Development, LLC, effective March 2007. That change was submitted to the credit underwriter, and Ms. Wong was a principal for the developer entity before it completed credit underwriting. Both Ms. O’Neill and Ms. Thorp testified that if the documents provided at hearing by APC had been in FHFC’s possession at the time APC’s application was scored, FHFC would have found that Ms. Wong was a principal of the St. Luke’s development and that her experience met principal developer experience requirements. In light of the evidence presented at hearing, it is clear that FHFC’s conclusion was wrong. The prior experience chart submitted by APC as part of its application provided all of the information requested by the RFA, and all of that information was accurate. The information available to FHFC in the application correctly indicated that Ms. Wong was a principle for the developer of the St. Luke’s Life Center development. APC’s application met all requirements of the RFA with respect to prior developer experience. The Corporation’s preliminary determinations that Ms. Wong was not a principal in the St. Luke’s development, and that the APC application did not, therefore, meet principal experience requirements to the contrary, made in good faith based upon incomplete information contained in its files, was clearly erroneous. FHFC’s contention that APC should have submitted explanations or further documentation of Ms. Wong’s developer experience at the time it submitted its application is untenable. APC submitted all of information requested of it. FHFC asked for a chart to be completed, which APC did, completely and accurately. An applicant cannot be found ineligible for failing to do more than was required by the RFA. Credit Underwriting A comparison of the RFA and rules with the 2011 Universal Cycle process shows that the Corporation has moved many requirements formerly required as part of the eligibility and scoring phase into a second review in the credit underwriting phase, as noted earlier. Rule 67-48.0072 provides in part: Credit underwriting is a de novo review of all information supplied, received or discovered during or after any competitive solicitation scoring and funding preference process, prior to the closing on funding, including the issuance of IRS Forms 8609 for Housing Credits. The success of an Applicant in being selected for funding is not an indication that the Applicant will receive a positive recommendation from the Credit Underwriter or that the Development team’s experience, past performance or financial capacity is satisfactory. The rule goes on to provide that this de novo review in the credit underwriting phase includes not only economic feasibility, but other factors statutorily required for allocation of tax credits, such as evidence of need for affordable housing and ability to proceed. These factors might cause an application to fail and never receive funding, even though it was nominally “awarded” the credits earlier. In that event, the RFA provides: Funding that becomes available after the Board takes action on the Committee’s recommendation(s), due to an Applicant declining its invitation to enter credit underwriting or the Applicant’s inability to satisfy a requirement outlined in this RFA, and/or Rule Chapter 67-48, F.A.C., will be distributed to the highest scoring eligible unfunded Application located in the same county as the Development that returned the funding regardless of the Funding Test. If there is not enough funding available to fully fund this Application, it will be entitled to receive a Binding Commitment for the unfunded balance. If an applicant nominally “awarded” funding in the eligibility and scoring phase fails credit underwriting, the next applicant in the queue of eligible applicants may still be granted funding, and so, is substantially affected by FHFC’s decisions in the credit underwriting phase.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Housing Finance Corporation enter a final order finding that APC Four Forty Four, Ltd., is eligible for funding, adjusting the Sorting Order accordingly, and otherwise dismissing the formal written protests of all Petitioners. DONE AND ENTERED this 4th day of June, 2014, in Tallahassee, Leon County, Florida. S F. SCOTT BOYD 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 4th day of June, 2014.
Findings Of Fact Florida Export Tobacco Co., Inc., Petitioner, operates, as a concessionaire, duty-free stores at Miami International Airport. The premises are owned by the Dade County Aviation Department and the stores are leased to Petitioner pursuant to the terms of a lease and concession agreement dated 19 July 1977, effective 1 August 1977 and continuing until 30 September 1987. (Exhibit 1 to Deposition) Pursuant to this agreement Petitioner occupies six stores and additional warehouse space at the Terminal Building and the International Satellite Facility. Article II in Exhibit 1 entitled Rental Charges and Payments provides for rental payments for each store and space occupied based upon a fixed fee of $X per square foot per year with the dollar per square foot cost varying with the space occupied. In addition to this minimal rental fee, Section 2.03 of this agreement provides: County Profit Participation: As additional consideration for the rights and privileges granted Concessionaire herein, Concessionaire shall pay the County a portion of its profits. As a convenience and in order to eliminate requirements for detailed auditing of expenditures, assets and liabilities and in order to provide an even flow of annual revenues for budgeting and bond financing purposes, said portion of the profits of the Concessionaire shall be calculated as the amount by which sixteen percent of the monthly gross revenues, as defined in Arti- cle 2.07, exceeds the sum of monthly rental payments required by Articles 2.01 and 2.04. Concessionaire shall pay such portion of its profits to County by the twentieth (20th) day of the month following the month in which the gross revenues were received or accrued. For the period October 1, 1982 through September 30, 1987, the percent of monthly gross revenues to be paid by Concessionaire as a portion of its profits shall be eighteen percent, payable and calculated in the same manner as above. The lessor provides air conditioning, garbage and sewage disposal facilities, security, and many other services to the lessee in addition to the space leased. From October 1976 through September 1977 Petitioner paid $40,499.66 in additional sales tax over the guaranteed minimum amount; for the year ending September 1978 this additional sales tax was $66,284.85; for the year year ending September 1979 this additional sales tax was $93,837.15; and for the year ending September 1980 this additional sales tax was $137,521.87. (Exhibit 2 to the Deposition) As the owner of the facility Dade County has the option of operating the various facilities and services available to the public or having these operated by a concessionaire. Dade County has opted for the manner it believed more profitable to the county and in the case of the duty free stores this has resulted in leasing the space to a concessionaire. The hotel at the airport is operated by the Aviation Department under a management contract. It is Petitioner's and Dade County's position that a sales tax should not be paid on the county profit participation charges because, if the Aviation Department operated the stores there would be no sales tax on any rental income and the County operates the facilities at the airport so as to maximize profits to the county. Therefore by requiring the concessionaire to pay sales tax, this reduces the profit available to share with the County.
The Issue The issues to be determined in this proceeding are 1) whether Respondent, the Department of Revenue (Respondent or the Department), demonstrated that it made an assessment against the taxpayer, as well as the factual and legal basis for the assessment; 2) whether Petitioner, 130 NE 40th Street, LLC, d/b/a Michael’s Genuine Food and Drink (Petitioner or Michael’s), is entitled to enterprise zone job credits (EZ credits) claimed on its sales and use tax returns for the audited period; and whether the penalty and interest assessed in the August 18, 2016, Notice of Decision is justified.
Findings Of Fact Petitioner is a Florida corporation with its home office and principal place of business in Miami, Florida. Respondent is an agency of the State of Florida, charged with administering the state’s sales tax laws under chapter 212, Florida Statutes (2012-2014). Michael’s is a limited liability company located at 130 NE 40th Street, Miami, Florida 33137. It operates a restaurant and bar at that address. Business Structure of Michael’s Michael’s opened in 2007 and is located in an enterprise zone in Miami. Michael’s enterprise zone identification number is 1301. Michael’s is owned by Michael Schwartz. In 2012, Mr. Schwartz opened a second restaurant known as Harry’s Pizzeria, which is also located in Miami. A third restaurant, the Cypress Room, was also opened during the audit period, although the timing of its opening is not clear from the record. Neither Harry’s Pizzeria nor the Cypress Room is the subject of this audit. All of the restaurants are separate legal entities. Mr. Schwartz is also the owner of a shared service company named Genuine Hospitality Group (GHG). The direct employees of GHG are the comptroller for the restaurants, the director of beverage, the director of operations, a marketing person, and the people overseeing the various restaurants. GHG does not have ownership in any of the restaurants, but provides services to each of them, including at different times, payroll, marketing, operations, and menu development. For example, during the years 2012 and 2013, GHG provided payroll functions for the various restaurants. According to Omar Azze, GHG’s comptroller, the idea was to create a “common paymaster” for the restaurants, because it would allow them to have a larger pool of employees for health insurance, in order to get a more favorable rate. When Michael’s decided to use this payroll method, Mr. Azze called the Department and canceled the reemployment tax registration of Michael’s because the taxes would be paid through GHG. Contrary to notations in the Department’s records, Michael’s never closed during the audit period: it still had the same employees and management team. The idea for using a common paymaster approach for the restaurants came from the restaurants’ accounting consultant. Paying employees through GHG was never intended to reduce the tax liability of Michael’s, or to transfer control of the employees to GHG, and taxes related to payroll were all paid through GHG for 2012 and 2013. Each restaurant maintained control over its own employees (general manager, two or three assistant managers, the head chef, bussers, waiters, cooks, support staff, and bartenders) and employee records, and employees did not “float” from restaurant to restaurant. GHG would pay the employees for Michael’s and the other restaurants, and all of the restaurants would reimburse GHG for the payroll payments for their respective employees. Mr. Azze’s testimony regarding this arrangement is consistent with the deductions on the restaurants’ respective federal tax returns for the payrolls in 2012 and 2013, and is credited. It is found that, during the calendar years 2012 and 2013, the employees remained under the direction and control of Michael’s and that payroll services alone were handled by GHG. In 2014, the third year of the audit period, the Petitioner decided to stop having GHG performing payroll functions, and to handle payroll in-house using a QuickBooks program, in order to reduce costs. In terms of the audit, this change in payroll method meant that for the first two years of the audit, all of the employees for Michael’s were paid through GHG, as were all of Michael’s’ reemployment taxes. The third year of the audit, employees and reemployment taxes were paid through Michael’s directly. Applications for EZ Credits for Michael’s Section 212.096 allows certain eligible businesses within identified “enterprise zones” to take a credit against sales and use taxes when there are employees hired who live within the identified enterprise zones and when there has been an increase in jobs over the 12 months prior to the date of the application. Section 212.096(1)(a) defines an “eligible business” as “any sole proprietorship, firm, partnership, corporation, bank, savings association, estate, trust, business trust, receiver, syndicate, or other group or combination, or successor business, located in an enterprise zone.” In order to obtain the credit, an eligible business must file an application, including a statement made under oath that includes, for each new employee, the employee’s name and place of residence; the enterprise zone number for the zone in which the new employee lives; the name and address of the eligible business; the starting salary or hourly wages paid to the new employee; and a demonstration to the Department that, on the date of the application, the total number of full-time jobs is greater than it was 12 months prior to the application. The application is initially filed with the governing body or enterprise zone development agency, which reviews the application and determines whether it contains all of the required information and meets the requirements of section 212.096. If it does, then the enterprise zone coordinator certifies the application and transmits it to the Department. In addition, the business also forwards a certified application to the Department. Once the Department receives a certified application for enterprise zone credits, it has ten days to notify the business that the credit has been approved. If the application is incomplete or insufficient to support the credit, the Department is required to deny the credit and notify the business, which is free to reapply. Section 212.096(2)(a) provides that “[u]pon an affirmative showing . . . that the requirements of this section have been met, the business shall be allowed a credit against the tax remitted under this chapter.” The credit “shall be allowed for up to 24 consecutive months, beginning with the first tax return due pursuant to s. 212.11 after approval by the department.” § 212.096(2)(b), Fla. Stat. Petitioner regularly submitted applications for EZ credits, and during the audit period, submitted applications on the following dates: February 1, 2012; August 1, 2012; February 4, 2013; April 2, 2013; July 19, 2013; August 15, 2013; August 30, 2013; January 6, 2014; January 30, 2014; March 3, 2014; March 27, 2014; and June 17, 2014. Each of these applications was made listing Michael’s as the taxpayer. Petitioner used a company named Economic Development Consultants (EDC) to help it calculate the credits Michael’s would be entitled to claim. Each month, Petitioner provided to EDC the names of employees terminated or resigned and those newly hired, along with the new hires’ addresses. Petitioner would also provide to EDC the number of full-time employees for each month. In determining residency for its employees, Petitioner relied on the addresses received from employees when they were hired. EDC would then provide a report saying which employees qualified for a credit, and do the necessary paperwork in order to obtain approvals for the credits. Each of Petitioner’s applications for EZ credits submitted during the audit period was approved, and Petitioner took the EZ credits associated with those applications with the understanding that they were properly approved. At the time the Department approved each of the applications for EZ credits, it had access to the information in and attached to the applications, including the identities of employees eligible for the credits. What the Department did not have when it reviewed the applications would be the actual wages paid to the eligible employees, because most of those wages would not have been paid at that point. Actions Taken By the Auditor On February 27, 2015, the Department issued a Notice of Intent to Audit Books and Records to Michael’s, indicating that it would be subject to audit for the period February 1, 2012, through January 31, 2015. Robert Ward was the auditor assigned to conduct the audit. Mr. Ward was relatively new to the Department, and had not previously conducted an audit that involved EZ credits. As part of his audit preparation, Mr. Ward pulled a copy of the Department’s standard audit plan, as well as the Department’s audit plan specifications for the industry in question (here, the restaurant industry). He noted that Michael’s had been audited previously and that the current audit resulted from a “lead,” but could not recall the basis or substance of the lead. He also noted that EZ credits had been an issue in the previous audit, which spanned the period from March 1, 2007, through June 30, 2009. Mr. Ward conducted a pre-audit interview with Omar Azze, Petitioner’s comptroller, on May 1, 2015.1/ While there was an agenda prepared for this pre-audit meeting, it does not appear to be in the record. At this pre-audit meeting, Mr. Ward was focused on the routine aspects of the audit as opposed to EZ credits. The issue of EZ credits was first raised in a meeting with Mr. Azze and Mr. Schwartz on May 27, 2015. At that time, Mr. Ward advised that EZ credits would be disallowed because the employees for whom credits were taken were on the payroll of GHG as opposed to Michael’s. Mr. Ward stated at hearing that this decision was made not based upon additional information, but based upon the sharing of employees by different entities. Mr. Ward acknowledged that Michael’s had received approval to take EZ credits, and that Michael’s provided all of the documentation requested of it. He had sought guidance from his trainer, Michelle Samuels, and a senior revenue consultant, Miguel Suarez. Mr. Ward was advised to verify the validity of the EZ credits claimed, with the focus on the growth of full-time employment. If a company subject to an audit had not received an approval letter for the credits, then the credits would be disallowed automatically. If there was an approval letter (as there was here), Mr. Ward understood that he was to look at the application itself and review the information provided with the application, including the schedules filed with the application, in order to validate the use of the EZ credits. Mr. Ward acknowledged that the person who reviewed the application for the Department when it was approved had all of this information. He was advised that the turn-around period for the initial applications was short, and that the initial reviewer is not required to validate the information, because the reviewer would trust the accuracy of the affirmation required of the taxpayer. The initial approval did not mean that the Department would not later go back and reexamine the information originally submitted. In addition to the documents submitted with the applications, Mr. Ward considered other Department records, such as reemployment tax records. He also verified addresses for named employees in the applications using the DAVID database of the Department of Highway Safety and Motor Vehicles. The DAVID database maintains information related to drivers’ licenses and car registrations. The information in the DAVID database is not available to the general public, and was not available to Petitioner. Mr. Ward also acknowledged that people can have a different mailing address from their residential address for a variety of reasons, and they were not always consistent, even in the DAVID database.2/ For example, one of the employees listed by Petitioner on an application dated August 1, 2012, was Aleksandar Gjurovski. The DAVID records indicate that on July 20, 2013, Mr. Gjurovski changed his mailing address. However, his residential address was not changed in the DAVID system until a date after the filing of the enterprise zone application. Mr. Ward relied on the change in the mailing address alone to determine that Mr. Gjurovski did not live within the enterprise zone at the time of the application. It is found that, at the time of the application, Mr. Gjurovski lived in the enterprise zone. After consultation with his supervisors, Mr. Ward disallowed all of the EZ credits for 2012 and 2013, as well as some of the credits for 2014. Respondent issued Michael’s a Notice of Intent to Make Audit Changes dated November 10, 2015, for audit number 200180508. The reasons given in the Explanation of Items included in the Work Papers are initially listed by employee, as opposed to by date. For all of the employees for which credits were claimed for 2012 and 2013, the primary reason stated by Mr. Ward is that the employees for which EZ credits were claimed were not employees of Michael’s, but instead were employees of another company. If the application for EZ credits was filed during 2012 or 2013, but the credits were claimed past December 2013, all of the credits related to that employee were disallowed. Other reasons listed for disallowing the tax credits were that there was no demonstrated job growth (for employees Kates, Gibson, Lopez, Jackson-Thompson, Daniels, Bradbury, Allante, Alicea, Wallace, and Herget); that the employee for which the credit was claimed did not live in the enterprise zone (for employees Coleman, Albert, Gjurovski, and Lopez); and discrepancies in terms of when employment ended compared to dates credits were claimed, or whether appropriate amount of credit was claimed for wages paid (for employees Kates, Poinsetti, Gomez, Daniels, Bradbury, Williams, Allante, and Herget). The first two of these reasons were based upon Mr. Ward’s verification of the information provided in the EZ credit applications. With respect to those employees for whom credits were disallowed because they had left the employ of Michael’s, Petitioner introduced a letter from the Department’s tax specialist, Suzanne Paul. The letter stated that a company could claim credits up to three months after employment ended in order to recapture the three months of employment required prior to submitting an application for that employee. Mr. Ward was not aware of this letter at the time he performed the audit, and had he known, it would have changed his note, at least as to Mr. Gjurovski, concerning that basis for disallowing the credit. Respondent assessed Michael’s sales and use tax for disallowed EZ credits, for untaxed purchases of fixed assets, and for untaxed consumable purchases. Only the assessment related to disallowed EZ credits is challenged in this proceeding. The Notice of Intent to Make Audit changes included a penalty of $62,609.01. In the letter accompanying the notice, Mr. Ward informed Petitioner that the penalty for items assessed in Exhibit B01 had been adjusted based on the reasonable cause guidelines outlined in Florida Administrative Code Rule 12- 13.007. It appears that there was no adjustment or compromise of penalties associated with the disallowance of EZ credits. Mr. Ward testified that penalties were assessed in this case because EZ credits were also an issue in the prior audit for Michael’s. The payroll arrangement at issue in this case was not at issue in the prior audit, however, as it did not begin until 2012. The financial dealings of Michael’s, including the payment of taxes to the Department, were also under a new comptroller, who was not involved in the first audit. Lastly, while the Department found fault with EZ credits in the first audit, it compromised the taxes assessed for the same amount as those associated with the EZ credits. Mr. Ward acknowledged that, under the circumstances related to this audit, the penalty seemed harsh. The Department issued a Notice of Proposed Assessment (NOPA) on December 15, 2015, in which it assessed taxes in the amount of $127,243.77, penalties of $62,609.01, and interest as of December 15, 2015, of $19,605.03. Michael’s filed an informal protest of the proposed assessment with the Department by means of a letter dated February 5, 2016. On August 18, 2016, the Department issued a Notice of Decision that sustained the proposed assessment against Michael’s in full. The Notice of Decision, which is, by its terms, the Department’s final position in this matter, only addresses the issue of whether Michael’s is an eligible employer for the purpose of receiving EZ credits.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order assessing additional taxes based upon discrepancies in wages paid for eligible employees, and rejecting those parts of the assessment attributable to disallowance of enterprise zone credits based on information related to Petitioner’s initial applications. It is further recommended that no penalties be imposed on the reduced assessment. DONE AND ENTERED this 16th day of June, 2017, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 16th day of June, 2017.
The Issue Is the taxpayer, Epic Hotel, LLC, entitled to a refund of $10,000 of sales tax paid for building materials that were used for the rehabilitation of real property located in an enterprise zone, on the basis that 20 percent of its permanent, full-time employees are residents of the Enterprise Zone?
Findings Of Fact The Department is an agency of the State of Florida and is authorized to administer the tax laws of the State of Florida. In 2008 Epic constructed and began operation of a hotel in a State of Florida Enterprise Zone in Miami-Dade County, Florida. Epic sought a refund of sales tax paid on building materials for the construction of the hotel. The sales tax paid on building materials used in the rehabilitation of real property located in an Enterprise Zone may be exempt up to $10,000, upon a showing that the items have been used for the rehabilitation of real property located in an Enterprise Zone and that 20 percent or more of the taxpayer’s fulltime, permanent employees reside in the Enterprise Zone. On or about August 24, 2009, Epic filed an Application for Refund–Sales and Use Tax. It requested refund of $10,000 in sales tax for building materials used to build the hotel. It submitted a completed Department form DR-26S and other documents, including a completed Department form EZ-M. The form EZ-M is the Department’s “Application for Eligibility” for the Florida Enterprise Zone Program Building Materials Sales Tax Refund. The form included a completed Section I identifying permanent, full-time employees Epic represented reside in the Enterprise Zone. The form represented that 22 percent of Epic’s full-time, permanent employees reside in the Enterprise Zone. The Enterprise Zone Coordinator for the area signed the EZ-M certifying, “that I have examined the statements contained on this application certificate, and to the best of my knowledge and belief they are true, correct and complete.” The record does not indicate whether the Enterprise Zone Coordinator is an employee of the Department. John Shettle, Tax Auditor for the Department, audited Epic’s refund application. Mr. Shettle is responsible for auditing refund applications. His duties include verifying that refund applications are complete and accurate, and that the applicant has provided the documentation required by the refund statute. The Department issued Epic a Notice of Intent to Make Refund Claim Changes, Form DR-1200R (for Refund Number R09246069). It proposed to deny the refund claim for $10,000. The Notice asked Epic to provide additional documentation aimed at establishing that Epic owned the property where the hotel was located and that the individuals identified in Section I to the form EZ-M were full-time, permanent employees of Epic. The requested documents included a copy of Epic’s 940 Federal Unemployment Tax Return and a copy of Epic’s W3 form. Mr. Shettle conducted independent research on the employee issue. He used the State’s unemployment tax records and the Department of Business and Professional Regulation’s employee leasing company registration data. He was unable to locate any evidence that the employees listed in Schedule A were employed by Epic. Epic has not presented any. Epic has a Hotel Operating Agreement with Kimpton Hotel & Restaurant Group, LLC. The Agreement provides for Kimpton to “supervise, direct, and control the management, operation, and promotion of the Epic hotel.” The employees identified as Epic employees on Section I of Epic’s EZ-M form are employees of Kimpton who provide the contracted services at Epic. They are not direct employees of Epic or employees leased by Epic. Epic relied upon the Final Order of the Department of Revenue in The Angler Resorts, LLC v. State of Florida, Department of Revenue, Case No. DOR-08-17-FOI (Fla. Dept. of Rev., March 16, 2008), in its dealings with the Department. In reliance upon that Final Order, Epic maintained that it was not required to provide anything more than the certified form EZ-M and a completed Department form DR-26S. The Department denied Epic’s refund application on the basis that Epic could not be verified as the owner, lessee, or lessor of the rehabilitated parcel, and that the individuals listed in Section I could not be confirmed as employees of Epic. During the course of this dispute about entitlement to the refund, Epic established ownership of the property at the time of the application. The Department consequently issued Epic a refund of $5,000. The Department has adopted rules governing the manner and form of refund applications.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is Recommended that the Department of Revenue grant Epic’s refund application and approve a sales tax refund for the total amount of $10,000. DONE AND ENTERED this 2nd day of August, 2010, in Tallahassee, Leon County, Florida. S JOHN D. C. NEWTON, II 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 2nd day of August, 2010. COPIES FURNISHED: Marshall Stranburg, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Tallahassee, Florida 32314-6668 Carrol Y. Cherry, Esquire Office of the Attorney General Revenue Litigation Bureau The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Herb Friesner Economic Development Consultants, Inc. 14361 Commerce Way, Suite 205 Miami Lakes, Florida 33016 Lisa Echeverri, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100
The Issue Whether Petitioner, Brian’s Painting and Wall Papering, Inc., conducted operations in the State of Florida without obtaining workers’ compensation coverage, meeting the requirements of Chapter 440, Florida Statutes (2007),1 in violation of Subsection 440.107(2), Florida Statutes. If so, what penalty should be assessed by Respondent, Department of Financial Services, Division of Workers’ Compensation, pursuant to Section 440.107, Florida Statutes, and Florida Administrative Code Chapter 69L.
Findings Of Fact 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. § 440.107, Fla. Stat. Petitioner is a corporation domiciled in Florida and engaged in the construction industry, providing painting and wallpapering services to private residences in Florida. On December 4, 2007, Investigator Ira Bender conducted a random workers’ compensation compliance check of a new home construction site located at 4009 Twenty-second Street, Southwest, in Lehigh Acres, Florida. Investigator Bender observed two men painting. He later identified the two men as Larry Zoelner and Brian Zack, who were later determined to be Petitioner’s employees. Investigator Bender continued the investigation of Petitioner, utilizing the Respondent’s Compliance and Coverage Automated System (“CCAS”) database that contained all workers’ compensation insurance policy information from the carrier to an insured and lists all the workers’ compensation exemptions in the State of Florida. Based on his search of CCAS, Investigator Bender determined that for the period, December 3, 2004, through December 4, 2007 (“assessed penalty period”), Petitioner did not have a State of Florida workers’ compensation insurance policy or a valid, current exemption for any of Petitioner’s employees, including Zoelner and Zack. Based on his search of CCAS, he also determined that Petitioner did not have a State of Florida workers’ compensation insurance policy or a valid, current exemption for Brian Galvin, Petitioner’s owner and operator, for the assessed penalty period. Galvin admitted that he did not have an exemption prior to December 4, 2007. Section 440.05, Florida Statutes, allows a corporate officer to apply for a construction certificate exemption from workers’ compensation benefits or compensation. Only the named individual on the application is exempt from carrying workers’ compensation insurance coverage. Petitioner was not in possession of a current, valid construction industry exemption for its corporate officer, Galvin, during the three-year search period. To be eligible for the exemption in the construction industry, an employer must pay a $50 processing fee and file a “notice of election to be exempt” application with Respondent for each corporate officer and have that application processed and approved by it. 7. Subsections 440.107(3) and 440.107(7)(a), Florida Statutes, authorized Respondent to issue SWOs to employers unable to provide proof of workers’ compensation coverage, including proof of a current, valid workers’ compensation exemption. Failure to provide such proof is deemed “an immediate serious danger to public health, safety, or welfare . . .” § 440.107(7)(a), Fla. Stat. Based on the lack of worker’s compensation coverage and a current, valid workers’ compensation exemption for its employees, including Galvin, Respondent issued a SWO on Petitioner on December 4, 2007. The SWO ordered Petitioner to cease all business operations for all worksites in the State of Florida. On the day the SWO was issued, Investigator Bender also served Petitioner with a “Request for Production of Business Records for Penalty Assessment Calculation,” for the purpose of enabling Respondent to determine a penalty under Subsection 440.107(7), Florida Statutes. Pursuant to Florida Administrative Code Rule 69L-6.015, Investigator Bender requested business records from Petitioner for the assessed penalty period. The requested records included payroll documents, copies of certificates of exemptions, employee leasing records, and other business records. Investigator Bender was satisfied that the records produced by Petitioner were an adequate response to the business records request. Based on Investigator Bender’s review of the business records, he determined that Galvin was dually-employed during the assessed period. Dual employment occurs when an employee is paid remuneration by two different employers. Galvin was simultaneously employed by SouthEast Personnel Leasing, Inc., as a painter and by Petitioner as its chief operating officer. In calculating the assessed penalty, Investigator Bender only took into account Petitioner’s payroll. It was determined that the payroll from the leasing company demonstrated secured payment of workers’ compensation coverage for the two painters and for Galvin, when he was operating as a painter. Pursuant to Florida Administrative Code Rule 69L- 6.035, Investigator Bender included “dividends” paid by Petitioner to Galvin during the assessed penalty period, in calculating Petitioner’s total payroll amount used in the calculation of the assessed penalty. Galvin argued that dividends paid to him by Petitioner should be excluded from the calculation. However, the dividends that Petitioner paid to Galvin constituted unsecured payment for workers’ compensation coverage, in violation of Chapter 440, Florida Statutes, and the Florida Insurance Code. Through the use of the produced records, Respondent calculated a penalty for the assessed period. The Amended Order, which assessed a penalty of $45,363.76, was issued and served to Petitioner on December 13, 2007. Based on business records Investigator Bender received from SouthEast Personnel Leasing, Inc., on December 17, 2007, Investigator Bender determined that the classification code assigned for Galvin should be changed from 5474 to 5606. Classification code 5474 represented the designation for a painter while classification code 5606 represented the designation for a manager. In the course of his investigation, Investigator Bender also deleted Charlie Galvin after he determined Charlie Galvin was not Petitioner’s employee. Investigator Bender assigned the new class code to the type of work performed by Galvin while working as a manger for Petitioner, utilizing the SCOPES Manual. He multiplied the class code’s assigned approved manual rate with the payroll per $100, and then multiplied all by 1.5. Consequently, the 2nd Amended Order, which was issued and served to Petitioner on December 18, 2007, assessed a penalty in the amount of $19,943.08. The recalculated penalty, as calculated, was consistent with the method in which the investigator had calculated the previous penalties.
Recommendation Based on the Findings of Fact and Conclusions of Law, it RECOMMENDED that Petitioner enter a final order, as follows: Petitioner failed to secure workers’ compensation coverage for its employees, including its corporate officer, as required by statute; and Petitioner be assessed a penalty of $19,943.08. DONE AND ENTERED this 22nd day of May, 2008 in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE 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 22nd day of May, 2008
The Issue Whether Rule 67-48.005, Florida Administrative Code, and Section VII on Page 16 of Form 1 of the 1999 Housing Credit Application Package adopted by Rule 67-48.002(10) Florida Administrative Code, are invalid exercises of delegated legislative authority. If so, whether Petitioners are entitled to an award of attorney's fees and costs.
Findings Of Fact Part V of Chapter 420, Florida Statutes, consisting of Sections 420.501 - 420.517, Florida Statutes, is the Florida Housing Finance Corporation Act. Respondent, Florida Housing Corporation (FHFC), is a public corporation created by the provisions of Section 420.504, Florida Statutes. Pursuant to Section 420.5099, Florida Statutes, FHFC is the designated housing agency for the State of Florida. FHFC administers the Low Income Housing Tax Credit Program and other housing programs in Florida pursuant to other provisions of the Florida Housing Finance Corporation Act. Pursuant to Section 420.504(2), Florida Statutes, FHFC is an agency of the State of Florida for the purposes of Chapter 120, Florida Statutes. FHFC is governed by an independent member Board of Directors appointed by the Governor. The Board members come from specifically designated industries and backgrounds as set forth in Section 420.504(3), Florida Statutes. Pursuant to Section 420.507, Florida Statutes, FHFC has all the powers necessary or convenient to carry out and effectuate the purposes and provisions of the Florida Housing Finance Corporation Act, including the power to enact rules. 2/ Petitioner submitted an application to the FHFC for 1999 Low Income Housing Tax Credits. The parties stipulated that Petitioner has standing to challenge the validity of the rules at issue in this proceeding. The parties further stipulated that Shepland does not have standing to challenge the validity of the rules at issue in this proceeding. Intervenors, Miami River Park, Ltd., and Wynwood Tower Apartments, Ltd., submitted applications to FHFC for 1999 Low Income Housing Tax Credits. The parties stipulated that these two entities have standing to intervene in this proceeding. The Low Income Housing Tax Credit Program is a federal program whose purpose is to encourage the development of housing for low-income families in the various states. 3/ Section 42 of the Internal Revenue Code (Title 26 of the United States Code) creates federal income tax credits that are allocated to each state and are awarded through state-administered programs to developers of low-income housing projects. The tax credits equate to a dollar-for-dollar reduction of the holder's tax liability which can be taken each year that the project satisfies the Internal Revenue Code requirements, for up to ten years. The developer typically sells or syndicates the tax credit to generate funding for the proposed project. Section 42 of the Internal Revenue Code requires that each state adopt a Qualified Allocation Plan (QAP) establishing procedures to be followed in awarding low-income credits allocated to the states. Section 420.5099, Florida Statutes, provides as follows: The Florida Housing Finance Corporation is designated the housing credit agency for the state within the meaning of s. 42(h)(7)(A) of the Internal Revenue Code of 1986 and shall have the responsibility and authority to establish procedures necessary for proper allocation and distribution of low-income housing tax credits and shall exercise all powers necessary to administer the allocation of such credits. The corporation shall adopt allocation procedures that will ensure the maximum use of available tax credits in order to encourage development of low-income housing in the state, taking into consideration the timeliness of the application, the location of the proposed housing project, the relative need in the area for low-income housing and the availability of such housing, the economic feasibility of the project, and the ability of the applicant to proceed to completion of the project in the calendar year for which the credit is sought. The corporation may request such information from applicants as will enable it to make the allocations according to the guidelines set forth in subsection (2), including, but not limited to, the information required to be provided the corporation by chapter 9I-21, Florida Administrative Code. The executive director of the corporation shall administer the allocation procedures and determine allocations on behalf of the corporation. Any applicant disputing the amount of an allocation or the denial of a request for an allocation may request an appeal to the board of directors of the corporation. For purposes of implementing this program in Florida and in assessing the property for ad valorem taxation under s. 193.011, neither the tax credits, nor financing generated by tax credits, shall be considered as income to the property, and the rental income from rent restricted units in a low-income tax credit development shall be recognized by the property appraiser. The corporation is authorized to expend fees received in conjunction with the allocation of low-income housing tax credits only for the purpose of administration of the program, including private legal services which relate to interpretation of s. 42 of the Internal Revenue Code of 1986, as amended. Pursuant to the provisions of Section 420.5099, Florida Statutes, FHFC has established rules for processing applications for housing tax credits. These rules, found in Chapter 67-48, Florida Administrative Code, constitute Florida's QAP. A prime consideration in developing the application process is that the process be completed in a timely manner, since the failure of a state to use all of its allocated credits in a timely manner will result in a loss of housing tax credits. Such a loss is contrary to the statutory mandate that FHFC ensure the maximum use of available tax credits. Petitioner has challenged FHFC's Rule 67-48.005, Florida Administrative Code, which is entitled Applicant Administrative Appeal Procedures, and provides, in pertinent part, as follows: Following the Review Committee's determination of preliminary scores and ranking, notice of intended funding or denial of funding will be provided to each Applicant with a statement that: Applicants who wish to contest the decision relative to their own Application must petition for review of the decision in writing within 10 calendar days of the date of the notice. The request must specify in detail the forms and the scores sought to be appealed. Unless the appeal involves disputed issues of material fact, the appeal will be conducted on an informal basis. The Review Committee will review the appeal and will provide to the Applicant a written position paper which recommends either no change in score or an increase or decrease in a score which it deems to be in error. If the Applicant disagrees with the Review Committee's recommendation, the Applicant will be given an opportunity to participate in the informal administrative appeal hearings scheduled by the Review Committee. If the appeal raises issues of material fact, a formal administrative hearing will be conducted pursuant to Section 120.57(1), Florida Statutes. Failure to timely file a petition shall constitute a waiver of the right of the Applicant to such an appeal. Applicants who wish to notify the Corporation of possible scoring errors relative to another Applicant's Application must file with the Corporation, within 10 calendar days of the date of the notice, a written request for a review of the other Applicant's score. Each request must specify in detail the assigned Application number, the forms and the scores in question. Each request is limited to the review of only one Application's score. Requests which seek the review of more than one Application's score will be considered improperly filed and ineligible for review. There is no limit to the number of requests which may be submitted. The Review Committee will review each written request timely received and will prepare a written position paper, which will be provided to each Applicant who timely filed a notification and to the Applicant whose score has been questioned, which recommends either no change in score or an increase or decrease in a score which it deems to be in error. Failure to timely and properly file a request shall constitute a waiver of the right of the Applicant to such a review. Notice will be provided to all Applicants whose score is reduced or whose Application is deemed ineligible pursuant to 67-48.005(1)(b) that they may contest the decision relative to their own Application by petitioning for review of the decision in writing within 10 calendar days of the date of the notice. The request must specify in detail the forms and the scores sought to be appealed. Unless the appeal involves disputed issues of material fact, the appeal will be conducted on an informal basis. The Review Committee will review the appeal and will provide to the Applicant a written position paper which recommends either no change in score or an increase or decrease in a score which it deems to be in error. If the Applicant disagrees with the Review Committee's recommendation, the Applicant will be given an opportunity to participate in the informal administrative appeal hearings scheduled by the Review Committee. No Applicant or other person or entity will be allowed to intervene in the appeal of another Applicant. If the appeal raises issues of material fact, a formal administrative hearing will be conducted pursuant to Section 120.57(1), Florida Statutes. Failure to timely file a petition shall constitute a waiver of the right of the Applicant to such an appeal. Petitioner has also challenged the following portion of the application form which has been adopted by reference by FHFC's Rule 67-48.002(10), Florida Administrative Code: . . . In consideration for the Corporation processing and scoring this Application, the Applicant and all Financial Beneficiaries hereby understand and agree that the Corporation will hear appeals only on the Applicant's own score. . . . In 1996, FHFC combined the application processes for the subject low-income tax credit program, the State Apartment Incentive Loan (SAIL) Program (Section 420.587, Florida Statutes) and the Home Investment Partnership (HOME) Program (Section 420.5089, Florida Statutes) to make the application process easier and more efficient. Each year FHFC initiates rulemaking to refine the application process from the previous year and to implement any changes in the application process. The administrative rules, with any amendments, are adopted annually. All prospective applicants under any of the three combined programs are invited to attend rulemaking workshops. After the allocation of tax credits for Florida is known, a Notice of Funding Availability setting forth that allocation, is published in the Florida Law Weekly. For the 1999 allocation period, the notice was published on October 23, 1998. Due to the limited number of housing credits available in each annual application cycle and the number of applications for those credits, there are not enough credits available for distribution in Florida for all applicants to receive housing credits in the year in which they apply. Consequently, applicants are competing for a fixed pool of resources. For the 1999 period, the application cycle was opened and the application form was available to interested persons on October 30, 1998. From November 9 through 11, 1998, application workshops were held in Tallahassee, Miami, and Orlando, to address any questions regarding the application process. Applicants are given what is referred to as the Application Package, which contains all pertinent forms and sets forth the instructions and criteria by which the applications will be evaluated by FHFC staff. Applicants were required to complete the applications and submit them to FHFC by January 7, 1999. Ninety applications for the three combined programs were filed. Each application was evaluated by FHFC staff pursuant to the instructions and criteria contained in the Application Package. Partly because FHFC staff is required to verify information reflected in each application, the evaluation process takes six to eight weeks to complete. The evaluation process results in a score for each application. The scores are reviewed and approved by a Review Committee, consisting of FHFC staff. On March 12, 1999, after scores were approved by the Review Committee, a pre-review score was mailed to each applicant. After the applicants were notified of their pre-review score, they had the week beginning March 15, 1999, to review the scoring of all applications. FHFC rules provide an opportunity for an applicant to question its pre-review score and to challenge the pre-review scores received by other applicants. The challenge to an applicant's own score is referred to as a Direct Appeal. The challenge by an applicant to another applicant's score is referred to as a Competitive Appeal. All Direct and Competitive Appeals were due on or before March 22, 1999. Upon receipt of the Direct Appeals and Competitive Appeals, FHFC staff first review the Competitive Appeals and draft a Competitive Appeal Position Paper for each unique issue raised. The Competitive Appeal Position Papers are approved by the Review Committee before being released, which, for 1999, was on April 5, 1999. The same process is followed for the Direct Appeals. The Direct Appeal Position Papers were approved by the Review Committee and released on April 7, 1999. An applicant whose application was adversely affected by a Competitive Appeal Position Paper (as the result of a Competitive Appeal filed by a competing applicant) has the opportunity to file what is referred to as a Direct Appeal of a Competitive Appeal (DACA). Thereafter, FHFC staff evaluates all issues raised by the Direct Appeals and by the DACAs, and prepares a position paper for each issue. On April 27, 1999, the Review Committee approved the Direct Appeal and DACA position papers. On May 4, 1999, these position papers were mailed to the interested parties. An applicant who was not satisfied with the Direct Appeal or DACA position paper for its application was given a limited period to request a proceeding pursuant to Chapter 120, Florida Statutes. If there were no disputed issues of material fact, the matter proceeded as an informal hearing. If there were disputed issues of material fact, the matter proceeded as a formal hearing. On June 11 and July 30, 1999, the Board of Directors of FHFC considered the Recommended Order that resulted from each administrative hearing and entered a Final Order, which determined the final scores for each application. Thereafter, the final ranking of the competing applications were completed and approved. Preliminary approval of a tax credit allocation to an applicant is based on the final ranking. An applicant selected for a tax credit allocation is thereafter "invited" by FHFC to a "credit underwriting" whereby the credit-worthiness of the applicant and the proposed project is further scrutinized by a credit underwriter and a draft credit underwriting report is prepared. The credit underwriting process takes fifty to sixty days to complete. For the 1999 cycle, the draft credit underwriting reports were due September 28, 1999. Once the credit underwriting reports are finished, the successful applicant is given a preliminary tax credit allocation. For the 1999 cycle, the applicant then must complete its project or certify that it has expended at least ten percent of its reasonably expected tax credit basis. If the project cannot be completed by the end of the calendar year, the applicant must enter into a Carryover Agreement. The applicant must have expended ten percent of its reasonably expected tax credit basis before it can enter into a Carryover Agreement. The applicant typically has to be prepared to spend large sums of money in a relatively short period of time to meet these requirements. An applicant does not have the opportunity for an administrative hearing pursuant to Chapter 120, Florida Statutes, on the scoring of a competing application after the Competitive Appeal Position Paper has been issued by FHFC staff. 4/ Pursuant to the challenged rules, an applicant who was not satisfied with the Direct Appeal or DACA position paper for another applicant's application is not permitted a Chapter 120 proceeding and is not permitted to intervene if the other applicant has requested a Chapter 120 proceeding. Such appeals, referred to as Cross Appeals, were once permitted by the rules of FHFC. FHFC determined that Cross Appeals disrupted the application process and placed too great a burden on the FHFC staff. Cross Appeals resulted in a process that was difficult to bring to closure and resulted in litigation expenses that were assessed against the total project cost for the development. Using rule development workshops that were appropriately advertised, FHFC adopted rules permitting Competitive Appeals, but prohibiting Cross Appeals. FHFC did not act arbitrarily or capriciously in adopting these rules.
