The Issue Is the Respondent's assessment for corporate income tax and interest for the tax years ending 12/31/78, 12/31/79, and 12/31/80 appropriate, and may it be properly imposed upon Petitioner?
Findings Of Fact The instant dispute between the parties arose out of how the substantial business interests of Petitioner Murray Kramer Corp. are to be defined and by what accounting method its corporate income tax assessments are to be made. Milton P. Weiss, C.P.A., is Petitioner's accountant and qualified representative for purposes of this proceeding. He is neither an internal bookkeeper for the corporation nor a corporate officer thereof. At all times material, Petitioner was conducting business, deriving income, or existing within the State of Florida, pursuant to Chapter 220, F.S. Petitioner invests primarily through partnerships. Among Petitioner's holdings and investments is ownership of an orange grove in the State of Florida from which it derived income by way of the sales of citrus fruit grown in Florida during the taxable years at issue: 1978, 1979, and 1980. The orange grove constitutes real and tangible property in Florida for purposes of Florida's corporate income tax. Petitioner has consistently filed Florida corporate income tax returns on a "separate accounting" basis since the inception of Florida's Corporate Income Tax Law on January 1, 1972. Petitioner used this method for the years at issue: 1978, 1979, and 1980. It did so without petitioning the Respondent Department of Revenue for permission at or before the filing of the returns to use the "separate accounting" method to determine the Florida tax base. Accordingly, Petitioner did not receive prior written permission from the Department to use the "separate accounting" method for those years, and the Department did not require that the Petitioner use the "separate accounting" method in those years. Nonetheless, Petitioner asserts that its pattern of using the "separate accounting" method for six years put the Department on sufficient notice that the corporate taxpayer would continue to use that method indefinitely and further asserts that it was therefore entitled to use such a "separate accounting" method on the basis of its prior consistent usage. Petitioner's Florida corporate returns declare investment income from dividends, interest, gains from securities, partnership income, and income from its orange grove located in Florida. In each of the disputed tax years, Petitioner entered its federal taxable income on Line 1 of the Florida Corporation Income Tax Return, FORM F-1120. This amount is not at issue and is accepted as a "given" by both parties. However, in each of the disputed tax years, Petitioner did not complete the apportionment schedule on Page 3 of the respective returns. Instead of using the apportionment method, Petitioner computed what it characterized as "Florida Profit" or "Florida Income" on a schedule it attached, based totally on the profits it derived from the Florida orange grove and then inserted that amount on Line 6, Florida Portion of Adjusted Federal Income, of the "Computation of Florida Tax Liability" on the Florida return. This entry did not relate computationally to the amount of federal taxable income reported federally on Line 1. All gross receipts from the sale of citrus fruit by Petitioner were derived from sales made to Zellwood Fruit Distributors. This dollar amount is also undisputed. Petitioner received payment from its Florida orange grove operation in the form of checks drawn by Zellwood. Approximately June 20, 1983, Respondent Department of Revenue made an initial audit of Petitioner's books and records for the taxable years in question. Respondent's auditor assigned at that time had full and free access to Petitioner's books and records. He and his supervisor memorialized their view that the "separate accounting" method employed by Petitioner was proper, but this judgment call (by the auditor on June 29, 1983 and by his supervisor on July 1, 1983) was in the nature of free-form agency action and was neither accepted nor formalized by their superiors within the agency who ultimately determined that the Petitioner should have employed the "apportionment" method and that the burden was upon the Petitioner even under the apportionment method to establish that one hundred percent of its income was not derived in Florida. The Respondent Department therefore determined the tax owed by Petitioner upon the basis of 100% of Petitioner's income as opposed to the yearly percentages that Petitioner had unilaterally assigned to its orange grove, and issued its Revised Notice of Intent to Make Corporate Income Tax Audit Changes on November 7, 1983. Florida's apportionment formula is a three-factor function which takes selected business activities of the taxpayer and computes the portion of that activity attributable to Florida, divided by that activity everywhere. A composite of the subtotal of those three measures (payroll, sales, and property) of business activity are used to compute Florida's share of the "everywhere" base that would be available under the adjusted federal taxable income base. See, Section 214.71(1), F.S. The Department calculated the tax using the three statutorily recognized apportionment factors of payroll, sales, and property. Concerning the first apportionment factor, payroll, Petitioner had federally reported no amount of payroll, and therefore this factor was determined by the Department to be zero, and pursuant to Section 220.15, F.S., the payroll factor was eliminated and the other two factors were used exclusively. Concerning the sales factor, all gross receipts of the orange grove were considered to be derived within the State of Florida, and all gross income attributable to intangible personal property was excluded from the sales factor, pursuant to Section 220.15(1), F.S. Concerning the property factor, the Department determined that all real and tangible personal property was within the State of Florida. The situs of the intangible property was not established by the taxpayer. Therefore, because Section 214.71, F.S. limits the construction of the property factor to include only "real and tangible personal property," it was thus determined to exclude intangible property. The Respondent Department of Revenue issued its Notice of Proposed Assessment on November 16, 1983, showing a balance of $10,596.00 ($7308.00 tax, $275.00 penalty, and $3,013.00 interest computed through October 31, 1983, plus notice of daily interest of $2.40 per day from November 1, 1983 until paid.) Petitioner timely availed itself of informal protest procedures, and the Department issued its Notice of Decision on March 15, 1985. By its June 21, 1988 Notice of Reconsideration, the Department concluded its informal proceedings and denied Petitioner's assertion of the right to use a "separate accounting" method and further denied Petitioner's challenge to the Department's assessment by the "apportionment" method, which in this instance had not made any apportionment for "outside Florida" activities. The situs of intangible personal property was not sufficiently demonstrated by the Petitioner at formal hearing. The Petitioner also did not establish that it owns real or tangible personal property outside Florida. Zellwood Fruit Distributors provided Petitioner Murray Kramer with letters attesting that, based upon information received from Winter Gardens Citrus Products Cooperative, Winter Gardens' sales percentages in the State of Florida were as follows: 1979 1980 18.60% 21.07% Zellwood provided no such figures to Petitioner for the year 1978. Petitioner contends, on the basis of the after the fact Zellwood letters, that Zellwood was a member of Winter Gardens, a cooperative, and Murray Kramer was an associate grower of Zellwood. At formal hearing, no one from Zellwood or Winter Gardens testified; no contract between Petitioner Murray Kramer and either Zellwood or Winter Gardens was introduced to prove agency; no bills of lading, sales slips, corporate documents, or other connective link among the three entities was offered in evidence; nor was any primary, direct, non-hearsay evidence of sales amounts or situs of Winter Gardens' sales offered by Petitioner. Milton Weiss, Petitioner's accountant, asserted that if a straight "apportionment" (not "separate accounting") calculation had been made for the income derived in Florida by Petitioner, percentages would be: 1978 1979 1980 24.03% 15.31% 15.01% These percentages rely in part on what are clearly the out-of-court statements of Zellwood's correspondent, relaying further out-of-court statements from Winter Gardens Citrus. (See the immediately preceding Finding of Fact). Neither of these out-of-court hearsay statements is such as may be used to supplement or explain direct evidence, since no direct, primary source evidence of these sales or income has been presented before the undersigned in this de novo proceeding. See, Section 120.58(1), F.S. Petitioner has not directly paid wages during the tax years at issue. Petitioner has not produced any federal partnership tax returns nor other persuasive proof to account for the return on its investments through partnership channels. During the tax years at issue, Petitioner was not a member of a Florida cooperative, as that term, "cooperative," is used in Section 214.71(3)(a)2, F.S. (See Finding of Fact 15). Petitioner was unable, by evidence of a type commonly relied upon by reasonably prudent persons in the conduct of their affairs, to establish that all amounts other than the percentages of gross income Petitioner had assigned by either of the alternative accounting methods was generated outside of the State of Florida. In so finding, the undersigned specifically rejects Petitioner's assertion that the initial audit report of June 1983 could, by itself alone, legally or factually establish that only the orange grove income was Florida income, that Petitioner's Florida income was solely from the orange grove, that the interest, dividends, and gains on securities sales were not derived in Florida, that the Petitioner taxpayer received rent income from partnerships, that the partnership real estate which gave rise to the rent income was 100% outside Florida, or that the Respondent's initial audit "verified" the figures needed to compute the sales factor, the figures for the property factor, and the figures for the payroll factor of the "apportionment" method for the following reasons: In addition to the first auditor's report being free-form agency action which was ultimately rejected by the agency, and in addition to the failure of either the first auditor or his supervisor to testify in the instant Section 120.57(1) de novo proceeding as to the accuracy of the underlying primary documentation which Petitioner Murray Kramer claimed the first auditor had apparently reviewed, Petitioner did not offer in evidence at formal hearing any such direct evidence documentation which it claimed had been reviewed by the auditors. Further, Respondent's successive auditor, Mr. Siska, testified that it is auditor practice to only examine those books and records individual auditors believe to be necessary to complete the audit. This discretionary element eliminates any guarantee of what the initial auditor relied upon. For the same reasons, Petitioner's assertion that the Internal Revenue Service (IRS) audit of its books and records for the year 1979 "verifies" that the Petitioner's books and records accurately reflect the transactions that took place, is rejected. Petitioner Murray Kramer had admitted a letter (P-10) notifying the corporation that the IRS' "examination of ... tax returns for the above periods shows no change as required in the tax reported. The returns are accepted as filed." The tax period indicated on this exhibit is "7912", which is not helpful, and even if it means, as Mr. Weiss testified, that the 1979 federal tax return which is part of the Florida Corporate Tax Return is accurate under federal law, this IRS letter alone does not verify all the underlying documentation for all three years in question. Also, specifically with regard to investments made through other entities, Mr. Weiss' testimony suggests that the wages paid and partnership returns of these other entities never were in the possession of, nor accessible by, this Petitioner. Petitioner's reliance on its federal returns is apparently based, in part, at least, upon its assertion that it is a "financial institution" as defined in Sections 214.71(3)(b) and 220.15(2), F.S., but the presentation quality of evidence in this case does not permit of such a finding, either. Petitioner has paid no portion of the assessed taxes.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue enter a Final Order which dismisses the Petition and affirms the assessment. DONE and ORDERED this 26th day of June, 1989, in Tallahassee, Leon County, Florida. ELLA JANE P. DAVIS Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 26th day of June, 1989. APPENDIX TO RECOMMENDED ORDER, CASE NO. 88-4100 The following constitute rulings, pursuant to Section 120.59(2), F.S. upon the parties' respective proposed findings of fact (PFOF). Petitioner's PFOF: 1, 6. Accepted. 2, 9, 10, 11, 17, 19. Rejected for the reasons set out in the Recommended Order. 3, 5, 7, 8, 12, 14, 16. Accepted but not dispositive of any material issue for the reasons set forth in the Recommended Order. With regard to item 8, specifically, this determination is non-binding in the de novo proceeding. 4. Rejected upon the citation given as not proved or applicable as stated. 13. Accepted in part and rejected in part as not proved or applicable as stated. See Conclusions of Law 11-12. 15, 18. Rejected as out of context and misleading upon the record as a whole, and as not dispositive of any material issue, and as subordinate and unnecessary to the facts as found. Respondent's PFOF: 1, 2, 3, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 18. Accepted. 4, 5. Accepted in part; what is not adopted is subordinate or unnecessary to the facts as found. 17. Accepted, but by itself is not dispositive of any material issue at bar, for the reasons set out in the Recommended Order. COPIES FURNISHED: Milton P. Weiss, C.P.A. 686 Hampstead Avenue West Hampstead, New York 11552 Jeffrey M. Dikman, Esquire Assistant Attorney General Tax Section Department of Legal Affairs The Capitol Tallahassee, Florida 32399-1050 Sharon A. Zahner, Esquire Assistant General Counsel Department of Revenue Room 204, Carlton Building Post Office Box 6668 Tallahassee, Florida 32314-6668 William D. Townsend, Esquire General Counsel 203 Carlton Building Tallahassee, Florida 32399 Katie D. Tucker, Executive Director Department of Revenue 102 Carlton Building Tallahassee, Florida 32399-0100 Milton P. Weiss, C.P.A. 3091 North Course Drive Pompano Beach, Florida 33069 =================================================================
The Issue Does Petitioner have standing to challenge Rule 12A- 1.091(3), Florida Administrative Code? If Petitioner has standing, is Rule 12A-1.091(3), Florida Administrative Code, an invalid exercise of delegated legislative authority? See Section 120.56, Florida Statutes.
Findings Of Fact Rathon Corporation, formerly known as Diversey Corporation, is a Delaware Corporation authorized to do business in Florida. It manufactures various detergents, cleaners, and soaps, and the equipment to dispense those products. The products are marketed in Florida and other states. The customers of the products include hotels, hospitals, factories, and restaurants. The devices that dispense the detergents, cleaners, and soaps are referred to as "feeders." Those feeders can range from simple hand soap dispensers to electronically regulated machines that inject soap into commercial dishwashers. The feeders are loaned to Petitioner's customers at no additional charge for the period of time that the customer continues to purchase the product(s) dispensed by the feeder. These circumstances existed in the period of July 1993 through March 1995. In the period of July 1993 through March 1995, Diversey Corporation, now Rathon Corporation, paid the State of Florida $58,969.22 in use tax associated with the feeders. During the period in question, the Petitioner manufactured the feeders at a facility in Santa Cruz, California. The feeders were not warehoused in the Santa Cruz facility for an extended period. They were prepared for shipment and shipped to customers in the various states, to include Florida and California customers, to be used in the places of business operated by the customers. The feeders being shipped were not packaged with other products. During the period July 1993 through March 1995, the Petitioner not only paid use tax to Florida for the feeders, it paid use tax in forty-four other states and the District of Columbia, based upon the costs of manufacturing the feeders. California was among the other forty-four states. During the period in question, Petitioner accrued and paid use taxes to Florida and California limited to the feeders used by customers in those states, based upon the product sales allocation method it used in relation to the forty-three other states and the District of Columbia. The feeders that were provided to Florida customers were shipped by common carrier. Upon their arrival in Florida no tax had been paid to California pertaining to those feeders. When the feeders arrived in Florida during the period at issue, use tax would be remitted to Florida. Subsequently, the Petitioner paid the State of California a use tax associated with the feeders that had been shipped to Florida customers and upon which a use tax had been imposed by the State of Florida and paid. The California payment is described in detail below. Petitioner had paid Florida use tax on the feeders shipped to Florida customers based on the total manufactured cost of the feeders to Petitioner, including materials, labor, and overhead. The additional use tax paid to California for those feeders was based only on the cost of materials. The overall costs of feeders allocated to Florida for the refund period was $982,803.00. Petitioner remitted a 6% use tax to Florida totaling $58,969.22 for the period in question. In 1996, Petitioner was audited for sales and use tax compliance by the State of California. That audit process included the refund period that is in question in this case, July 1993 through March 1995. Following the audit, the State of California issued a Notice of Determination asserting additional liability for tax and interest that totaled $355,753.95. Petitioner paid that assessment. The California auditor had arrived at the assessment by concluding that Petitioner owed California for 44.57% of all feeders manufactured at Petitioner's Santa Cruz facility. The 44.57% represented all newly manufactured feeders that had been loaned by Petitioner to its customers during the refund period over the entire United States. As a consequence, the assessment of use tax by the State of California included tax on feeders for which Petitioner had paid Florida $58,969.22 in use tax prior to the California assessment of $355,753.95. Petitioner did not apply for credit in California for the portion of the $355,753.95 that would relate to the feeders brought to Florida during the period in question. Petitioner took no action to obtain a credit on the amount paid to Florida as a means to reduce the California tax obligation pursuant to the 1996 audit, because Petitioner had been told that the use tax for the feeders used by Florida customers was legally due in California and not in Florida. In arriving at the determination that 44.57% of the feeders manufactured during the period in question had been loaned to customers within the continental United States, the California auditor took into account that 21.8% of the feeders and feeder parts were sold for export, leaving 78.2% to be used in the United States. Of the 78.2% remaining for the United States, 57% were complete feeders sent to customers within the United States, and 43% were repair parts that were sent to Petitioner's Cambridge Division in Maryland, where those repair parts were being stored for future use. The percentage of 44.57% was arrived at by multiplying 57% times 78.2%, representing the percent of total feeders manufactured for use in the United States that were sent to customers within the United States and not held in inventory as repair parts. Again, California based its use tax for tangible personal property manufactured in that state to include only the cost of materials. Consequently, when the California auditor computed use tax to be collected by California using the 44.57% of total feeders manufactured to be used in the United States by Petitioner's customers in the United States, the California auditor used a cost factor of 55% of overall costs which was attributable to the cost of materials only. The total cost of feeders manufactured by Petitioner in California during the period in question, as related in the California tax audit, was $19,028,714.00. The total cost manufactured for use in the United States was $8,481,098.00, representing 44.57% of the overall cost of manufacturing. When the $8,481.098.00 is multiplied by 55%, representing the cost of materials only, the total costs of the goods subject to the use tax for the period in question is $4,664,604.00. A use tax rate of 7% was applied against the amount of $4,664,604.00. To attribute the portion of use tax paid to California following the 1996 audit associated with feeders that had been sent to Florida during the period in question, the answer is derived by multiplying $982,803.00 by 55% for a total of $540,542.00, and in turn multiplying that amount by 7%, the rate of tax imposed by California. That total is $37,837.91 in use tax that was subsequently paid to California after $58,962.22 had been paid to Florida for use tax on the same feeders. Diversey Corporation sought a tax refund in the amount of $58,977.00, through an application dated August 8, 1996, in relation to the period July 1993 through March. Eventually through the decision by the Respondent in its Notice of Decision of Refund Denial dated July 16, 1997, Respondent refused to grant the refund of $58,977.00. At present, Petitioner requests that it be given a refund of $37,837.91, which represents the portion of use tax paid to Florida that has been duplicated in a payment of use tax to California. Respondent, in its Notice of Decision of Refund Denial entered on July 16, 1997, and based upon the facts adduced at the final hearing, premises its proposed agency action denying the refund request upon the language set for in Section 212.06(1)(a) and (7), Florida Statutes. The determination to deny the refund request was not based upon reliance on Rule 12A-1.091(3), Florida Administrative Code. The theory for denying the refund is premised upon Respondent's argument that use tax was due to Florida, "as of the moment" feeders arrived in Florida for use in Petitioner's business operations associated with its customers. Petitioner then paid the use tax to Florida at the time the feeders arrived in Florida. Having not paid California Use Tax prior to paying Florida Use Tax, Respondent concludes, through its proposed agency action, that it need not refund to Petitioner the use taxes it paid to California at a later date. Petitioner had referred to Rule 12A-1.091, Florida Administrative Code, following receipt of the Notice of Proposed Refund Denial issued on December 9, 1996, possibly creating the impression that Petitioner believed that Rule 12A-1.091, Florida Administrative Code, would support its claim for refund. It later developed that Petitioner did not have in mind reliance upon Rule 12A-1.091, Florida Administrative Code, to support its claim for refund. Instead, Petitioner made reference to that rule and specifically Rule 12A-1.091(3), Florida Administrative Code, as a means to perfect a challenge to Rule 12A-1.091(3), Florida Administrative Code, filed with the Division of Administrative Hearings on December 15, 1997, claiming that the challenged rule was an invalid exercise of authority. That challenge was assigned DOAH Case No. 97-5908RX. In summary, notwithstanding Petitioner's argument to the contrary, Respondent has never relied upon Rule 12A-1.091(3), Florida Administrative Code, or any other part of that rule in its proposed agency action denying the refund request. Absent Petitioner's affirmative reliance upon Rule 12A-1.091(3), Florida Administrative Code, the rule has no part to play in resolving this dispute. CONCLUSIONS OF LAW The Division of Administrative Hearings has jurisdiction of the subject matter and the parties to this action in accordance with Sections 120.56, 120.569(1), and 120.57(1), Florida Statutes. Petitioner sought repayment of funds paid into the State Treasury for use taxes for the period of July 1993 through March 1995. See Section 215.26(1), Florida Statutes. Respondent, in defending its decision to deny the repayment, has consistently relied upon provisions within Chapter 212, Florida Statutes, as well as the language within Section 215.26(1), Florida Statutes. In particular, Respondent has relied upon the language at Section 212.06(7), Florida Statutes, in defending its proposed agency action. Petitioner did not look to the provisions of Rule 12A-1.091(3), Florida Administrative Code, to assist the Petitioner in its refund claim. Instead, Petitioner claims that an inference has been created that Respondent utilized Rule 12A-1.091(3), Florida Administrative Code, to determine the refund question adverse to the interest of Petitioner. Petitioner believes this creates the opportunity to challenge the rule. Given that Respondent did not rely upon Rule 12A-1.091(3), Florida Administrative Code, to defend against the Request for Repayment of Funds, Petitioner is not substantially affected by the rule and is not entitled to seek an administrative determination of the invalidity of the rule. Upon consideration, it is ORDERED: That Petitioner's challenge to the validity of Rule 12A-1.091(3), Florida Administrative Code, is DISMISSED.1 DONE AND ORDERED this 20th day of April, 1998, in Tallahassee, Leon County, Florida. CHARLES C. ADAMS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 20th day of April, 1998.
Findings Of Fact FMCC is a corporation organized and existing under Delaware law. FMCC maintains its principal place of business in Dearborn, Michigan. FMCC is a wholly owned subsidiary of Ford Motor Company. FMCC qualified and is authorized to do business in the State of Florida pursuant to the foreign corporation provisions of Chapter 607, Florida Statutes, and has continuously maintained a registered office and agent in this state during the audit years at issue. During the tax years 1980-1982, inclusive, FMCC and Ford filed corporate tax returns in Florida and paid the taxes due thereon under the Florida Income Tax Code; FMCC maintained 7 to 8 branch offices and employed approximately 200 people in Florida; and Ford had contractual relationships with approximately 130 to 150 authorized Ford dealers in Florida. A copy of a representative agreement between Ford and the dealers is Exhibit 3 to this Stipulation. FMCC's principal business is financing the wholesale and retail sales of vehicles manufactured by Ford Motor Company. During the audit period FMCC provided financing for the purchase of vehicles as authorized by Ford dealers from Ford Motor Company. FMCC also: provided financing for the purchase of automobiles by the public from the dealers; and engaged in commercial, industrial and real estate financing, consumer loan financing, and leasing company financing in the State of Florida as well as other states. Attached as Composite Exhibit 4 are sample documents utilized by FMCC in the above financing. The majority of the intangibles in question are accounts receivables held by FMCC and owned by Florida debtors in connection with the purchase of tangible personal property shipped to or located in the State of Florida. FMCC is the holder of security agreements executed by thousands of Florida debtors. These security agreements gave FMCC a lien on tangible personal property located in the State of Florida. The Florida Secretary of State's Office was utilized by FMCC during the assessment period to perfect and protect its liens created under these security agreements with Florida debtors by the filing of U.C.C. financing statements. None of the original notes are stored in Florida. During the assessment period, FMCC utilized or could have utilized the Florida Courts to recover sums due by Florida debtors on delinquent accounts receivable. In addition, FMCC utilizes the Florida Department of Highway Safety and Motor Vehicles to perfect its liens on motor vehicles pursuant to Chapter 319, Florida Statutes. In 1983, the Department conducted an audit of the FMCC intangible tax returns for tax years 1980 through 1982, inclusive. On June 3, 1983, the Department proposed an assessment of tax, penalty and interest in the total amount of $2,560,379.00. See Exhibit 5. FMCC filed a timely protest. On October 8, 1984, the Department issued a Notice of Decision. See Exhibit 2. On December 12, 1984, the Department acknowledged receipt of FMCC's timely November 8, 1984 Petition for Reconsideration. On February 18, 1985, the Department issued a Notice of Reconsideration. See Exhibit 6. FMCC elected to file a Petition for Formal Proceedings, which was received on April 8, 1985. On the basis of the revised audit report, the Department of Revenue imposed the intangible tax on FMCC for the tax years 1980 through 1982, inclusive, in the following categories, and in the taxable amounts listed as follows: 1/1/80 1/1/81 1/1/82 Commercial Finance Receivables-- $342,892,615 $403,061,571 $486,412,164 Retail Commercial Finance Receivables-- 218,591,180 241,993,462 228,303,569 Wholesale Simple Interest Lease Receivables-- 66,345,902 75,978,095 71,315,777 Retail Lease Finance Receivables N/A N/A N/A Capital Loan Receivables 3,112,877 2,064,698 2,419,770 Consumer Loan Receivables 10,144,531 14,122,666 18,578,699 Service Equipment Financing--Dealer I.D. 481,869 368,186 422,108 Receivables Ford Rent-A-Car Receivables 27,825,283 26,179,377 20,362,896 Ford Parts & Service Receivables -0- 10,499,401 10,800,313 (10) Accounts Receivables--Customers & Others 3,452,194 4,581,629 4,952,234 (11) Accounts Receivables--Affiliate 1,617,880 2,914,094 4,438,849 (12) C.I.R. Receivables 23,243,257 27,387,938 24,222,621 TOTAL FLORIDA RECEIVABLES------ 697,707,588 809,151,117 872,229,000 TAX AT 1 MILL---- 697,708 809,151 872,229 LESS ORIGINAL TAX PAYMENT------ 312,703 351,976 339,142 LESS PETITION PAYMENT ON AGREED CATEGORIES------ 51,069 53,567 44,586 TOTAL REMAINING TAX ASSESSED------ $333,936 $403,608 $488,501 TOTAL TAX FOR ALL YEARS----- $1,226,045 REVISED ASSESSMENT FIGURES DOES NOT INCLUDE $1,386.18 OF THE PETITION PAYMENT At the time it filed its petition for a formal hearing, FMCC agreed to and paid the 1 mill tax, but no interest or penalty, on the following amounts. The taxability of these items is no longer in dispute, only penalty and interest. 1980 1981 1982 (8) Ford Rent-A-Car 27,825,283 26,179,377 20,362,896 Receivables (12) CIR 23,243,257 27,387,938 24,222,621 Receivables Capital Loan Receivables (item 5 of paragraph 11) reflect amounts of money owed by Ford dealers to FMCC. The obligation arises from loans made to Ford dealers located in Florida to expand showroom or other facilities and for working capital. The items located as (10) Accounts Receivable - Customers and Others and (11) Accounts Receivables - Affiliates in paragraph 11 reflect only the amount of accrued interest to which FMCC is entitled on notes from non-affiliates and affiliates, respectively, from the last settlement date prior to year end until the end of each respective year. The principal amounts owed on these notes, which are not secured by realty, are included in other categories. The Department does not assess a tax for similar interest when the amount owed is secured by realty. Wholesale and retail intangibles were created and handled in 1980, 1981 and 1982 by FMCC in the manner set forth in Exhibit 7. The Department of Revenue has imposed penalties in the amount of $543,968 composed of $330,051 as the 25% delinquent penalty imposed pursuant to Fla. Stat. Section 199.052(9)(a) (1983), and $15,886 as the 15% undervalued Property penalty imposed pursuant to Section 199.052(9)(d)(1983), Florida Statutes. The Department offered abatement of the 15% omission penalty ($198,031) imposed pursuant to Fla. Stat. Section 199.052(9)(c) (1983). The closing agreement required pursuant to Fla. Stat. Section 213.21 reflecting this reduction of penalty was not signed by petitioner. FMCC's intangible tax returns have been audited on prior occasions. The manner of reporting was identical to the manner in which FMCC reported its intangibles for tax years 1980 through 1982. The 1973-1975 and the 1976-1978 audits were "no change" audits. FMCC's method of reporting receivables generated from Florida sales was challenged by the Department of Revenue. The challenge was dropped because the Department of Revenue did not have the statutory authority to assess sales of tangible personal property with an f.o.b. point other than Florida. Chapter 77-43, Laws of Florida amended Section 199.112, Fla. Stat. to allow tangible personal property (sic) [to be taxed] regardless of the f.o.b. point of sale. This amendment applied to the January 1, 1978 taxable year. There was a 1978-1980 "no change" audit. Ford Motor Company has filed refund claims for certain categories for the tax year 1981 and 1982. Ford Motor Company claims that it inadvertently paid intangible tax on accounts receivable owned by FMCC. As presented in the Notice of Decision, no refund will be made as it will be handled as a credit against taxes due by Ford Motor Company. While not an announced policy, the Department of Revenue drafted and utilized proposed rules relating to compromising penalties. These rules are not final. Attached as Exhibit 8 are the proposed rules. A copy of these rules was provided to Petitioner by letter dated July 28, 1986. In addition, while not an announced policy the Department of Revenue utilized guidelines established by the Internal Revenue Service and federal court for compromising penalties.
The Issue The issue presented for decision in this case is whether state and local option taxes may be imposed upon Petitioner, Co-Op Oil Company, Inc. (“Co-Op Oil”), based upon the gallons of fuel sold at retail stations that were not owned or operated by Co-Op Oil, and to which Co-Op Oil did not consign fuel, but that were voluntarily “linked” to Co-Op Oil for reporting purposes via Department of Revenue (“DOR”) Form DR-120.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following findings of fact are made: During the audit period, Co-Op Oil was a domestic corporation engaged in the business of wholesale and retail petroleum distribution, and held Florida motor fuel tax license No. 09000447. Since the audit period, Co-Op Oil has exited the retail portion of the petroleum distribution business. DOR is an executive agency of the State of Florida. Among other duties, DOR is charged with administration and enforcement of Florida’s fuel tax laws, pursuant to Chapter 206, Florida Statutes. During the audit period, Co-Op Oil was a wholesale petroleum distributor to marinas, commercial fishermen, construction companies, and other businesses not served by retail facilities. Jim Smith, President of Co-Op Oil, testified that beginning in August, 1989, and continuing through December, 1994, Co-Op Oil requested that certain independent retailers to which Co-Op Oil supplied petroleum be “linked” to Co-Op Oil for retail tax reporting purposes. Mr. Smith testified that he made the decision to request linkage for those retail dealers that he believed incapable of correctly reporting the taxes on their own. His purpose was to ensure that all taxes owed to the state were actually reported and paid. Mr. Smith testified that he understood “linkage” to require Co-Op Oil to report and remit all the fuel taxes that Co-Op Oil actually collected on the gallons of fuel it sold to the linked dealers. Essentially, Co-Op Oil collected and remitted taxes on the net gallons of fuel it delivered to the dealers. DOR does not dispute that Co-Op Oil remitted all the taxes that it actually collected on the net gallons delivered to the linked dealers. However, in reporting taxes for the linked facilities, Co-Op Oil did not report “gains” for those facilities. The concept of “gains” is based on the principle that the volume of a volatile substance such as gasoline changes with the temperature. In the petroleum industry, a “net gallon” is based on the volume of a gallon of fuel at 60 degrees. The industry has developed a formula to account for the difference in volume caused by temperatures above or below 60 degrees. Under the adjustments made pursuant to the formula, a “gallon” of gasoline stored at a temperature below 60 degrees is worth more than a gallon stored at a temperature higher than 60 degrees because of its greater compression. The linked facilities in question were located in and around Pinellas County, where the year-round temperature in their underground tanks is significantly greater than 60 degrees, meaning that gasoline stored therein would reasonably be expected to expand after delivery by Co-Op Oil. This expansion would result in the retail facilities being able to sell marginally more gallons of fuel to the ultimate consumers than the net gallons purchased from Co-Op Oil at the wholesale level. This phenomenon of “gains” at the retail level, along with alleged abuses by dealers, led DOR to successfully persuade the Legislature in 1992 to adopt a statutory requirement that retailers who were not also wholesalers or refiners must collect and remit tax on the additional gallons of fuel sold at the retail level. Section 206.41(1)(b), Florida Statutes (1995), imposing the constitutional gas tax, contained the typical language: If any licensee owns or operates retail stations or has fuel on consignment at retail stations and has sold more fuel than was purchased tax-paid when the fuel was removed from the rack or than was reported to the state when first purchased or removed from storage tax-free, the licensee must report the additional gallons sold and pay the additional tax, due for the month, on his or her local option gasoline tax return or a return designated by the department. The “rack” is that part of a terminal facility by which petroleum products are loaded into tanker trucks or rail cars. Section 206.01(16), Florida Statutes (1995). In practice, the “rack” also refers to bulk plant facilities operated by wholesalers such as Co-Op Oil. Similar language requiring the reporting and payment of “gains” was included in Section 206.60(1)(b), Florida Statutes (1995)(county gas tax); Section 206.605(1)(b), Florida Statutes (1995)(municipal gas tax); Section 336.021(2)(b), Florida Statutes (1995)(county nine cent gas tax); Section 336.025(2)(b), Florida Statutes (1995)(local option gas tax); and 336.026(2)(a), Florida Statutes (1995)(State Comprehensive Enhanced Transportation System Tax). The cited sections from Chapter 336, Florida Statutes (1995) also provided that refiners, importers, wholesalers, and jobbers were to be considered as retail dealers when electing to remit the subject taxes on behalf of retail stations they owned or operated, or where they had fuel on consignment. Administratively, DOR accomplished the collection of the tax on “gains” by requiring dealers to base their tax returns on “metered gallons,” i.e., the reading of gallons at the gas pumps used by retail customers. Petitioner conceded at hearing that retail facilities, when filing their own tax returns, were required to calculate the taxes based on metered gallons. A Florida form DR-120 is the form upon which a motor fuel dealer reports the amount of motor fuel sold and the amount of local county option taxes due. On a monthly basis during the audit period, the Petitioner filed form DR-120 with the Respondent. All taxes reported by Co-Op Oil on these forms during the audit period were calculated based on net gallons sold by Co-Op Oil to the linked dealers. A Florida form DR-119 is the form upon which a motor fuel dealer reports the amount of fuel sold and the amount of state taxes due. On a monthly basis during the audit period, the Petitioner filed form DR-119 with the Respondent. All taxes reported by Co-Op Oil on these forms during the audit period were calculated based on net gallons sold by Co-Op Oil to the linked dealers. During the audit period, DOR had in place no formal mechanism by which a wholesaler such as Co-Op Oil could “link” its tax return to that of a retailer that it neither owned nor operated nor to which it consigned fuel. Mr. Smith credibly testified that in 1989 he was instructed by a DOR employee named Mary Ann Moye that such linkage could be accomplished by written notification to DOR and the actual reporting and collection of taxes by the wholesaler on behalf of the retailer. Peter Steffens, a 22-year DOR employee intimately familiar with the evolution and application of the fuel taxes at issue in this proceeding, testified that while “linkage” did not formally exist in statute or rule, DOR in fact treated “linked” retailers as consigned retailers. In other words, when a wholesaler such as Co-Op Oil linked a retailer’s return to its DR-120, the wholesaler would be treated as if it were consigning fuel to that retailer, whether it was collecting tax at the time of delivery or at the time of retail sale. DOR took the position that a wholesaler such as Co-Op Oil steps into the shoes of its linked retailers, and remains in those shoes after it delivers fuel to the retailers. To avoid the loss of taxes that are unquestionably owed, DOR places upon linked wholesalers a continuing responsibility to see that all taxes are reported and paid even after the fuel is physically delivered to the retailers. Given that DOR did not impose linkage on the wholesalers, but only allowed it at the written request of the wholesalers, this was a reasonable requirement. Because the statutes provided that a consignor must pay tax on “gains,” DOR took the position in its audit that Co-Op Oil was also required to pay “gains” for the stations it linked on its DR-119 and DR-120 tax returns for the audit period. Mr. Smith took the position that Co-Op Oil was required to pay tax only on those net gallons it sold to its retailers because, unlike a consignor, Co-Op Oil itself realized no profit from the “gains” of its retail dealer. Mr. Smith questioned the validity of the entire concept of “gains,” but was well aware of DOR’s position on the issue, having litigated an administrative tax assessment proceeding against DOR in 1993 in which “gains” was a central issue. See Co-Op Oil Company, Inc. v. Department of Revenue, Division of Administrative Hearings Case No. 93-2019 (Recommended Order, Sept. 22, 1993). Mr. Smith acknowledged that the tax on “gains” might be owed by the retail dealers, but took the position that DOR should seek payment of that tax directly from the retailers. Mr. Smith testified that he assumed that once the dealers were linked to Co-Op Oil, they would be treated as ultimate consumers for his reporting purposes. Mr. Smith admitted that his assumption was based on his reading of the statutes, not on any guidance he had received from DOR. DOR made initial inquiry to Mr. Smith as to the taxes being reported and paid by Co-Op Oil during telephone conversations in December, 1995. By follow-up letter dated January 4, 1996, Charles E. Pate, Senior Tax Specialist with DOR, wrote to Mr. Smith as follows, in pertinent part: It is not intended that the method of reporting you have chosen should reduce the tax liability that would result if each retail dealer were reporting individually on form DR-121. It is necessary that each dealer you are selling to reconstruct the difference between net and gross gallons for the period 7/92 through the present. All applicable state and local taxes will be assessed on the calculated adjustment. Mr. Pate testified that he made several subsequent requests to Mr. Smith for the information regarding the unreported “gains” of the retailers in question. Mr. Pate stated that, despite Mr. Smith's promises, the requested information was never provided by Co-Op Oil. It was undisputed that sales agreements with its retailers gave Co-Op Oil a contractual right to collect from the retailers any additional fuel tax that might become due. Mr. Smith acknowledged that he never supplied the “gains” information to Mr. Pate, but could not recall ever promising to do so, stating that his understanding of Mr. Pate’s letter was that DOR needed to require each dealer to reconstruct their sales for the audit period. Mr. Smith stated that all but three of the retailers in question were out of business, and that he did not attempt to obtain the information from the others. Mr. Smith’s testimony established that he is very knowledgeable as to fuel tax law. In addition to calculating and paying the taxes for his business since at least 1989, he has attended seminars on the subject, served on a task force made up of DOR and industry representatives that drafted changes to the fuel tax laws, and has acted as a legislative lobbyist on tax issues on behalf of his company and the Florida Petroleum Marketers Association. Given his knowledge, it was unreasonable for him to assume that a tax on “gains” otherwise owed by his retailers need not be paid simply because their tax returns were administratively linked with those of Co-Op Oil. DOR did not attempt directly to force the retailers to reconstruct their records. Mr. Pate did inform Mr. Smith that if Co-Op Oil would produce the records, then DOR would pursue the individual dealers. However, no dealer records were ever produced by Co-Op Oil. Mr. Pate was thus forced to assess the tax based on an estimate. He arrived at this estimate by assuming a one percent “gain” on the net gallons reported by Co-Op Oil for the linked retailers. This was a reasonable and conservative assumption, consistent with the industry standards for calculation of “gains.”
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that the Department of Revenue enter a final order sustaining the assessment of additional tax, penalties, and interest against Co-Op Oil. DONE AND ENTERED this 30th day of July, 1998, in Tallahassee, Leon County, Florida. LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 1998. COPIES FURNISHED: James E. Smith, President, Co-Op Oil Company, Inc. 4911 8th Avenue South Gulfport, Florida 33707 John N. Upchurch, Esquire Nicholas Bykowsky, Esquire Assistant Attorneys General Office of the Attorney General Tax Section The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100
The Issue Whether the Respondent discriminated against Petitioner in her employment based on her gender or race in violation of Section 760.10, Florida Statutes?
Findings Of Fact Janet Cartwright is a white female who formerly worked at the Department of Revenue (DOR or the Department) as a tax auditor. Ms. Cartwright began employment with the Department of Revenue May 1, 2000, as a tax auditor at the Atlanta Service Center. During her employment with DOR, she had four supervisors: Emmanuel Minta, Ron Lee-Owen, Glynn Walters and Evonne Jones Schultz. The function of a tax auditor is to audit all pertinent books and records of taxpayers assigned to them. Auditors are required to maintain a working knowledge of the taxes within their area of responsibility; to travel to the site of the taxpayer's books to perform their audit duties; to review all records during an audit for potential non-compliance with Florida tax statutes; to gather pertinent tax records to support their findings; and to prepare supporting work papers. Ms. Cartwright went on medical leave in September 2003 and did not return to work. On January 2, 2004, she notified her supervisor that she would be applying for early retirement based on a disability, and requested that her medical leave without pay status be extended until her retirement date was established. On or about March 29, 2004, her request for disability retirement benefits was denied. On April 19, 2004, a recommendation was made to terminate her employment based on Petitioner's inability to perform her duties. On July 13, 2004, Petitioner was advised by certified letter that the Department was proposing to terminate her from the position as Tax Auditor II, effective August 31, 2004. Ms. Cartwright acknowledged receiving the July 13, 2004, letter. The July 13, 2004, letter stated: You began employment with the Department of Revenue effective May 1, 2000, as a Tax Auditor I, and on July 12, 2000, you were promoted to a TA II position. You are currently a TA II, which is a field audit position that requires the auditor to independently travel to the taxpayer's location to audit the company's information for Florida taxes. You have been on Leave Without Pay (LWOP) status since September 18, 2003. Further, in a letter dated September 29, 2003, from your physician, Dr. Daniel Goodman, M.D., he indicates that due to your medical condition of narcolepsy, cataplexy and sleep apnea, you are chronically exhausted and always at a risk of falling asleep at any time and have difficulty operating a car at all times. Additionally, Dr. Goodman recommended that you look into getting long-term disability. On January 2, 2004, you provided a letter to your supervisor, Eve Jones, Process Group Manager, requesting that your LWOP status be extended until your retirement benefits are established. However, on March 29, 2004, you were denied disability benefits. The July 13, 2004 letter identified the disciplinary standard upon which the Department relied and the documents considered by the Department in making its decision. It concluded: Your continuing inability to perform your duties has caused not only a concern for your well being, but has also imposed a hardship on the other staff that have had to handle your job duties and responsibilities in addition to their regular duties. Your Program Director and I agree that because of your continuing inability to perform the duties of your position, with no indication of when you might be able to begin performing your normal work duties, dismissal for inability to perform assigned job duties [is] the only appropriate action in your case. No evidence was presented that Ms. Cartwright's termination was based upon her race or gender. The letter contained a notification of Petitioner's right to appeal the action to the Public Employees Relations Commission or to file a grievance pursuant to Section 447.401, Florida Statutes. Ms. Cartwright did not pursue either remedy. Instead she continued to pursue approval of her request for disability retirement, which was successful. On August 30, 2004, the day before her termination would be effective, she faxed to the Department a letter which stated: Last week I received the "Order of Remand," the final document necessary to process my disability retirement effective September 1, 2004. Therefore, after what was an extraordinary amount of time to apply for, and be approved for, disability retirement, I will be terminating employment as a Tax Auditor II effective August 31, 2004. I thank the Department for allowing me to remain on a leave of absence without pay during this process. On August 30, 2005, she filed a complaint against the Department with the Florida Commission on Human Relations alleging racial and gender discrimination. Ms. Cartwright claimed that she was denied training essential to her position; that she was denied a flex schedule; that she was asked to perform clerical and janitorial duties not required of her male counterparts; and that she was not allowed to drive her own car to field audit locations. The more credible evidence indicates that Ms. Cartwright received formal training in Tallahassee a few months after she was hired, received computer based training and on-the-job training. No credible evidence was received that other similarly situated employees received training denied to Ms. Cartwright. Her claim that she was denied training involved events occurring before she began medical leave without pay, well over a year before she filed her complaint with the Commission. Ms. Cartwright claimed that she was denied a flex time schedule. To the contrary, while there was a delay in approval of flex time during part of her tenure, Ms. Cartwright was approved for flex time schedules on May 2, 2000 (the day after beginning work with the Department) and on August 13, 2002. Ms. Cartwright admitted that the issue regarding flex time was resolved over three years before she filed her complaint with the Florida Commission on Human Relations. Ms. Cartwright, along with other members of the staff, was asked to perform clerical duties when the office was short- handed. Ms. Cartwright did not identify any person on the staff who was not asked to perform such functions. Likewise, members of the staff were asked to take shifts on a volunteer basis with respect to "coffee duty." Ms. Cartwright claimed that she was asked to clean out the refrigerator, but did not testify when this request was made. As she did not return to work after September 18, 2003, it would have been well over a year before she filed her complaint with the Florida Commission on Human Relations August 30, 2005. Finally, Ms. Cartwright claimed that she was not allowed to drive her own car to field audits. The more credible evidence indicates that Ms. Cartwright was never prohibited from driving her own car, but that office policy provided that when more than one auditor went to an audit location, only the senior auditor would be paid for mileage when using a personally owned vehicle. Ms. Cartwright did not identify any other employee who was not a senior auditor who was paid mileage when accompanying a senior auditor in the field. Moreover, the trips for which mileage was not approved occurred during the period covering September through December 2002. These trips occurred well over two years before Ms. Cartwright filed her complaint with the Commission on Human Relations. The issues raised in her complaint, i.e., lack of training, denial of flex schedule, performance of clerical or janitorial duties and not being compensated for driving her own car, are separate incidents and do not constitute a continuing violation tied to her proposed termination. All of the incidents identified in her complaint, including the proposed termination, occurred more than 365 days before Petitioner filed her complaint with the Commission on Human Relations.
Recommendation Upon consideration of the facts found and conclusions of law reached, it is RECOMMENDED: That a final order be entered dismissing the Petition for Relief. DONE AND ENTERED this 2nd day of January, 2007, 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 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of January, 2007.
The Issue The issue is whether the application filed by Mr. Johnson for a certificate of registration as a Florida Farm Labor Contractor should be issued by the Department.
Findings Of Fact Mr. Johnson had been the subject of a prior administrative complaint by the Department of Labor and Employment Security Case No. 88-3795. In that proceeding he was represented by Mr. Thomas Montgomery, Esquire, of Belle Glade, Florida. That proceeding involved an earlier application by Mr. Johnson for a certificate of registration as a Florida Farm Labor Contractor, which the Department denied because Mr. Johnson was liable for unpaid unemployment compensation taxes in the amount of $1,400, and under Rule 38B-4.06(5), Florida Administrative Code, he was ineligible for registration until those unemployment compensation taxes had been paid. The parties had reached a stipulated settlement in that action, under which Mr. Johnson agreed to pay $100.00 per month until the balance due had been paid in full. That stipulation had been signed by Mr. Montgomery, the lawyer for Mr. Johnson. The stipulation was filed on November 18, 1988, with the Division of Administrative Hearings, and consequently an Order Closing File was entered in Case No. 88-3795. Mr. Johnson failed to make payments in accordance with the stipulation agreement. Given the accrued interest and penalties, Mr. Johnson is currently indebted to the State of Florida for unpaid employment compensation taxes, interest, penalties and filing fees in the amount of $2,213.94. Mr. Johnson's failure to make payment as required under the stipulation which he entered into in settlement of Case No. 88-3795, his prior application for a certificate of registration as a Farm Labor Contractor, causes the Hearing Officer to disbelieve that Mr. Johnson was mistaken as to the location of the hearing. The Notice of Hearing was clear. Mr. Johnson has also failed to answer requests for admissions and interrogatories served upon him in this proceeding. Mr. Johnson is continuing to engage in a pattern of conduct designed to evade his responsibility to pay unemployment compensation taxes which he owes. His application for a certificate of registration filed June 4, 1990, should be denied.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered denying the application of James Johnson for a certificate of registration as a Florida Farm Labor Contractor. DONE and ENTERED this 30th day of November, 1990, at Tallahassee, Florida. WILLIAM R. DORSEY, JR. Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of November, 1990. Copies furnished: Francisco Rivera, Esquire Department of Labor and Employment Security 2012 Capital Circle, Southeast Suite 307, Hartman Building Tallahassee, Florida 32399-0658 James Johnson 391 Shirley Drive Pahokee, Florida 33034 Hugo Menendez, Secretary Department of Labor and Employment Security Berkeley Building, Suite 200 2590 Executive Center Circle, East Tallahassee, Florida 32399-2152 Stephen Barron, General Counsel Department of Labor and Employment Security 307 Hartman Building 2012 Capital Circle, Southeast Tallahassee, Florida 32399-0658
The Issue The issue in this case is whether the taxpayer owes use tax, penalty and interest on the purchase of tangible personal property under Chapter 212, Florida Statutes.
Findings Of Fact Iseaseal, LLC, a Delaware corporation, has its principal place of business at 695 East Main Street, Suite 103, Stamford, Connecticut. Its federal employer identification number is 06-1600000. On November 22, 2000, the taxpayer purchased a 1982, 72-foot, Hatteras CPMY yacht, named “Windcrest,” with hull number HATBN3270182 and 60 net tons of admeasurement. The purchase was made through a registered yacht broker. The yacht’s sales price was $725,000. On November 21, 2000, at the closing for the yacht, the taxpayer’s managing member, Paul Bakker, signed an Affidavit for Exemption of Boat Sold for Removal from the State of Florida by a Nonresident Purchaser. The yacht was also registered with the Coast Guard. However, to date, the yacht has not been registered or titled in Florida or any other U.S. state or territory. The taxpayer took possession of the yacht at Pier 66, in Fort Lauderdale, Florida, on November 22, 2000. Also, on November 22, 2000, the taxpayer was issued a 90-day decal known as a “cruising decal.” A cruising decal, with certain restrictions, exempts the purchase of a yacht from sales tax if the purchaser agrees to remove the yacht from Florida within 90 days after the date of purchase and does remove the purchased yacht. On December 28, 2000, the taxpayer removed the yacht from Florida to the Bahamas. The removal occurred within 90 days after the purchase date. As a result, the sale became exempt from Florida sales tax and the Petitioner did not pay Florida sales tax on the purchase of the yacht. On January 15, 2001, the taxpayer returned the yacht to Florida for repairs. A repair bill shows that the yacht remained at the repair facility for four and a half hours on January 16, 2001. The repair visit was within six months after the departure date of December 28, 2000. There was no evidence that the repair facility was registered with the Department of Revenue or how long the boat remained in Florida waters. The yacht also returned to Florida for repairs on May 21, 2001. Again there was no evidence that the repair facility was registered or how long the boat remained in Florida waters. The evidence did not establish that the tax exemption related to use of Florida waters for 20 days or repairing a boat in Florida apply. Since the purchase date, the Petitioner has leased mooring space in Florida. The Petitioner’s insurance policy also indicates that the yacht was moored in Florida and includes a Florida endorsement for such mooring. Additionally, the Petitioner reported to Connecticut’s Department of Revenue that the yacht was exempt from Connecticut sales tax because the yacht was purchased and berthed in the State of Florida. Based on copies of the bill of sale, closing statement, banking statements, credit card statements, mortgage documents, insurance agreements, mooring agreements, repair and parts receipts and a chronological listing of the yacht’s whereabouts since the date of purchase, the yacht has operated, and continues to operate, in Florida waters. Indeed, the yacht remained in Florida for more than 183 days from July 1, 2002 through December 31, 2002. Moreover, since September 11, 2002, the yacht has been moored or stored in Florida the majority of the time because the main users of the yacht lost interest in sailing the yacht and travel after the terrorist attack on the twin towers in New York City. The Department found that the Petitioner was liable for use tax on its use and storage of the yacht here in Florida. On May 5, 2004, the Department issued an enforcement billing to the Petitioner for use tax, penalty and interest, pursuant to Sections 212.05(1)(a)2 and 212.06(8), Florida Statutes. The Department assessed the Petitioner use tax and interest based on the sales price of the yacht. The Department also assessed the Petitioner a mandatory penalty equal to the tax because it returned the yacht to Florida within six months of the departure date. The Petitioner admitted that, through ignorance of Florida’s tax exemption law, he violated Chapter 212, but argues that the assessment of tax, interest and mandatory penalty is excessive. On May 24, 2004, the Department issued the Petitioner a Notice of Final Assessment for Sales and Use Tax, Penalty and Interest Due. The Notice set forth the basis for the assessment of tax, in the sum of $43,500, penalty, in the sum of $43,500, and interest, in the sum of $14,759.84, plus additional interest that accrues at the rate of $10.73 per day. The Department issued the Petitioner the Final Assessment because it returned the yacht to Florida within six months of the departure date and the yacht remained in Florida for more than 183 days in a calendar year. Since the Petitioner returned the yacht to Florida within 6 months of the purchase date and allowed the yacht to remain in Florida for more than 183 days in a calendar year, the Petitioner is liable for use tax, penalty and interest in the use and storage of the yacht in Florida.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Revenue enter a final order upholding the assessment of use tax, penalty and interest against the Petitioner. DONE AND ENTERED this 31st day of January, 2005, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER 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 31st day of January, 2005. COPIES FURNISHED: Paul Bakker Iseaseal, LLC 695 East Main Street Stamford, Connecticut 06901 Carrol Y. Cherry, Esquire Assistant Attorney General Office of the Attorney General Revenue Litigation Section Plaza Level 01, The Capitol Tallahassee, Florida 32399-1050 Bruce Hoffman, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100
The Issue Whether Respondent violated Section 112.3143(3), Florida Statutes, by voting on September 7, 2000, September 21, 2000, October 19, 2000, November 30, 2000, and December 21, 2000, as a member of the Palm Beach Gardens City Council on certain matters affecting the Mirasol development project when Respondent's homebuilding company was engaged in discussions with the master developer of the project concerning the company's participation in the project, as alleged in the Order Finding Probable Cause, and, if so, what is the appropriate penalty.
Findings Of Fact Based on the evidence adduced at the public hearing and the record as a whole, the following findings of fact are made to supplement and clarify the extensive factual stipulations set forth in the parties' Joint Prehearing Stipulation5: Each of the "Sabatello companies" referred to in the parties' Stipulation of Fact 3 was wholly owned by Respondent and his brothers Paul, Theodore, and Michael Sabatello, with each of the four brothers owning an equal (25%) share of the company. Of these companies, only one, Sabatello Development Corporation IV (SD IV) was involved in the Mirasol Project. SD IV has been in continuous existence since its formation in or around the 1980's. It is a Subchapter S corporation. As such, its profits are passed through to its four shareholders, Respondent and his three business associate- brothers, in equal amounts. As president of SD IV, Respondent "oversees all [of its] functions." Craig Perna, the Taylor Woodrow "representative" mentioned in the parties' Stipulation of Fact 5, had "overall responsibility for every aspect of the [Mirasol] development" project, including the "selection of builders." The builder selection process started with Mr. Perna getting the names of "prominent builders in the Palm Beach Gardens market" having "excellent reputation[s]" and then contacting them to inquire as to their interest in participating in the Mirasol Project. Respondent was among those Mr. Perna contacted. He was contacted (by telephone) in mid-May of 2000. At that time, he advised Mr. Perna he was "very interested" in having his company considered for selection as a builder in Mirasol. As a member of the Palm Beach Gardens City Council, Respondent had reviewed documents submitted by Taylor Woodrow to obtain PCD approval for the Mirasol Project. As a result, he was familiar with the project and recognized its potential. At the time, residential "golf developments," like the Mirasol Project, sold out quickly and were "very profitable." Builders competed vigorously for the relatively limited opportunities that were available to build in these developments. Having the upper hand over builders because of this competitive landscape, Taylor Woodrow, as the master developer of the Mirasol Project, did not have to engage in "give [and] take with any builder" concerning contractual matters. As Mr. Perna put it in his deposition testimony, "You either wanted to participate or you didn't under my terms, period, the end." Respondent's company, SD IV, was one of at least ten or builders vying to be selected to participate in the Mirasol Project. Over a period of approximately eight months (from mid- May 2000, to mid-January 2001), Taylor Woodrow requested and obtained from SD IV and from the other would-be participants in the project (Other Builders) information and documents in order to evaluate these builders' qualifications for selection. The requests directed to SD IV were extensive and concerned such matters as the company's financials, products, pricing, form contracts, sales operations, customer service department, past accomplishments, current capacity, and "appetite for future work." Taylor Woodrow also wanted to see floor plans and architectural drawings. These requests were made both in writing and verbally. Wanting to maximize its chances of being selected, SD IV provided Taylor Woodrow with "whatever [was] ask[ed] for." Initially, Respondent was SD IV's "sole contact person" in its dealings with Taylor Woodrow. In this capacity, he engaged in "numerous discussions" with Taylor Woodrow representatives regarding SD IV's possible participation in the Mirasol Project. On or about May 17, 2000, Taylor Woodrow sent to Respondent and the Other Builders copies of "artist's drawings of potential elevations of homes that would be built in Mirasol," accompanied by a cover letter requesting feedback from the would-be project participants in the form of "more specific" drawings, consistent with the renderings, showing what they would build if selected. These "more specific" drawings were to be reviewed by the Mirasol Architectural Review Committee to determine whether or not they were acceptable. In a conversation that Respondent had with Mr. Perna following his receipt of this May 17, 2000, correspondence, Respondent stated, in reference to the elevations depicted in the "artist's drawings" Taylor Woodrow had provided, that "they were within the basic parameters" of what SD IV intended to build if selected. SD IV subsequently prepared and submitted to Taylor Woodrow the "more specific" drawings that had been requested. "[M]ost of the drawings" were "very similar" to drawings that SD IV had used in other developments. The first vote that Respondent allegedly unlawfully cast was on Resolution 71, 2000 at the Palm Beach Gardens City Council September 7, 2000, meeting. As the summary statement on its first page reflects, Resolution 71, 2000 was: A resolution of the City Council of the City of Palm Beach Gardens, Florida, providing for approval of a site plan of development for Parcels 1 through 5 with a total of 114 zero lot line single-family home lots and 85 single-family custom home lots within the Golf Digest (Mirasol) PCD, located along PGA Boulevard and as more particularly described herein; providing for five waivers to allow for reductions in the side interior setback, an increase in lot coverage, the placement of pools, screen enclosures and accessory structures within the side interior and rear setbacks, and a reduction in the minimum lot width requirement; providing for conditions of approval; and providing for an effective date. The minutes of the September 7, 2000, Palm Beach Gardens City Council meeting reflect that Respondent and City Attorney Rubin, among others, were present and that, with respect to Resolution 71, 2000, in pertinent part, the following occurred: Resolution 71, 2000- Principal Planner Jim Norquest presented the project. The City Council was assured by the petitioner [Taylor Woodrow] that an architectural committee with proper requirements had been established. Ann Booth, Urban Design Studio, agent for the petitioner, described the project. Landscaping themes for different parcels were described by the landscape architect. Councilman Clark made a motion to approve Resolution 71, 2000. Vice Mayor Jablin seconded the motion, which carried by unanimous 5-0 vote. The next allegedly unlawful votes that Respondent cast were on Resolutions 72, 2000 and 73, 2000 at the Palm Beach Gardens City Council September 21, 2000, meeting. As the summary statement on its first page reflects, Resolution 72, 2000 was: A resolution of the City Council of the City of Palm Beach Gardens, Florida, providing for approval of a site plan of development for Parcels E, F and G with 35, 39, and 67 zero lot line single-family home lots within the Golf Digest (Mirasol) PCD, located along PGA Boulevard and as more particularly described herein; providing for five waivers to allow for reductions in the side interior setback, an increase in lot coverage, the placement of pools, screen enclosures and accessory structures within the side interior and rear setbacks, and a reduction in the minimum lot width requirement; providing for conditions of approval; and providing for an effective date. As the summary statement on its first page reflects, Resolution 73, 2000 was: A resolution of the City Council of the City of Palm Beach Gardens, Florida, providing for approval of a site plan of development for Parcels H and I with 56 single-family custom home lots and 79 zero lot line single-family home lots within the Golf Digest (Mirasol) PCD, located along PGA Boulevard and as more particularly described herein; providing for six waivers to allow for reductions in the side interior setback, street side setback, an increase in lot coverage, a reduction of lot width, and the placement of pools, screen enclosures, and accessory structures within the side interior and rear setbacks; providing for conditions of approval; and providing for an effective date. The minutes of the September 21, 2000, Palm Beach Gardens City Council meeting reflect that Respondent, among others, was present and that, with respect to Resolution 72, 2000 and Resolution 73, 2000, in pertinent part, the following occurred: Resolution 72, 2000- Principal Planner Jim Norquest presented the project. Ann Booth, Urban Design Studio, agent for the petitioner [Taylor Woodrow], described recreational open space proposed by the petitioner. Petitioner was requested to include in the design a tot lot, pool, two tennis courts, and a building, for which staff was directed to draft language for a condition of approval. The language was read into the record during consideration of Resolution 73, 2000: The recreation center south of parcel F shall include a swimming pool, two tennis courts, a tot lot, and a recreation building unless different amenities are approved by City Council at site plan review. Councilman Clark made a motion to approve Resolution 72, 2000 with the additional condition as read into the record by petitioner. Vice Mayor Jablin seconded the motion, which carried by unanimous 5-0 vote. Resolution 73, 2000- Principal Planner Jim Norquest presented the project. Ann Booth, Urban Design Studio, agent for the petitioner [Taylor Woodrow], described the proposed homes and landscaping. Petitioner agreed to provide a gazebo or tot lot on Parcel H, and to allow continued access to the open space at the entrances by residents on both sides of the road. Petitioner and staff agreed to the following condition of approval, which was read into the record by petitioner: The recreation center south of parcel F shall include a swimming pool, two tennis courts, a tot lot, and a recreation building unless different amenities are approved by City Council at site plan review. Councilman Clark made a motion to approve Resolution 73, 2000 with the additional condition as read into the record by petitioner and with the understanding placed on the record by petitioner regarding the open space at the entrances to parcels H and I. Vice Mayor Jablin seconded the motion, which carried by unanimous 5-0 vote. The "waivers" that were granted by Resolutions 71, 2000, 72, 2000, and 73, 2000 were from the requirements of the Palm Beach Gardens Code that Taylor Woodrow, or whichever builder(s) it subsequently selected to build on the affected parcels, would otherwise have to meet. The next vote of Respondent's that has been called into question is his vote at the October 19, 2000, Palm Beach Gardens City Council meeting on Resolution 92, 2000. As the summary statement on its first page reflects, Resolution 92, 2000 was: A resolution of the City Council of the City of Palm Beach Gardens, Florida, providing for approval of a site plan for a[n] 8,046 square foot fire rescue and police substation within the Golf Digest (Mirasol) PCD, located 1/4 mile north of PGA Boulevard on the east side of Jog Road and as more particularly described herein; providing for waivers; providing for conditions of approval; and providing for an effective date. This "site [had to] be completed and dedicated prior to the issuance of [any] certificate of occupancy for any dwelling units in the Golf Digest [Mirasol] PCD" or the "opening of a golf course" in the PCD. The minutes of the October 19, 2000, Palm Beach Gardens City Council meeting reflect that Respondent, among others, was present and that, with respect to Resolution 92, 2000, in pertinent part, the following occurred: Resolution 92, 2000- . . . . Senior Planner Ed Tombari reviewed the petition. A representative of Gee & Jenson answered questions regarding the project and Ann Booth, Urban Design Studio, spoke on behalf of the petitioner [Taylor Woodrow]. Councilman Clark made a motion to approve Resolution 92, 2000. Vice Mayor Jablin seconded the motion, which carried by unanimous 3-0 vote. On November 3, 2000, Elaine Appleyard, a legal assistant with Taylor Woodrow, sent the following e-mail to Taylor Woodrow's Aaron Chorost, who was the chief financial officer for the Mirasol Project: Good morning Aaron - we're finalizing a redline on the Builder Agreement and need two items clarified: Is the intention to have just one closing on all of the lots? Will this particular builder be building anywhere else on the property other than Parcel 4? Mr. Chorost responded within the half hour by sending Ms. Appleyard the following e-mail: I cannot guarantee that Sabatello will purchase beyond parcel 4. It is likely that he will look to do all the 60' wide lots which means he could also purchase parcels 7 and 16 in the future. Likewise for Kenco, buying parcel 5 plus in the future could be doing parcel 12 also. Kenco may also be a builder in the custom builder program but not Sabatello. Yes, there will be only one closing for each parcel containing all the lots in the parcel. These were "completely internal" e-mail communications to which no one outside of Taylor Woodrow, including Respondent and the Other Builders, were privy. No decision had yet been made as to who would be building on Mirasol Parcel 4.6 Taylor Woodrow was even seriously considering keeping the parcel so that it could build on the property itself. At the November 30, 2000, Palm Beach Gardens City Council meeting, Respondent and the other four members of the City Council present voted in favor of Resolution 115, 2000, a consent agenda item which "approv[ed] the Golf Digest-Jog Road (AKA Mirasol Plat One) Plat." The land that was the subject of this resolution had to be platted and dedicated to Palm Beach County before any building permits could be issued for residential construction in Mirasol. On December 4, 2000, Mr. Perna sent Respondent a memorandum requesting certain information that would be needed in the event SD IV was selected to build on Mirasol Parcel 4. The memorandum read as follows: Please forward the list of your Officers and Directors for your parcel immediately. Sabatello - Parcel 4 ("Paradisio") We will be preparing the documents this week for your review. Respondent subsequently provided the requested information. The December 5, 2000, memorandum authored by City Attorney Rubin, which is referenced in the parties' Stipulation of Fact 10, was provided to all members of the Palm Beach Gardens City Council, including Respondent, as well as to the Interim City Manager. The memorandum read as follows: You have indicated that the Sabatello Companies, of which you are a principal, is currently in negotiations with the developers of the Mirasol Planned Community District ("PCD") to become a builder of homes within that community.[7] Your activities as a builder would be limited to specific parcels or pods within the PCD. You asked this office to provide a legal opinion as to your obligation to abstain from voting in your official capacity on matters relating to Mirasol that come before the City Council. Voting conflicts for members of the City Council are governed by section 112.3143, Florida Statutes. Subsection (3)(a) provides that a municipal officer shall not vote in an official capacity on any measure that "would inure to the special gain" of the officer, a principal by whom the officer is retained, or a relative or business associate of the officer. According to the state Ethics Commission, the determination of whether the officer receives a special private gain is based upon the size of the class of persons affected by the vote at issue. The Mirasol PCD encompasses a variety of residential, commercial, recreational and community uses. The residential uses range from low density single family homes to high density multi-family apartments. It is anticipated that your company's activities will be limited to the construction of single family dwellings within a specific, identifiable parcel for which a site plan has already been approved. Because of this limited involvement, there does not appear to be any requirement that you abstain from every vote relating to the approval of plats, parcels and site plans within the entire Mirasol PCD. See CEO 85-62 (city council member not prohibited from voting on rezoning of property within a large redevelopment area where member's corporation owns a parcel of land within the same area). By way of example, the City Council's approval of the site plan for the fire station or the plat for Jog Road in no way inures to your or your company's special private gain. You would, however, be required to abstain from any additional votes relating to the specific parcels or pods within the community in which your company possesses or acquires an interest by virtue of a contractual relationship with the master developer. Where a conflict of interest exists, you are required to state the nature of your interest prior to the vote and file a voting conflict memorandum with the City Clerk, within 15 days. The existence of a voting conflict does not necessarily require you to abstain from all discussion relating to the matter (although you are free to do so). If you plan to participate in discussion of a matter in which you know you have a conflict, you must file a written conflict memorandum before the public meeting. You have also expressed concern that upon learning that your company will be building homes within Mirasol, members of the public may perceive a conflict of interest in all matters relating to Mirasol. To avoid the appearance of impropriety, it would be appropriate to make the following disclos[ure] prior to any vote: "While it is anticipated that the Sabatello Companies will be building homes within Mirasol, the matter before the City Council does not concern the areas in which such construction will take place and is wholly unrelated to any interest held by me or my corporations." Should you have any questions or be in need of additional information, please do not hesitate to contact this office. In a December 8, 2000, letter to Respondent's brother and business associate, Paul Sabatello, Taylor Woodrow's James Harvey, the Mirasol Architectural Review Committee project development manager, wrote: Please accept this letter as our approval of the following items that will require administrative modification of the City of Palm Beach Gardens Parcel Four site plan: We have no objection to modifying the side yard setbacks to 3'1" and 6'11" with a minimum of 10' separation between buildings. All other approved setbacks must be met. We have no objection to moving the zero side of the lot (now 3'1" per your request) on lots 10 thru 38 to the opposite lot line. We have no objection to building the models on lots #40, #39, #7, #8, and #9. We have no objection to modifying the roof tile, body and trim, and paver colors to those submitted with your A.R.C. submission dated November 22, 2000. In addition, the Rafael, Michelangelo, Dante and Be[rn]in[i] models have been reviewed and meet the Design Guidelines established for this parcel.[8] If you should need any further information feel free to give me a call. Those of the Other Builders "being considered for [Mirasol] Parcel 4" were sent similar letters advising them of the Mirasol Architectural Review Committee's action on the plans and drawings that they had submitted. On December 11, 2000, Ms. Appleyard sent the following e-mail to Mr. Perna: Attached are redlined and clean copies of the most recent versions of the Parcel Builder Agr. and Brokerage Agr. Marc asks that you stamp these draft before sending to Carl. [T]hanks. Although it was Mr. Perna's intention that copies of these "draft" agreements be sent to all those "in the mix to become a builder" in Mirasol, including Respondent's company, for their review and comments, Respondent never received any agreement marked "draft" from Taylor Woodrow. Respondent, however, did receive the following letter, dated December 18, 2000, from Mr. Perna: Please find attached the matrix regarding your price lot in Paradisio[9] with corresponding square footage. You can see that it will be necessary to reduce your 2 story to 4,000 square feet in order to fit into the overall structure. You can split up your premiums but standard options and upgrades must stay within the box. Please do not hesitate to give me a call if you have any questions. The "Mirasol Housing Price Matrix," a copy of which was enclosed with the letter, provided that the "base lot price charged to [the selected] builder" for the 46 lots in Mirasol Parcel 4 would be $139,000 per lot. "That would be the deal" for whoever was selected to build on that parcel. There was no room for negotiation. Copies of the "Mirasol Housing Price Matrix" were also sent to the Other Builders. Taylor Woodrow advised SD IV, as well as the Other Builders, that, if selected, they would be expected to start construction of their model homes as soon as possible so that the homes could be completed before the last day of March when the "season" ended. It therefore encouraged them to take such preliminary steps as might be necessary for them to "be ready to pull a building permit" upon the conclusion of the builder selection process.10 This included filing paperwork to obtain City of Palm Beach Gardens administrative (staff) approval of site plan modifications endorsed by the Mirasol Architectural Review Committee.11 Any builder wanting to file such pre- selection paperwork had the permission of Taylor Woodrow (the property owner) to do so (as Taylor Woodrow's agent). SD IV, through Paul Sabatello, filed such paperwork, along with a $150.00 check (for the filing fee),12 with the Palm Beach Gardens Planning and Zoning Division on December 18, 2000. In doing so, SD IV was seeking approval of the modifications to the Mirasol Parcel 4 site plan referenced in Mr. Harvey's December 8, 2000, letter to Paul Sabatello. SD IV's submission was accompanied by a cover letter, dated December 18, 2000, from Paul Sabatello to Steve Cramer, the Palm Beach Gardens' Interim Growth Management Director, which read as follows: Please find enclosed architectural drawings, exterior colors and site plans for your review and approval for Parcel 4 (Paradisio) Mirasol. The floor plan and building colors vary slightly from the prototypical plans previously submitted. We are requesting at this time an approval for the ability to use 3'-1" + 6'11" side yard set backs instead of the usual 0 + 10'. These set back conditions provide the required 10' building separation while according to Table 600 of the Standard Building Code allowing us to include some glass on what would be the zero side. The enclosed site plans show this clearly for the proposed models on specific lots. This set-back condition would apply to all lots in Parcel 4. One additional request for approval. The original site plan indicated zero side of lots with the "zero flip" occurring on lots 9, 10 and 38, 39. [T]his is not possible with the new set back[] conditions. Therefore, we are requesting that the zero side 3'-1" set back side be as follows: Lots 1-23 "Zero" on Right Lots 24-46 "Zero" on Left The enclosed site plan indicates the change that we are requesting. Also enclosed please find the letter of approval from the Mirasol Architectural Review Committee for the above-mentioned request.[13] Should you have any questions do not hesitate to call. Thank you. The "architectural drawings" that were submitted showed the Da Vinci model (on lot 9), the Raphael model (on lot 10), the Bernini model (on lot 11), the Dante model (on lot 39), and the Michelangelo model (on lot 40). On the forms that were part of the filing, the representation was made that SD IV owned Mirasol Parcel 4. In fact, Taylor Woodrow was the owner of the property, and it had merely given SD IV permission to make the filing on its behalf. It had not, at the time of the submission, entered into any agreement with SD IV regarding ownership of the property. Among the other things that SD IV did around this time to be "ready to go" if and when selected by Taylor Woodrow to build on Mirasol Parcel 4 was to assemble materials it would need to submit to the Palm Beach Gardens Building Department to obtain building permits to construct model homes on the parcel. As part of this process, Respondent signed and dated building permit application forms. He did so as early as December 20, 2000, the same date that a list of subcontractors (to accompany the permit applications) was prepared.14 Respondent recognized that it was a "gamble" to do the things that SD IV was doing to ready itself to begin building in Mirasol because there was the chance that the company would not be chosen to participate in the project and that all its preparation would be for naught. Nonetheless, he considered it to be a "gamble" worth taking and made good business sense. Such pre-selection risk-taking was not uncommon among builders doing business in Palm Beach Gardens.15 The most recent of Respondent's allegedly unlawful votes were cast at the Palm Beach Gardens City Council December 21, 2000, meeting. These votes were in favor of approving six items on the consent agenda (Resolutions 127, 2000; 128, 2000; 129, 2000; 130, 2000; 131, 2000; and 132, 2000) involving the platting of parcels that were part of the Mirasol Project, including Mirasol Parcel 4, as more particularly described in the parties' Stipulation of Fact 11. These plats had to be approved before any building permits could issue. By the time of the December 21, 2000, votes, Respondent was aware that Mirasol Parcel 4 was where SD IV would be building (at least at the outset) if selected to participate in the Mirasol Project. He was hopeful that his company would get the opportunity to build there, but it was a matter over which he had no control. It was in the hands of Taylor Woodrow. As of December 21, 2000, Taylor Woodrow had not extended SD IV an offer to participate in the Mirasol Project, nor had it given SD IV any assurances that such an offer would be forthcoming. There was uncertainty as to whether SD IV would be selected. It was not until the following month that this uncertainty was eliminated when Taylor Woodrow finally made its decision to allow SD IV to become a builder in Mirasol, specifically on Mirasol Parcel 4. In voting on these and prior resolutions affecting the Mirasol Project, Respondent was acting in a manner consistent with the verbal advice he had solicited from the City Attorney before each vote, as well as the advice contained in City Attorney Rubin's December 5, 2000, memorandum (which is set forth above). At the time of each of these votes, Respondent's company did not have "an interest by virtue of a contractual relationship with the master developer" in any property in Mirasol. Therefore, according to what he had been advised by City Attorney Rubin, he was not required to abstain from voting. On December 28, 2000, the City of Palm Beach Gardens Planning and Zoning Division granted its approval of the modifications SD IV had sought (through its December 18, 2000, filing) to the Mirasol Parcel 4 site plan. Respondent first learned that his company had been selected to build on Mirasol Parcel 4 when he received from Taylor Woodrow a letter dated January 22, 2001, so advising him, along with a Parcel Builder Agreement and Exclusive Agency Brokerage Agreement for Mirasol Parcel 4. These agreements were fully executed in February of 2001. SD IV paid $139,000 per lot for the lots that it purchased in Mirasol Parcel 4 (consistent with the pre-selection pronouncement that had been made in the 'Mirasol Housing Price Matrix" that Taylor Woodrow had distributed). SD IV was one of first builders to start construction in Mirasol. SD IV successfully built out Mirasol Parcel 4. It sold all of the 46 homes it built.16 A total of 12 builders, including SD IV, participated "in the whole [Mirasol] [P]roject." Not all of the Other Builders were selected to participate in the project.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Commission issue a public report finding the evidence presented at the public hearing in this case insufficient to clearly and convincingly establish that Respondent violated Section 112.3143(3), Florida Statutes, by voting at the September 7, 2000, September 21, 2000, October 19, 2000, November 30, 2000, and December 21, 2000, Palm Beach Gardens City Council meetings on matters affecting the Mirasol Project and dismissing the complaint filed against Respondent. DONE AND ENTERED this 4th of March, 2009, in Tallahassee, Leon County, Florida. S 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 4th day of March, 2009.
