99-002492 Greater Newton Community Redevelopment Corporation vs. Department Of Revenue Status: Closed Recommended Order on Friday, November 5, 1999.

Summary: Petitioner, a not-for-profit corporation, failed to prove entitlement to consumer certificate of sales and use tax exemption.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GREATER NEWTOWN COMMUNITY )

REDEVELOPMENT CORPORATION, )

)

Petitioner, )

)

vs. ) Case No. 99-2492

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

____________________________________)

RECOMMENDED ORDER

On September 22 and 23, 1999, a formal administrative

hearing was held in this case before J. Lawrence Johnston,

Administrative Law Judge, Division of Administrative Hearings

(DOAH).

APPEARANCES

For Petitioner: Cynthia E. Porter, Executive Director

Greater Newtown Community

Redevelopment Corporation

1751 Dr. Martin Luther King, Jr., Way

Sarasota, Florida 34234

For Respondent: Bill Nickell, Esquire

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314-6668

STATEMENT OF THE ISSUE

The issue in this case is whether Respondent, the Department

of Revenue, should grant Petitioner's application for a

consumer's certificate of exemption from sales and use tax.

PRELIMINARY STATEMENT

Respondent gave notice of intent to deny Petitioner's

application for a consumer's certificate of exemption from sales

and use tax, and Petitioner requested a formal administrative

hearing. Respondent referred the matter to DOAH, and final

hearing was scheduled for September 22, 1999, in Tampa, Florida.

Later, the hearing was changed to televideo, with hearing

locations in Tampa and Tallahassee.

Petitioner failed to appear for final hearing. Nonetheless,

Respondent stipulated to admission of Petitioner's application as

Petitioner's Exhibit 1, if Petitioner signified its desire to so

stipulate. (Respondent objected to use of the exhibit as sole

support for findings of fact except as to Petitioner's articles

of incorporation and the letter from the United States Internal

Revenue Service (IRS) stating the Petitioner is exempt from

federal income tax under Internal Revenue Code (IRC) Section

501(a) as an organization described in IRC Section 501(c)(3).)

Respondent presented no evidence at final hearing, did not order

a final hearing transcript, and was given ten days to file a

proposed recommended order.

The following day, Petitioner requested a telephone hearing

to explain why it did not appear for final hearing. The

telephone hearing was arranged, and the parties agreed to

continuation of final hearing by telephone. Without objection,

Petitioner was permitted to supplement the evidentiary record

posthearing with a copy of its Annual Report for the year ending

June 30, 1999, which is admitted as Petitioner's Exhibit 2.

Without objection, Respondent was permitted to supplement the

record posthearing with copies of final orders in three previous

administrative proceedings, which are officially recognized. No

other evidence was presented by either party.

Neither party ordered a final hearing transcript. The

parties were given ten days from the filing of the late exhibits

in which to file proposed recommended orders. After filing of

the late exhibits, only Respondent filed a Proposed Recommended

Order.

FINDINGS OF FACT

1. Petitioner is a nonprofit organization incorporated

under the laws of the State of Florida on or about August 27,

1997.

2. Petitioner applied to Respondent for a consumer's

certificate of exemption from sales and use tax. While the

application indicates that it is based on exemption status as an

"enterprise zone," Petitioner clarified at final hearing that it

actually was basing its application on exemption status as a

"charitable institution." ("Enterprise zone" is not an exemption

category under the applicable statutes. See Conclusions of Law,

infra .)

3. The IRS has determined that Petitioner is exempt from

federal income tax under IRC Section 501(a) as an organization

described in IRC Section 501(c)(3).

4. A letter dated February 2, 1999, stated that Petitioner:

was formed in 1997 to plan and implement

redevelopment efforts in the Greater Newtown

Community which lead to overall improvement

in the quality of life of its residents. In

the short time since our inception, we have

responded to community needs by implementing

a broad range of programs that will have a

positive impact on our community.

But from the evidence presented (which included no testimony from

either party), it is difficult to ascertain factual detail about

Petitioner, its activities, or its finances.

5. In addition to grant application and fund-raising

activities, it appears that Petitioner has been involved in

informational and participation-recruitment meetings and

information-gathering surveys for planning purposes (called the

Business Retention and Expansion Survey). Petitioner also

appears to have been involved in a Storefront Renovation Program

and several community celebrations. Petitioner has plans for

other economic and community redevelopment activities. But it

cannot be ascertained from the evidence which of the other

economic development activities have taken place and which are

still in grant application or planning stages. For example,

documentation regarding Petitioner's involvement in one activity

refers to the activity as the "proposed WAGES Employment

Challenge."

6. Petitioner obtained $128,000 of funding from the City of

Sarasota for seed money for its economic redevelopment and other

activities. Petitioner budgeted to spend the $128,000 in 1998.

The entire budget consists of salaries, fringe benefits, and

overhead expenses.

7. According to a "Profit and Loss" statement for January

through October 1998, Petitioner spent $30,581.49 during that

time period. All of those expenditures were in the category of

payroll and overhead expenses.

8. One activity referenced in Petitioner's documentation is

Petitioner's "partnering" with financial institutions and

mortgage brokers to process mortgage loans for affordable

housing. In that case, the expenditures would be by the other

institutions, not by Petitioner.

9. There is no information as to any other expenditures

made by Petitioner.

CONCLUSIONS OF LAW

10. Petitioner seeks an exemption from tax. It is well

recognized that tax exemptions must be construed strictly against

the taxpayer seeking their benefit. E.g. , Capital City Country

Club v. Tucker , 613 So. 2d 448, (Fla. 1993). "While doubtful

language in taxing statutes should be resolved in favor of the

taxpayer, the reverse is true in construction of exceptions and

exemptions from taxation." Department of Revenue v. Skop , 363

So. 2d 678, 680 (Fla. 5th DCA 1980).

11. The burden of proof in this case is on Petitioner to

show by clear evidence that it is entitled to a sales tax

exemption. Green v. Pederson , 99 So. 2d 292, 296 (Fla. 1957).

12. Section 212.08(7)(o)2., Florida Statutes (1997), states

in pertinent part: "The provisions of this section . . . shall

be strictly defined, limited and applied in each category." (All

statutory references are to Florida Statutes (1997).)

13. To demonstrate that it is entitled to a consumer's

certificate of exemption from sales and use tax, an applicant

must show that it meets all the criteria of one of the

definitions under Section 212.08(7), Florida Statutes. See

Gainesville Amateur Radio Society, Inc. v. Department of Revenue ,

D.O.A.H. Case Number 94-1200 (Final Order dated June 23, 1995).

An organization that meets only part of a category's requirements

is not eligible for an exemption certificate.

14. Section 212.08(7)(o)2.b, Florida Statutes, defines

"charitable institution" as:

[O]nly nonprofit corporations qualified as

nonprofit pursuant to s.501(c)(3), United

States Internal Revenue Code of 1954, as

amended, and other nonprofit entities, the

sole or primary function of which is to

provide, or to raise funds for organizations

which provide, one or more of the following

services if a reasonable percentage of such

service is provided free of charge, or at a

substantially reduced cost, to persons,

animals, or organizations that are unable to

pay for such service:

(I) Medical aid for the relief of

disease, injury, or disability;

(II) Regular provision of physical

necessities such as food, clothing, or

shelter;

(III) Services for the prevention of or

rehabilitation of persons from alcoholism or

drug abuse; the prevention of suicide; or the

alleviation of mental physical, or sensory

health problems;

(IV) Social welfare services including

adoption placement, child care, community

care for the elderly, and other social

welfare services which clearly and

substantially benefit a client population

which is disadvantaged or suffers a hardship;

(V) Medical research for the relief of

disease, injury, or disability;

(VI) Legal services; or

(VII) Food, shelter, or medical care for

animals or adoption services, cruelty

investigations, or education programs

concerning animals; and the term includes

groups providing volunteer staff to

organizations designated as charitable

institutions under this sub-paragraph;

nonprofit organizations the sole or primary

purpose of which is to coordinate, network,

or link other institutions designated as

charitable institutions under this

subparagraph with those persons, animals, or

organizations in need of their services; and

nonprofit national, state, district, or other

governing, coordinating, or administrative

organizations the sole or primary purpose of

which is to represent or regulate the

customary activities of other institutions

designated as charitable institutions under

this sub-paragraph. Notwithstanding any

other requirement of this section, any blood

bank that relies solely upon volunteer

donations of blood and tissue, that is

licensed under chapter 483, and that

qualifies as tax exempt under s. 501(c)(3) of

the Internal Revenue Code constitutes a

charitable institution and is exempt from the

tax imposed by this part.

15. Rule 12A-1.001(3)(g), Florida Administrative Code,

provides in pertinent part:

1. 'Charitable institutions' means only

nonprofit corporations qualified as nonprofit

pursuant to s. 501(c)(3), United States

Internal Revenue Code, 1954, as amended, and

other nonprofit entities that meet the

following requirements:

a. the sole or primary function is

providing a 'qualified charitable service' as

defined in this subsection; and

b. a reasonable percentage of such service

is provided free of charge, or at a

substantially reduced cost, to persons,

animals, or organizations that are unable to

pay for such service.

2. 'Qualified charitable service' means:

a. Medical aid for the relief of disease,

injury, or disability;

b. Regular provision of physical

necessities such as food, clothing, or

shelter;

c. Services for the prevention of or

rehabilitation of persons from alcoholism or

drug abuse; the prevention of suicide; or the

alleviation of mental, physical, or sensory

health problems; services include public

education or awareness programs intended to

relieve or prevent any disease, injury, or

disability;

d. Social welfare services including

adoption placement, child care, community

care for the elderly, and other social

welfare services which clearly and

substantially benefit a client population

which is disadvantaged or suffers a hardship;

e. Medical research for the relief of

disease, injury, or disability;

f. Legal services;

g. Food, shelter, or medical care for

animals or adoption services, cruelty

investigations, or education programs

concerning animals;

h. Providing volunteer manpower to

charitable institutions as defined in this

subsection; or

i. Raising funds for 'charitable

institutions' as defined in this subsection.

* * *

3. a. For the purpose of this subsection the

following terms and phrases shall have the

meaning ascribed to them except when the

context clearly indicates a different

meaning:

* * *

e. 'Sole or primary function' means that a

charitable organization, excluding hospitals,

must establish and support its function as

providing or raising funds for services

outlined in subparagraphs 1. and 2. above, by

expending in excess of 50.0 percent of the

charitable organization's expenditures

towards referenced charitable concerns,

within the charitable organization's most

recent fiscal year.

* * *

4. a. For charitable institutions other than

hospitals, a 'reasonable percentage' of the

charitable services provided free or at a

substantially reduced cost to those unable to

pay will be determined by the particular

circumstances of each institution. The

following factors shall be considered in

determining whether a nonprofit entity is

providing a reasonable percentage of its

charitable services free of charge or at a

substantially reduced cost to persons,

animals, or institutions unable to pay for

such services:

I. services are provided free of charge;

II. services are provided at a

substantially reduced cost to the recipient;

III. available services are provided to

anyone who requests the service without

regard to ability to pay;

IV. the ratio of services offered without

cost or at a substantially reduced cost to

the cost of all services provided;

V. the fair market value of the provided

services offered free or at a substantially

reduced cost compared to the amount of sales

tax savings to the institution resulting from

exemption;

VI. the likelihood that due to the nature

of the services provided and the geographic

area in which the services are provided, the

services will be delivered to those unable to

pay;

VII. medical research services and public

education and awareness programs are intended

to benefit the public in that they are

directed toward or involve diseases,

injuries, or disabilities which can affect

members of the public.

b. If a charitable institution, other than

a hospital, does not screen to determine

whether its clientele are unable to pay, the

institution may submit to the Department a

statement signed by an officer or director of

the institution which specifies the

institution's best good faith estimate of the

percentage of its services provided without

charge or at a substantially reduced cost to

persons unable to pay and the basis for the

estimate.

16. Petitioner is exempt from federal income tax under IRC

Section 501(a) as an organization described in IRC Section

501(c)(3) and so meets this requirement of Section 212.08(7)(o)b,

Florida Statutes. But Petitioner proved none of the other

requirements for issuance of a consumer's certificate of

exemption from sales and use tax.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that the Department of Revenue enter a final

order denying Petitioner's application for a consumer's

certificate of exemption from sales and use tax.

DONE AND ENTERED this 5th day of November, 1999, in

Tallahassee, Leon County, Florida.

___________________________________

J. LAWRENCE JOHNSTON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

t his 5th day of November, 1999.

COPIES FURNISHED:

Bill Nickell, Esquire

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314-6668

Cynthia E. Porter, Executive Director

Greater Newtown Community

Redevelopment Corporation

1751 Dr. Martin Luther King, Jr., Way

Sarasota, Florida 34234

Joseph C. Mellichamp, III, Esquire

Office of Attorney General

The Capitol, Plaza Level 01

Tallahassee, Florida 32399-1050

Linda Lettera, General Counsel

Department of Revenue

204 Carlton Building

Tallahassee, Florida 32399-0100

Larry Fuchs, Executive Director

Department of Revenue

104 Carlton Building

Tallahassee, Florida 32399-0100

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15

days from the date of this Recommended Order. Any exceptions to

this Recommended Order should be filed with the agency that will

issue the final order in this case.