19-001879 1701 Collins Miami Owner, Llc vs. Department Of Revenue Status: Closed Recommended Order on Tuesday, December 17, 2019.

Summary: Petitioner is entitled to a refund of overpayment of the stamp tax because it paid the tax based on the entire undifferentiated consideration it had received for real estate, tangible personal property, and intangible personal property.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

1701 COLLINS ( MIAMI ) OWNER LLC ,

Petitioner,

vs. Case No. 1 9 - 1879

DEPARTMENT OF REVENUE ,

Respondent.

_______________________________/

RECOMMENDED ORDER

This case came before Administrative Law Judge John G.

Van Laningham for final hearing by video teleconference on

September 17 , 20 19 , at sites in Tallahassee and Lauderdale

Lakes , Florida.

APPEARANCES

For Petitioner: Joseph C. Moffa , Esquire

Jonathan W. Taylor, Esquire

Moffa, Sutton & Donnini, P.A.

Trade Center South, Suite 930

100 West Cypress Creek Road

Fort Lauderdale , Florida 33 309

Rex D. Ware, Esquire

Moffa, Sutton & Donnini, P.A.

3500 Financial Plaza, Suite 330

Tallahassee, Florida 32312

For Respondent: Mark S. Urban , Esquire

Office of the Attorney General

The Capitol, Plaza Level 01

Tallahassee, Florida 32399

STATEMENT OF THE ISSUE

The issue in this case is whether Petitioner is entitled to

a refund of nearly $500 thousand on an a lleged overpayment of

the stamp tax , where P etitioner paid the tax based on t he entire

undifferentiated consideration it had received, as a lump - sum

payment, from the sale of an operating hotel business comprising

real estate, tangible personal property, and intangible personal

property .

PRELIMINARY STATEMENT

Documentary stamp tax and surtax are due when a deed or

other instrument reflecting the transfer of real estate is

recorded. Stamp taxes are calculated based upon the

consideration exchanged for real estate, not other types of

property. In 2015, Petitioner 1701 Collins (Miam i) Owner, LLC,

sold an operating hotel business comprising real estate,

tangible personal property, and intangible personal property for

an undifferentiated, lump - sum of $125 million. Upon

recordation of the deed, Petitioner paid stamp tax on the entire

$ 125 million. This, Petitioner later came to believe , was a

mistake, because the lump - sum purchase price had included

consideration for tangible personal property and intangible

personal property .

On February 6, 2018, Petitioner timely filed an application

for a documentary stamp tax and surtax refund with Respondent

Department of Revenue, requesting a refund of about

$500 thousand. On April 2, 2018, Respondent issued a Notice of

Proposed Refund Denial indicating its intent to deny the refund

application. Petitioner filed an informal protest of the denial

on May 31, 2018. Respondent issued a Notice of Decision of

Refund Denial on January 9, 2019 , which sustained the refund

denial.

On February 20 , 2019, Petitioner filed its Petition for

Chapter 120 Hearing to protest the intended denial of its refund

application, which Respondent referred to the Division of

Administrative Hearings ("DOAH") . T he proceeding was docketed

under DOAH Case No. 19 - 1879. Simultaneously, a related case

(19 - 1883) was filed with DOAH, which arose from Respondent 's

denial of a similar refund request and presented nearly

identical issues. As presiding officer, the undersigned

administrative law judge ("ALJ") consolidated DOAH Case

No s . 19 - 1879 and 19 - 1883 and set the final hearing for June 28,

2019.

On June 7, 2019, Petitioner filed a motion for continuance,

urging that the final hearing be postponed so that Petitioner

could (i) bring a rule challenge under section 120.56(4),

Florida Statutes, and then (ii) move for c onsolidation of the

rule challenge with the pending section 120.57(1) proceedings.

The undersigned continued the final hearing to September 17,

2019.

On July 9, 2019, Petitioner filed its Petition to Determin e

Invalidity of Agency Statement, which initiated DOAH Case

No. 19 - 3639RU. In due course, the rule challenge was

consolidated with the refund denial case; DOAH Case No. 19 - 1883

was closed upon the filing of a Notice of Voluntary Dismissal;

and the final hearing in the remaining consolidated cas es, DOAH

Case Nos. 19 - 1879 and 19 - 3639RU, was held on September 17, 2019.

Petitioner called five witness during its case - in - chief:

Afshin Kateb, c hief f inancial o fficer of YDS Investments; Holly

Unck, v ice p resident of Transaction Tax Services for CBRE, I nc.;

Bernice Dowell, p resident of Cynsur, LLC (an expert in property

valuation and allocation); Charles Phillips, r evenue p rogram

a dministrator I for Respondent (called as an adverse witness) ;

and Henry Small, t ax c onferee for Respondent (called as an

adverse witness). In addition, Petitioner's Exhibits 1

through 1 9 were admitted into evidence.

Respondent presented its case through Messrs. Phillips and

Small, during Petitioner's case. In addition, Respondent

offered Respondent's Exhibit s 1 through 35, which were admitted

into evidence.

The two - volume final hearing transcript was filed on

October 9 , 201 9 . Each party timely filed a p roposed r ecommended

o rder on October 2 9 , 201 9 , in accordance with the deadline

established at the conclusi on of the hearing.

Respondent filed a Motion for Attorney's Fees and Costs on

November 4, 2019. The motion is hereby denied.

Unless otherwise indicated, citations to the Florida

Statutes refer to the 201 9 Florida Statutes.

FINDINGS OF FACT

1. On February 23, 2015, Petitioner 1701 Collins ( Miami )

Owner, LLC ( " Taxpayer " ), a Delaware limited liability company,

entered into a Purchase and Sale Agreement ( " Agreement " ) t o sell

a going concern, namely a hotel and conference center doing

business in Mi ami Beach, Florida, as the SLS Hotel South Beach

(the " Hotel Business " ) , to 1701 Miami (Owner), LLC, a Florida

limited liability company ( " Purchaser " ). Purchaser paid

Taxpayer $125 million for the Hotel Business.

2. The Hotel Business comprised two categ ories of

property, i.e., real estate ( " RE " ) and personal property ( " PP " ).

The PP, in turn, consisted of two subcategories of property,

tangible personal property ( " TPP " ) and intangible personal

property ( " ITPP " ). It is undisputed that the property

transf erred pursuant to the Agreement included RE, TPP, and

ITPP.

3. The sale closed on June 5, 2015, and a special warranty

deed was recorded on June 8, 2015 , which showed nominal

consideration of $10. Pursuant to the Agreement, Taxpayer was

responsible for remitting the documentary stamp tax and the

discretionary surtax (collectively, " stamp tax " ). S tamp tax is

due on instruments transferring RE; the amount of the tax,

payable per instrument recorded, is based upon the consideration

paid for RE. Stamp tax is not assessed on considera tion given

in exchange for PP.

4 . The Agreement contains a provision obligating the

parties to agree, before closing, upon a reasonable allocation

of the lump - sum purchase price between the three types of

property comprising the Hotel Business. For reasons unknown,

this allocation , which was to be made " for federal, state and

local tax purposes, " never occurred. The failure of the parties

to agree upon an allocation, if indeed they even attempted to

negotiate this point , did not prevent the sale from occurring.

Neither party declared the other to be in breach of the

Agreement as a result of th eir nonallocation of the

consideration .

5. The upshot is that, as between Taxpayer and the

Purchaser, the $125 million purchase price was treated as

undifferentiated consideration for the whole enterprise.

6 . Taxpayer paid stamp tax in the amount of approx imately

$1.3 million based on the full $125 million of undifferentiated

consideration. Taxpayer paid the correct amount of stamp tax if

the entire consideration were given in exchange for the RE

transferred to Purchaser pursuant the Agreement —— if, in othe r

words, the Purchaser paid nothing for the elements of the Hotel

Business consist ing of PP.

7. On February 6, 2018, Taxpayer timely filed an

Application for Refund with Respondent Department of Revenue

(the " Department " ), which is the agency responsible for the

administration of the state ' s tax laws. Relying on a report

dated February 1, 2018 (the " Deal Pricing Analysis " or " DPA " ),

which had been prepared for Taxpayer by Bernice T. Dowell of

Cynsur, LLC, Taxpayer sought a refund in the amount of

$495,013 .05. As grounds therefor, Taxpayer stated that it had

" paid Documentary Stamp Tax on personal property in addition to

real property. "

8. Taxpayer ' s position, at the time of the refund

application and throughout this proceeding , is that its stamp

tax li ability should be based, not on the total undifferentia t ed

consideration of $125 million given in the exchange for the

Hotel Business , but on $77.8 million, which , according to the

DPA, is the " implied value " of —— i.e., the pro - rata share of the

lump - sum pu rchase price that may be fairly allocated exclusively

to —— the RE transferred pursuant to the Agreement. Taxpayer

claims that, to the extent it paid stamp tax on the " implied

values " (as determined in the DPA) of the TPP ($7 million) and

ITPP ($40.2 million) included in the transfer of the Hotel

Business, it mistakenly overpaid the tax. 1 /

9. On February 23, 2018, the Department issued a Notice of

Inten t to Make Refund Claim Changes, which informed Taxpayer

that the Department planned to " change " the refund amount

requested, from roughly $500 thousand , to $0 —— to deny the

refund, in other words. In explanation for this proposed

decision, the Department wrote: " [The DPA] was produced 3 years

after the [special warranty deed] was recorded. Please provi de

supporting information regarding allocation of purchase price on

or around the time of the sale. "

10. This was followed, on April 2, 2018, by the

Department ' s issuance of a Notice of Proposed Refund D enial,

whose title tells its purpose. The grounds w ere the same as

before: " [The DPA] was produced 3 years after the document was

recorded. "

11. Taxpayer timely filed a protest to challenge the

proposed refund denial, on May 31, 2018. Taxpayer argued that

the $125 million consideration , which Purchaser paid for the

Hotel Business operation, necessarily bought the RE, TPP, and

ITPP constituting the going concern ; and, therefore, because

stamp tax is due only on the consideration exchanged for RE , and

because there is no requirement under Florida law that the

undifferentiated consideration exchanged for a going concern be

allocated, at any specific time, to the categories or

subcategories of property transferred in the sale , Taxpayer ,

having paid stamp tax on consideration given for TPP and ITPP,

is owed a refund .

12. The Department ' s t ax c onferee determined that the

proposed denial of Taxpayer ' s refund request should be upheld

because, as he explained in a memorandum prepared on or around

December 27, 2018, " [t]he taxpayer [had failed to] establish

that an allocation of consideration between Florida real

property, tangible personal property, and intangible property

was made prior to the transfer of the property such that tax

would be based only on the consideration allocated to the real

pro perty. "

13. The Department issued its Notice of Decision of Refund

Denial on January 9, 2019. In the " Law & Discussion " section of

the decision, the Department wrote:

[1] When real and personal property are

sold together, and there is no itemization

o f the personal property, then the sales

price is deemed to be the consideration paid

for the real property. [2] Likewise, when

the personal property is itemized, then only

the amount of the sales price allocated for

the real property is consideration for the

real property and subject to the documentary

stamp tax.

The first of these propositions will be referred to as the

" Default Allocation Presumption. " The second will be called

" Consensual - Allocation Deference. " The Department cited no law

in support of either principle.

14. In its intended decision, the Department found , as a

matter of fact, that Taxpayer and Purchaser had not " established

an allocation between all properties prior to the transfer " of

the Hotel Business. Thus, the Department conclu ded that

Taxpayer was not entitled to Consensual - Allocation Deference,

but rather was subject to the Default Allocation Presumption,

pursuant to which the full undifferentiated consideration of

$125 million would be " deemed to be the consideration paid for

the " RE. Taxpayer timely requested an administrative hearing to

determine its substantial interests with regard to the refund

request that the Department proposes to deny.

15. After initiating the instant proceeding, Taxpayer

filed a Petition to Determine Invalidity of Agency Statement,

which was docketed under DOAH Case No. 19 - 36 3 9RU (the " Rule

Challenge " ). In its section 120.56(4) petition, Taxpayer

allege s that the Department has taken a position of disputed

scope or effect ( " PDSE " ) , which mee ts the definition of a " rule "

under section 120.52( 16 ) and has not been adopted pursuant to

the rulemaking procedure prescribed in section 120.54. The

Department ' s alleged PDSE , as described in Taxpayer ' s petition,

is as follows:

In the administration of documentary stamp

tax and surtax, tax is due on the total

consideration paid for real property,

tangible property and intangible property,

unless an allocation of consideration paid

for each type of property sold has been made

by the taxpayer on or before the date the

transfer of the property or recording of the

deed.

If the alleged PDSE is an unadopted rule, as Taxpayer further

alleges, then the Department is in violation of section

120.54(1)(a).

16. Although the Rule Challenge will be decided in a

separate F inal O rder, the question s of whether the alleged

agency PDSE exists, and, if so, whether the PDSE is an unadopted

rule , are relevant here , as well, because neither the Department

nor the under signed may " base agency action that determines the

substantial interests of a party on an unadopted rule. "

§ 120.57(1)(e) 1., Fla. Stat. Accordingly, the Rule Challenge

was consolidated with this case for hearing.

17. The Departm ent, in fact, has taken a PDSE , which is

substantially the same as Taxpayer described it. The

undersigned rephrases and refines the agency ' s PDSE , to conform

to the evidence presented at hearing, as follows:

In determining the amount stamp tax due on

an instrument arising from the lump - sum

purchase of assets comprising both RE and

PP , then, absent an agreement by the

contracting parties to apportion the

consideration between the categories or

subcategories of property conveyed, made not

later than the date of recor dation (the

" Deadline " ) , it is conclusively presumed

that 100% of the undifferentiated

consideration paid for the RE and PP

combined is attributable to the RE alone .

According to the PDSE , the parties to a lump - sum purchase of

different classes of property ( a " Lump — Sum Mixed Sale " or

" LSMS " ) possess the power to control the amount of stamp tax by

agreeing upon a distribution of the consideration between RE and

PP , or not, before the Deadline. 2 / If they timely make such an

a greement, then, in accordance with Consensual - Allocation

Deference , which is absolute, the stamp tax will be based upon

whatever amount the parties attribute to the RE. If they do

not, then, under the Default Allocation Presumption, w hich is

irrebuttable , the stamp tax will be based upon the

undifferentiated consideration.

18. Simultaneously with the issuance of this Recommended

Order, the undersigned is rendering a Final Order in the Rule

Challenge, which determines that the PDSE a t issue is an

unadopted rule. This determination precludes the undersigned,

and the Department, from applying the PDSE as an authoritative

rule of decision in determining Taxpayer ' s substantial

interests . The undersigned concludes further, for reasons se t

forth below, that the PDSE does not reflect a persuasive or

correct interpr etation of the applicable law. Rather, because

the stamp tax is assessed only against the consideration given

in exchange for RE, the law requires that , i n determining the

amount of stamp tax due on an instrument arising from a n LSMS , a

pro - rata share of the undifferentiated consideration must be

allocated to the RE . The amount of the undifferentiated

consideration that is reasonably attributable to the RE conveyed

in a n LSMS is a question of fact.

19. To prove its allegation that only $ 77.8 million of the

consideration received from Purchaser for the Hotel Business ,

and not the entire $125 million, is attributable to the RE

conveyed in the LSMS , Taxpayer relies upon the DPA a nd the

testimony of Ms. Dowell , who authored that report . The

Department did not present any expert testimony to rebut the

opinions of Ms. Dowell concerning the allocation of the

undifferentiated consideration. Rather, the D epartment argues

that Ms. Dowell ' s opinions are unreliable as a matter of law and

should be disregarded , if not excluded as inadmissible —— a

position that depends heavily upon the Daubert standard for

screening expert testimony , which does not apply in administrative proceedings , for reasons that will be explained

in the Conclusions of Law .

20. Alternatively, the Department asserts , based on

Taxpayer ' s 2015 federal income tax return, that the amount

paid for the RE component of the Hotel Business was actually

$ 122 million . Although this argument is inconsistent with the

Department ' s main position, because it co ncedes that the

allocation is a disputable issue of material fact , rather than a

legal conclusion driven by the Default Allocation Presumption or

Consensual - Allocation Deference, as applicable, t he Department

is correct that the tax return can be viewed as evidence in

conflict with Ms. Dowell ' s testimony ; the undersigned will

resolve the evidential conflict in favor of Ms. Dowell ' s

testimony, in findings below.

21. Primarily, though, the Department eschews evidence

bearing on the pro - rata allocation of the consideration on the

grounds that the Default Allocation Presumption conclusively

establishes the taxable amount as a matter of law. In ot her

words, the Department considers Ms. Dowell ' s opinions to be

irrelevant , regardless of her credibility as an expert witness ——

or lack thereof . In this respect, the Department has made a

strategic error because the Default Allocation Presumption,

besides being extralegal, is both irrational and arbitrary. It

is irrational to assume that the seller in an arm ' s length

transaction would simply give away valuable PP for nothing of

value in return . It is ar bitrary automatically to assign all of

the undifferentiated consideration paid in a n LSMS to one

category of property transferred , i.e ., RE , to the exclusion of

the other property types exchanged . S ystematically allocating

the entire purchase price to a ny other involved property class,

e. g. , T PP, would be equally (un)justifiable. Put another way,

there is no rational answer to the question: Why not deem the

entire purchase price allocable to the personal property ? Why

not a 50/50 split instead? Or 60/40? The Default Allocation

Presumption, in short, is not even a reasonable inference.

22. Without the Default Allocation Presumption to trump

the DPA, the Department is left with the representations of

value in the Form 4797 attached to Taxpayer ' s 201 5 federal

income tax return as its best, indeed only, rebuttal evidence.

The f orm is used to r eport gain or loss from s ales of b usiness

p roperty , such as, in this instance, the Hotel Business . In its

return, Taxpayer reported gross sales price s of $20 million for

the hotel land, $102 million for the hotel building, and

$3 million for the hotel ' s furniture, fixtures, and equipment.

In other words, Taxpayer represented to the Internal Revenue

Service that $122 million of the undifferentiated consider ation

for the Hotel Business was attributable to RE , with the balance

going towards TPP. Notably, Taxpayer did not list, much less

assign value to , any " section 197 intangible " property, such as

goodwill, going concern value, workforce in place, business

records, operating systems, permits, licenses, trade names, etc.

See 26 U.S.C § 197 (d). Taxpayer ' s Form 4797 statements

regarding the cumulative sales price of the RE are admissions

that , arguably at least, conflict with Ms. Dowell ' s opinions as

expressed in the DPA. See § 90. 803(18) , Fla. Stat.

23. What is to be made of these admissions? They are not

binding, of course . Taxpayer is free to disavow or distinguish

the statements in its Form 4797, which is essentially what it

has done. Different taxes, different rules, different reasons ——

in these general terms, Taxpayer strives to deflect attention

from , and dismiss as irrelevant any serious consideration of,

its federal income tax filing. T axpayer ' s position is not

without merit because, in fact, the stamp tax is fundamentally

different from the federal income tax, as are the laws governing

these noncomparable revenue raising measures.

24. On the other hand, Taxpayer did declare the gross sales

price s of the land, building, and TPP to be as described above ,

and these statements of apparent historical fact would seem to

be true regardless of the specific tax purposes that prompted

their making. Th ere is more to this evide nce than Taxpayer

would have it. U ltimately , however, the undersigned finds the

Form 4797 evidence to be less persuasive than the DPA , for

several reasons.

25. First, it is undisputed that ITPP was conveyed in the

LSMS of the Hotel Business , and this ITPP included section 197

intangibles. But: Was Taxpayer r equired to segregate, and

report separately, the gross sales price of these section 197

intangibles on its Form 4797? The undersigned does not know .

Or, w as Taxpayer allowed (or even obligated) to put the value of

the section 197 intangibles onto, say, the building? Again, the

undersigned does not know. To evaluate the persuasive force of

the Form 4797 admissions, however, one needs to know these

things. If Taxpayer w ere not required, for example, to report

separately the value of the section 197 intangibles, and if,

further, there were tax advantages in not doing so, then the

admissions at issue would not be very probative.

26. There is no evidence in the record regardin g how , from

May 2012, when Taxpayer acquired the Hotel Business , Taxpayer

valued the attendant section 197 intangibles , for federal income

tax purposes. It is possible that , for reasons undisclosed in

this proceeding, Taxpayer never segregate d the cost of the

section 197 intangibles but instead allowed t he value of the

ITPP to be taxed as part of the value of the building. In any

event, topics such as the proper classification of business

property under the I nternal Revenue Code ; the different

amor tization periods applicable to various types of property ;

the tax planning strategies an owner might cautiously,

aggressively, or even illegally employ to minimize its

liability ; and the common mistakes made, or advantages

overlooked, by tax preparers, are complex and beyond the scope

of the current record . 3 / As a result, the statements regarding

asset prices in Taxpayer ' s 2015 federal income tax return , which

sit in the record practically devoid of meaningful context, are

consistent with too many alternative possibilities to be

credited as persuasive admissions about the respective values of

the land and building in question. 4 /

2 7 . Second, as mentioned, T axpayer did not state, on the

Form 4797, that ITPP was sold for a price of $0, in wh ich case

one might expect T axpayer also to have report ed a loss on the

sale of section 197 intangible property . Rather, T axpayer did

not disclose the sale of any ITPP in the LSMS at issue. This is

important, from a weight - of - the - evidence standpoint, because it

is an undisputed historical fact that valuable IT P P was conveyed

to Purchaser in the subject transaction , which makes it

unreasonable to infer a gross sales price of $0 for the IT P P.

I magine , however, the probative force the Form would have had if

Taxpayer had listed a gross sales price of, say, $1 million for

the ITPP, together with corresponding reductions in the prices

of the RE and TPP; in such a hypothetical situation, the

Form 4797 admissions would have been much more persuasive as an

appo rtionment of the undifferentiated consideration . As it

stands , however, the reasonably inferable likelihood is that

Taxpayer did not report the sales price of the ITPP because it

did not report the sale of ITPP —— not because there was no sale

(for there was) or because the sales price was $0 (which is

unlikely), but for other reasons , unknow able on the instant

record .

2 8 . Third, for purposes of levying Taxpayer ' s 2015 real

estate property taxes, the Miami - Dade T ax Collector appraised

the RE at $39 million . (This figure is the higher of two

contemporaneous assessments by the local taxing authority. )

This is less than one - third of $122 million —— but, in contrast,

constitutes 50% of Ms. Dowell ' s pro - rata allocation of

consideration to the RE. There is no evidence in the record

regarding the reliability of the local tax collector ' s

appraisals of hotel property, or specifically the percentage of

fair market value such assessments are reasonabl y likely to

reflect. Th erefore, the undersigned does not place too much

weight on the 2015 ad - valorem tax assessments. Still, one

cannot help but notice that Ms. Dowell ' s opinions on the RE ' s

implied value are much closer to the Miami - Dade County Tax

Collector ' s appraisal than the Form 4797 admissions . 5 /

29 . Having found that the Form 4 797 admissions possess

some, but not much, probative value regarding the allocation of

the undifferentiated consideration, the DPA emerges largely

unscathed . As fact - finder, the undersigned ha s the discretion ,

nevertheless, to reject, as not credible, the expert testimony

of Ms. Dowell. But he credits her opinions , both because

Ms. Dowell is a qualified authority on the subject matter, and

because the opinions she has expressed are objectively

reasonable and logically supported.

3 0 . As for Ms. Dowell ' s credentials, she has a b achelor of

s cience degree and a m aster of s cience degree, both in finance.

She has worked in the field of property valuation for around

30 years. Working for major hotel companies, Ms. Dowell

routinely performed the sort of allocation of value between

asset classes that she has conducted in this case. In 2007,

Ms. Dowell formed Cynsur, Inc., which performs value allocations

f or hospitality industry clients, predominately for taxation

purposes, as here. Ms. Dowell has conducted approximately 1,000

deal pricing analyses for clients around the country. In the

niche of implied value allocations between the categories of

property transferred in LSMS transactions involving hotel

operations, Ms. Dowell is clearly an experienced , knowledgeable,

and credible expert.

3 1 . The DPA that Ms. Dowell prepared is not an independent

appraisal of the hotel property per se, but an allocation of the

undifferen tiated consideration , which uses estimates of value as

the basis for dividing the lump - sum purchase price into three

shares, each representing an amount reasonably attributable to a

type of property conveyed in the LSMS. The estimates of value

that provid e the grounds for determi ning the implied price - per -

category are a kind of appraisal, but the DPA is not designed or

expected to produce a total valuation that might exceed, or fall

short of, the $125 million lump - sum purchase price that is being

apportion ed. Again, to be clear, the goal of the DPA is to

divide the $125 million into asset classes , not to verify

whether $125 million was the fair market value of the Hotel

Business in 2015, because the stamp tax applies , not to

fair market value as such, but to that portion of the

undifferentiated consideration fairly attributable to the RE

conveyed.

3 2 . Ms. Dowell ' s approach to apportionment is to determine

the " implied values " of the RE and TPP by analyzing the income

an owner would expect to receive on a separate investment in the

RE or TPP, as the case may be, apart from the Hotel Business as

a whole. She starts with a discounted cash flow analysis of the

Hotel Business as a going concern, using the Purchaser ' s pro

forma pro jections as developed at the time of the LSMS. In this

instance, Purchaser had presented a five - year projection of cash

flow to analyze the investment, which assumed that the Hotel

Business would be sold at the end of year five . Using

Purchaser ' s assumpt ions, Ms. Dowell determined that the hotel

acquisition would yield an implied rate of return on ( and of )

investment of 11.99%.

3 3 . With this in mind, Ms. Dowell sought to quantify the

present value of the income that an owner would expect to

receive on an investment in the hotel RE alone, based on a

hypothetical or proxy rent for this asset in isolation . To

determine the hypothetical rent, Ms. Dowell needed to make

certain assumptions, which are set forth in the DPA. She

determined, ultimately, that 12% of gross operating revenue

represents a reasonable approximation of the proxy rent for the

RE assets in question. Of course, the assumptions underlying

this determination are not necessarily, or even prob ably, the

only reasonable assumptions that could have be en made. The

Department, however, did not offer any expert opinion evidence

that challenged Ms. Dowell ' s assumptions , nor did it present

alternative rental scenarios.

34. Ms. Dowell discounted the projected, five - year RE

income stream at 10%, reflecting the more conservative nature of

a pure RE investment as compared to an investment in the Hotel

Business as a going concern. The Department did not offer any

expert opinion testimony disputing this discount factor .

Ms. Dowell concluded that the net present value of the RE at

issue was $77,803,50 0 ( $7 7. 8 million when rounded ), which

represents about 62% of the undifferentiated consideration for

the Hotel Business . The undersigned credits this opinio n and

finds that $7 7. 8 million is a reasonable allocation of

consideration to the RE component of the Hotel Business.

35. Ms. Dowell performed a similar analysis of a

hypothetical standalone investment in the hotel TPP and

calculated a net present value o f $7 million, using a discount

rate of 11%. This left the remainder of $40,196,500 to be

allocated to ITPP. For present purposes, the breakdown between

TPP and ITPP is relatively unimportant because the stamp tax is

not payable on consideration given for PP of any stripe.

Indeed, the ultimate factual determination that $7 7. 8 million of

the undifferentiated consideration is reasonably attributable to

RE is the material finding; from that, it follows mathematically

that the remaining balance of $47 .2 milli on reflects

consideration for the PP , however that figure might be allocat ed

between TPP and ITPP. Thus, having found that $7 7. 8 million is

a reasonable allocation of consideration to the RE component of

the Hotel Business, the undersigned is bound to det ermine that

$4 7.2 million is a reasonable allocation of consideration to

the PP.

36. Because Taxpayer paid stamp tax on $125 million

instead of $7 7. 8 million, it overpaid the tax and is due a

refund. It is undisputed that the amount of the stamp tax that

Taxpayer paid on the excess consideration above $7 7. 8 million

is $495,013.05.

CONCLUSIONS OF LAW

3 7 . DOAH has personal and subject matter jurisdi ction in

this proceeding pursuant to s ections 72.011(1)(a), 120.569,

120.57(1), and 120.80(14)(b), Florida Statutes.

38 . Although designated the " r espondent, " the Department

has the initial , albeit limited, burden of proving " that an

assessment has been made against the taxpayer and the factual

and legal grounds upon which the . . . department made the

assessment. " § 120.80(14)(b)2., Fla. Stat. If the Department

meets its burden by a preponderance of the evidence , then the

ta xpayer must establish, also by the greater weight of the

evidence, that the assessment is incorrect. See IPC Sports,

Inc. v. Dep ' t of Rev . , 829 So. 2d 330, 332 (Fla. 3d DCA 2002).

Here, the Department has carried its limited burden, and thus,

the parties agree, the real burden in this case is upon

Taxpayer, who seeks a refund, to establish that it overpaid the

correct amount of stamp tax due on the special warranty deed

because the reasonably determinable consideration given in the

LSMS for the RE conveye d to Purchaser was $77.8 million.

39 . Section 201.02 , Florida Statutes, provides in relevant

part:

(1)(a) On deeds, instruments, or writings

whereby any lands, tenements, or other real

property, or any interest therein, shall be

granted, assigned, transf erred, or otherwise

conveyed to, or vested in, the purchaser or

any other person by his or her direction, on

each $100 of the consideration therefor the

tax shall be 70 cents. When the full amount

of the consideration for the execution,

assignment, transf er, or conveyance is not

shown in the face of such deed, instrument,

document, or writing, the tax shall be at

the rate of 70 cents for each $100 or

fractional part thereof of the consideration

therefor. For purposes of this section,

consideration include s, but is not limited

to, the money paid or agreed to be paid; the

discharge of an obligation; and the amount

of any mortgage, purchase money mortgage

lien, or other encumbrance, whether or not

the underlying indebtedness is assumed.

Here, there is no dis pute that the special warranty deed is a

taxable instrument under section 201.02 ; that the full amount of

the consideration for the conveyance of the RE at issue was not

shown o n the face of the deed; and that the stamp tax is payable

on the full amount of consideration given for the RE.

40. In addition to the foregoing stamp tax, each county :

may levy, subject to the provisions of

s. 125.0167, a discretionary surtax on

documents taxable under the provisions of

s. 201.02, except that there shall be no

surt ax on any document pursuant to which the

interest granted, assigned, transferred, or

conveyed involves only a single - family

residence.

§ 2 0 1 .031(1), Fla. Stat . " All provisions of chapter 201, except

s. 201.15, apply to the surtax. " § 201.031(2) , Fla. Stat.

41. The stamp " tax attaches at the time the deed or other

instrument of conveyance is delivered, irrespective of the time

when the sale is made. " Fla. Admin. Code R. 12B - 4.011(1). Upon

recordation, the c lerk of the c ircuit c ourt has a duty " to se e

to it that proper stamp taxes are paid prior to a recording of

the document, " and it is " the duty of the owner and holder of

the deed . . . to see to it that proper amount of stamp taxes

are attached thereto prior to recording. " Fla. Admin. Code

R. 12B - 4.007.

42. A person who believes he has overpaid the stamp tax

may seek a refund pursuant to section 215.26, Florida Statutes.

Florida Administrative Code Rule 12B - 4.004(1)(b) requires that

an application for refund must be filed with the Department

" w ithin 3 years after the date the tax was paid. " A taxpayer

has the right to contest the denial of a refund under

section 72.011(1)(a), wh ich authorizes the filing of a complaint

in circuit court, and, alternatively, the filing of a petition

for formal administrative hearing, as the taxpayer's a vailable,

but mutually exclusive, remedies. Here, it is undisputed that

Taxpayer timely requested a tax refund and timely elected the

administrative remedy for contesting the Department ' s intended

denial o f refund.

4 3 . In applying taxing statutes, courts must be careful

not to subject to tax anything which has not been clearly so

burdened. " Taxes cannot be imposed except in clear and

unequivocal language. Taxation by implication is not

p ermitted. " Fla . S & L Servs., Inc. v. Dep ' t of Rev. , 443 So.

2d 120, 122 (Fla. 1st DCA 1983) . The " authority to tax must be strictly construed. " Dep't of Rev. v. GTE Mobilnet , 727 So. 2d

1125, 1128 (Fla. 2d DCA 1999) . As the Florida Supreme Court explained,

It is a f undamental rule of construction

that tax laws are to be construed strongly

in favor of the taxpayer and against the

government, and that all ambiguities or

doubts are to be resolved in favor of the

taxpayer. This salutary principle is found

in the reason that the duty to pay taxes,

which necessary to the business of the

sovereign, is still a duty of pure statutory

creation and taxes may be collected only

within the clear definite boundaries recited

by statute.

Maas Bros., Inc. v. Dickinson , 195 So. 2d 193, 198 (Fla. 1967);

see also Mikos v. Ringling Bros. - Barnum & Bailey Combined Shows ,

497 So. 2d 630, 632 (Fla. 1986)( " The courts are not taxing

authorities and cannot rewrite the statute . " ).

4 4 . Section 120.57(1)(e)1. provides that neither the

agency nor an " administrative law judge may . . . base agency

action that determines the substantial interests of a party on

an unadopted rule or a rule that is an invalid exercise of

delegated legislative authority. " Accordingly, because the

PDSE, wh ich comprises the Default Allocation Presumption and

Consensual - Allocation Deference, has been determined to be an

unadopted rule for reasons stated in the Final Order issued,

contemporaneously, in the companion Rule Challenge , 6 / it shall

not be applied as a governing principle of decision in this

case.

4 5 . There remain for resolution , broadly speaking, two

legal questions, namely: (1) What is the correct understanding

of section 201.02 ' s mean ing, to the extent relevant here ; and

(2) Does the Daubert standard for reviewing expert testimony

apply in administrative proceedings such as this? These matters will be addressed, in turn, below.

46. The PDSE is, at bottom, a reflection of the

Department ' s interpretation of section 201.02, and specifically

th e term " consideration " as used therein. The logic behind the

Department ' s position can be expressed as a syllogism : because

(i) the term " consideration " as used in section 201.02(1)(a)

unambiguously means and refers to the bargained - for product of

mutual assent between contracting parties , given in exchange for

promised performance ; and because (ii) Purchaser and Taxpayer

never agree d that $77.8 million is the proper basis for stamp

tax purposes ; it follows, therefore , that (iii) the entire lump -

sum payme nt of $125 million must be regarded as " taxable

consideration " under section 201.02(1)( a) . The flaw in the

Department ' s reasoning is not in the premises, (i) and (ii),

both of which are true, and neither of which is disputed. The

problem is that the conclusion, (iii), is a non sequitur .

47. To begin, the Department ' s position is internally

inconsistent. Consider the Department ' s own words . The " crux

of [ our ] argument, " writes the Department, is " that

consideration must be the product of an agreemen t. " ( e mphasis

added) . As a means of "eliminat[ing] the arbitrariness that

would ensue if any payor of documentary stamp taxes could

unilaterally determine the value upon which to pay taxes," the

Department goes on , section 201.02 requires the contracting

parties' " agreement to establish taxable consideration ."

( e mphasis added) . Now , i f , as the Department contends,

section 201.02 requires that a specific amount of consideration

for RE must be expressly agreed upon by the contracting parties

in order to count as " taxable consideration " for purposes of

calculating the stamp tax, then consistency demands that when a

lump - sum payment is made for a mixture of properties including

RE, TPP, and ITPP, as here , the whole undifferentiated

consideration must not be taxed as though it were 100%

attributable to RE because the contracting parties never agreed

to such an allocation . The Department ' s argument is a paradox

in asmuch as its crucial premise —— no " taxable consideration "

without agreed allocation —— leads to a self - defeating conclusion .

Because there can be no stamp tax without " taxable

consideration, " the Department ' s argument proves that there c an

be no stamp tax without agreed allocation in the context of an

LSMS.

48. The Department " solves " this self - created conundrum

with the help of the Default Allocation Presumption, whereby it

simply " deem s " undifferentiated consideration to have been

allocated 100% to RE transferred in an LSMS. Think of the

Default Allocation Presumption as a magic wand that turns

" undifferentiated consideration " into " taxable consideration. "

Ironically, when the Department waves this magic wand over an

LSMS involving undifferentiated consideration , it conjures an

allocation to which the contracting parties never agreed —— or,

put another way, it " unilaterally determine[s] " the " taxable

consideration . " The Department fails to explain why it is less

arbitrary for the Department unilaterally to allocate all

undifferentiated consideration to RE irrespective of the facts

and circu mstances surrounding the underlying transaction , than

for the Department and the taxpayer , when an allocation dispute

arises, to present evidence at trial or hearing from which a

judge or other neutral fact - finder —— and not the tax collector or

payor unilaterally —— can determine the " taxable consideration . "

Only one of the parties to the instant case , it turns out, is

urging a unilateral determination of taxable consideration , and

that party is not Taxpayer .

49. Look closely , and it will be seen , as well, that t he

Department uses a little rhetorical sleight of hand to sell the

illusion of a n exegesis of the statutory text , slyly in serting

the term " taxable consideration " in to its argument in place of

" consideration , " as though these terms unambiguously stand for

the same concept . They do not. It is necessary, therefore, to

define the relevant terminology.

50. It is axiomatic that, as a legal term of art,

" consideration " is that bargained - for " something, " which, under

the law of contracts, is essential to the formation of a legally

binding agreement. For clarity , this type of consideration will

be referred to as " contractual consideration. "

51. No one disagrees that section 201.02 clearly and

unambiguous ly (i) imposes a stamp tax on any deed or other

instrument whereby a grantor conveys RE, or an interest therein,

to a grantee, and (ii) specifies that the tax shall be assessed

against the " consideration therefor, " mean ing the contractual

consideration for the RE. The amount of contractual

consideration given for RE , and subject to the stamp tax under

section 201.02, will be called " taxable consideration. "

52. Of course, not all contractual consideration is

taxable consideration. Contractual consideration given for

anything other than RE is " nontaxable consideration. " Thus,

w hen a contract has nothing to do with real property , the

contractual consideration is 100% nontaxable consideration.

Conversely, when a contract involves n othing but the transfer of

real property , the contractual consideration is 100% taxable

consideration.

53. In contrast to these all - or - nothing situations, the

contractual consideration in an LSMS transaction is not

necessarily either 100% taxable or 100% nontaxable. Where, as

here, the contracting parties do not itemize the lump - sum

purchase p ayment by specifying the respective prices - per - item ,

the contractual consideration is " undifferentiated

consideration , " that is, a mixtur e of taxable consideration and

nontaxable consideration in non - negotiated measures . ( If , in

contrast, the contracting parties to an LSMS itemize the

purchase payment, then the contractual consideration is

" consensually allocated consideration. " ) To determine the

correct amount of stamp tax payable on undifferentiated

consideration requires a division or apportionment of the

undifferentiated consideration, so that the nontaxable

consideration is separated from the taxable consideration and

not include d in the cost basis .

54. The Department steals a n analytical base when it

switches, without warning or explanation, from talking about

contractual " consideration, " to discussing " taxable

consideration. " The law of contracts requires that , to form a

legally enforceable agreement, the parties must agree on the

contractual consideration ; but whether t hey agree upon an amount

of taxable consideration depends , not on contract law, but on

whether consensual allocation is a deal point for one or both

parties . 7 / Nor, contrary to the Department ' s unsupported

assertion, does " the operative statute [section 201.02 ]

require[] agreement " to a consensually allocated consideration.

The statute , as a matter of fact, says nothing whatsoever about

either undiff erentiated consideration or consensually allocated

consideration ; the relevant administrative rules are equally

silent on these matters .

55. Once the different meanings of " consideration " have

been identified and labeled , it becomes clear that t he

Department has merely assume d, rather than persuasively

established, not only (i) that th e statute requires contracting

parties to agree upon an apportionment of any lump - sum payment

made in exchange for RE and PP conveyed as a package in a single

trans action ; but also (ii) that, in the absence of consensually

allocated consideration, the stamp tax must be imposed on the

whole undifferentiated consideration. Th e Department ' s

understanding of section 201.02(1)(a) goes way beyond the plain

meaning of the term " consideration " as used therein. Indeed,

what the Department is doing here cannot fa irly be called

interpretation; it is legislating.

56. So what does the statute (as opp osed to the

Department) require? Despite their differences, both Taxpayer

and the Department agree that, given the absence of specific

direction, the plain statutory language makes it necessary, when

dealing with undifferentiated consideration, to determi ne how

much of the lump - sum purchase price is attributable to RE —— to

ascertain, in other words, the taxable consideration . The

Department contends , as we ' ve seen, that this particular factual

issue must be determined as a matter of law, pursuant to the

Default Allocation Presumption. 8 / There is no statute or rule,

however, which clearly, or even arguably, supports the

Department ' s position. Taxpayer contends that this factual

issue is susceptible to ordinary methods of proof and hence must

be resolved as a question of fact, based upon competent

substantial evidence. Taxpayer ' s position squares with the

plain language of the statute , for several reasons .

5 7. As a preliminary observation, i t is important to note

that, notwithstanding their dispute, the parties agree that the

allocation of undifferentiated consideration must be determined

based upo n facts extrinsic to the deed. The Department would

presume an allocation of 100% of the $125 million purchase price

as taxable consideration , from the basic f act —— which, although

undisputed , is not found with in the four corners of the special

warranty deed —— of the contracting parties ' failure or inability

to allocate the purchase price themselves, by mutual agreement .

Taxpayer, f or its part, relies upon the DPA and Ms. Dowell ' s

testimony to prove the allocation it desires , all of which are

extrinsic to the deed as well. The undersigned concludes that

s ection 201.02(1)(a) plainly supports this use of extrinsic

evidence in situations where the full amount of t he

consideration is not shown on the face of the deed, as here.

Were extrinsic evidence inadmissible in this case , the stamp tax

would have to be assessed against the nominal consideration of

$10 as stated in the special warranty deed —— an outcome that no

one is advocating.

5 8 . The courts have approved this understanding of the

statute. A good , and apposite, example is Andean Investment

Company v. Department of Revenue , 370 So. 2d 377 (Fla. 4th

DCA 1978), where the taxpayer, a general partnership, protested

the Department ' s imposition of stamp taxes on conveyances of RE

to the partnership. The RE transfers were of separately owned

warehouses, the owners of which each agreed to convey his

propert y to the partnership , which took the assets subject to

existing mortgages . In return for the conveyance of his

warehouse , each owner received a share in the partnership in an

exact proportion to his equity in the property he transferred .

Id. at 378. The taxpayer argued that there had been no taxable

consideration given for the RE transfers , because no money had

changed hands and the partners remained liable , as partners, for

the respective mortgage debts. T he court rejected th is

contention on the grounds that the partnership ' s assumption of

the mortgages constitut ed " a shifting of the economic burden, "

which " is sufficient consideration in the transfer of real

property to warrant paying of the [stamp] taxes. " Id.

59. The court agreed with the taxpayer, however, that the

Department had " miscal culated the amount of the tax liability. "

Id. at 379. In computing the tax, the Department had followed

its existing rule for determining the taxable consideration when " the owner of property forms a general partnership with other

parties and he conveys the property to the partnership subject

to a mortgage for which the partnership assumes the burden of

making mortgage payments , " which the court acknowledged

established " a proper method for determining the amount of tax

owed. " Id. Nevertheless, the court held that the Department

would need to " reduce the consideration figure, in this case, by

the proportionate share of the individual grantor ' s liability as

a partner in the entire partnership burden of indebtedness. "

Id. The cour t explained:

All transactions should be taxed the same;

to apply [the computation rule] strictly in

each case would not recognize cases, such as

this, which vary from the norm in terms of

the consideration received by the grantor.

If we say the transactio n is taxable because

an economic burden is shifted then we must

accurately assess that burden shifting by

adjusting the consideration figure. If one

partner ' s transfer reduces his actual

liability then the consideration for his

transfer is proportionately increased. When

another partner ' s actual liability is

increased as a result of the transfer the

consideration for that transfer is

proportionately reduced.

Id.

60. As the court in Andean surely recognized, " adjusting

the consideration " on a per - partner basis to account for each

partner's particular share of the partnership ' s total

indebtedness would require findings of material fact , which in

turn might lead to a hearing or hearings if any of those facts

happened to be disputed by one or more of the individual

partners. Clearly, some cases arising under section 201.02 ——

most likely, for the most part, those which " vary from the norm

in terms of the consideration received by the grantor, " such as

Andean ; su ch as this case —— will need to be adjudicated . That is

not a function of any statutory ambiguity but of the many ways a

free people , operating in a robust capitalist economy, may

choose to structure their consensual arrangements in both

personal and business affairs , which give rise to such a variety

of RE transactions that disputes over taxable consideration are

inevitable.

61. Equally important, Andean teaches us , upon reflection,

that undifferentiated consideration must be ad justed to ensure

that all transactions are taxed the same . Imposing the tax on

the nontaxable consideration received by the grantor for PP

transferred in an LSMS is no different conceptually, and no less

objectionable, than imposing the tax on a partner ' s net increase

in liability as the result of a transfer in which he receives a

proportionate share of partnership liability that exceeds his

pro - rat a share of the preexisting personal liability he had

under a mortgage whose burden has been shifted to the

p artnership. The undifferentiated consideration received by

Taxpayer in this case should be reduced , in determin ing the

taxable consideration, to the implied value of the RE

($77.8 million) as a proportionate share (62%) of the negotiated

value of the Hote l Business ($125 million) , for the same reason

th at , in Andean , the pro - rat a value of the partnership ' s

assumption of each partner ' s mortgage liability needed to be

further reduced (or increased) , on a per - partner basis, by the

respective partners' proportionate share s of the entire

partnership burden of indebtedness : namely, to burden with tax

no more or less than the reasonably determinable amount of

consideration received for the transfer of RE. 9 /

62. That the amount of taxable consideration is

potentially a triable issue in a RE transfer invo lving

undifferentiated consideration does not , of itself, require that

the Default Allocation Presumption be rejected . Evidentiary

presumptions are a well - known feature of the landscape of

litigation, after all , and thus , the ALJ could conceivably apply

the Default Allocation Presumption in a proceeding to determine

stamp tax liability, if he or she were to decide , in the

exercise of independent judgment, that the statute is best

interpreted as providing therefor . There is, however, a good

reason not to read the Default Allocation Presumption into

section 201.02(1)(a) —— besides the obvious one that the statute

is unambiguous and needs no such " interpretation " —— namely, the

principle that " presump tions arise as a matter of law, and the

power to establish them is reserved solely to the courts and the

legislature. " B.R. v. Dep ' t of H RS , 558 So. 2d 1027, 1029

(Fla. 2d DCA 1989)(agency policy requiring finding of child abuse if bruises remained visibl e for at least 24 hours was

unauthorized and unconstitutional). Thus, " [a]n agency of the

executive branch of our government has no authority to formulate

an evidentiary presumption. " Id. ; see also , Little v. Dep ' t of

Labor & Emp. Sec. , 652 So. 2d 927, 928 (Fla. 1st DCA 1995)

(agency lacks implied or inherent power to adopt or apply a legal presumption absent specific statutory or constitutional

authority; McDonald v. Dep ' t of Prof ' l Reg. , 582 So. 2d 660, 664

(Fla. 1st DCA 1991).

63. The Department does not have the power to enact, on

its own authority, an evidentiary presumption such as the

Default Allocation Presumption . Further, in any event, because

section 201.02 does not plainly and unambiguously provide for

such a presumption, the undersigned w ill not infer, from

silence, a meaning that would expand the reach of the stamp tax.

As mentioned, taxing statutes are to be construed against the

tax collector, to the extent reasonably possible ; reading the

Default Allocation Presumption into section 20 1.02 would turn

this canon of statutory construction on its head .

64. It is concluded that the Default Allocation

Presumption is n either compatible with, n or supported by, the

plain meaning of section 201.02 . T he Department ' s claim that

undifferentiated consideration must be deemed taxable

consideration in all circumstances is therefore rejected . As a

result, in sum, the undersigned has treated the amount of

taxable consideration received by Taxpayer in the RE transfer

at issue as a disputed issue of material fact , which he has

resolved in Taxpayer's favor , in his capacity as the

trier - of - fact , based upon the greater weight of the competent

substantial evidence adduced at hearing.

6 5. As a final legal subject, the undersigned turns to

section 90.702, Florida Statutes, wherein the legislature has

codified the Daubert standard for evaluating the reliability of

testimony by experts. See Daubert v. Merrell Dow Pharm . , Inc. ,

509 U.S. 5779, 113, S. Ct. 2786, 125 L. Ed. 2d 469 (1993). The

statute provides as follows:

If scientific, technical, or other

specialized knowledge will assist the trier

of fact in understanding the evidence or in

determining a fact in issue, a witness

qualified as an expert by knowledge, skil l,

experience, training, or education may

testify about it in the form of an opinion

or otherwise, if:

(1) The testimony is based upon sufficient

facts or data;

(2) The testimony is the product of

reliable principles and methods; and

(3) The witness has applied the principles

and methods reliably to the facts of the

case.

66. The Department objected at hearing to Ms. Dowell ' s

testimony, urging the undersigned not to accept her as an expert

under the Daubert standard . The objection was overruled. The

Department continues to argue that, at a minimum, Ms. Dowell ' s opinions , even if admissible, should be placed under the

section 90.702 microscope, found wanting, and disregarded as

unreliable . The undersigned addresses this issue to express his

opin ion that the Daubert standard does not apply in

administrative proceedings.

67. The undersigned is, of course, well aware that , in

SDI Quarry v. Gateway Estates Park Condominium Association ,

249 So. 3d 1287, 1293 (Fla. 1st DCA 2018), the First District

Court of Appeal wrote that section 90.702 ( the Daubert standard )

would " apply in administrative proceedings under Chapter 120. "

This was a dictum, however, because, as the court held,

"Appellant never raised a Daubert objection or requested a

Daubert hear ing below , " and therefore , failed to " preserv e[] for

appeal " the issue of whether certain expert testimony should

have been excluded under section 90.702. Id. Since there was

no Daubert ruling for the court to review , it was not necessary

for the court to decide whether Daubert would apply in

administrative proceedings.

68. Further, to the extent the SDI Quarry dictum on

Daubert can be regarded as law, it is directly and

irreconcilably in conflict with the Florida Su preme Court ' s decision in Florida Industrial Power Users Group v. Graham ,

209 mention even did not y inexplicabl ppeal A ourt of . C D the First which case controlling , a 1142 (Fla. 2017) So. 3d istrict In

Graham , the Court held that " the Florida Evidence Code is not

applicable to administrative proceedings. " Id . at 1146.

Because section 90.702 is part of the Florida Evidence Code, it can not be enforced here , per Graham , as though it were

applicable to administrative proceedings . At the very least, the ALJ has the discretion to refuse to apply the Daubert

standard .

69. In Graham , the Court held that " the Public Service

Commission has discretion on whether to apply the Florida

Evidence Code and, in particular, the rule of sequestration to

its proceedings. " Id. at 1145. This discretion, the Court

added, necessarily included " the discretion to refuse to apply the rule of sequestration, codified in section 90.616, Florida

Statutes, during its proceedings. " Id. at 1146. Perhaps the

Court would say the same about section 90.702, leaving it to the

discretion of the ALJ to apply, or not to apply, the Daubert

standard on a case - by - case basis. But g iven that subjecting the testimony of experts to scrutiny under the Daubert standard

carries the genuine potential to affect the outcome of a case , whereas invoking (or not invoking ) the Rule is unlikely in most

instances to be dispositive , the undersigned is not confident

the Court would be as willing to authoriz e the discretionary use

of this powerf ul evidentiary tool. In the undersigned's view,

the decision on whether to make Daubert appl icable to

proceedings before DOAH should be left to the legislature, which

can amend the Administrative Procedure Act to incorporate

section 90.702 if it desires.

70. At any rate, if the undersigned has discretion on

whether to follow section 90.702, which he doubts but will

assume for the limited purpose of making this last point, it was

well within such discretion for the undersigned to refus e to

apply the Daubert standard at hearing , as he did, when the

Department —— despite having been on notice of Ms. Dowell ' s

opinions since February 2018 —— raised its Daubert objection for

the very first time . See, e.g. , Rojas v. Rodriguez , 185 So. 3d

710, 711 - 12 (Fla. 3d D CA 2016) ; see also Club Car, Inc. v. Club

Car (Quebec) Imp., Inc. , 362 F.3d 775 (11th Cir. 2004)(judge has

broad discretion to reject Daubert objection not raised before

trial).

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department of Revenue e nter a

final order approving Taxpayer's claim and authorizing payment

of $495,013.05 to Taxpayer as a refund of overpayment of the

stamp tax , plus statutory interest if and to the extent

section 213.255, F lorida Statutes, requires such additional

compensation . (If a dispute of material fact arises in

connection with the payment of interest, the Department should

re turn the matter to DOAH for a hearing.)

DONE AND ENTERED this 17th day of December , 20 19 , i n

Tallahassee, Leon County, Florida.

___________________________________

JOHN G. VAN LANINGHAM

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 17th day of December , 20 1 9 .

ENDNOTES

1 / The numbers in the text have been rounded for ease of

discussion. The actual f igures arrived at by Ms. Dowell for the

implied values of the several property types making up the

Hotel Business, as stated in the DPA, are : $77,803 , 500 (RE);

$7,000,000 (ITPP); and $40,196,500 (TPP), which total

$125 million.

2 / The Deadline is the date of recordation, by default. The

Department has reserved the right to enlarge the Deadline but

apparently has not developed criteria for limiting its exercise

of discretion in this regard.

3 / To be clear, there is no evidence that Taxpayer underreported

its 2015 income, filed a fraudulent return, or took any

indefensible or questionable positions vis - à - vis its federal

taxes.

4 / Although Taxpayer has the real burden of proof in this

proceedi ng, it was up to the Department, as the proponent of the

Form 4797 admissions, to provide evidence (or argument at least)

from which the undersigned could evaluate the import and

significance of Taxpayer's Form 4797 statements. The Department

failed in th is regard, and, consequently, the undersigned finds

the Form 4797 to be of limited evidential weight.

5 / Along the same lines, it is of passing interest that the

average of $122 million (Form 4797) and $39 million (local tax

collector) is $80.5 million —— which is practically

indistinguishable from Ms. Dowell's opinion. The undersigned

does not suggest that this is a scientifically or statistically

reliable measure, but it does provide some reassurance that

Ms. Dowell's opinion is not out of line .

6 / See 1701 Collins (Miami) Owner, LLC v. Dep't of Rev. , DOAH

Case No. 19 - 3639RU (Fla. DOAH December 17 , 2019) .

7 / In the instant case, such an allocation obviously was not a

material deal point because the transaction closed without one,

despite the contractu al provision obligating the parties to

itemize the lump - sum payment, which they apparently waived.

8 / Under Consensual - Allocation Deference, the Department would

accept the contracting parties' timely agreement to apportion

the lump - sum purchase price be tween taxable and nontaxable

consideration as conclusive proof of the taxable consideration.

9 / See Dep't of Rev. v. Dix , 362 So. 2d 420, 422 (Fla. 1st

DCA 1978)(taxable consideration must be "actual monetary consideration" or "consideration with a reasonably determinable

pecuniary value"). Here, the undifferentiated consideration is

actual monetary consideration ($125 million), but the taxable

consideration is not because the transfer of RE occurred as part

of an LSMS involving no actual allocation. Since the RE

transferred has a reasonably determinable, implied pecuniary

value, however, we can reasonably determine the taxable

consideration by apportioning the undifferentiated

consideration.

COPIES FURNISHED :

Joseph C. Moffa, Esquire Jonathan W. Taylor, Esquire

Moffa, Sutton & Donnini, P.A.

Trade Center South, Suite 930

100 We st Cypress Creek Road

Fort Lauderdale, Florida 33309

( eServed)

Jeanette Moffa, Esquire

Moffa, Sutton & Donnini, P.A.

Trade Center South, Suite 930

100 West Cypress Creek Road

Fort Lauderdale, Florida 33309

(eServed)

Rex D. Ware, Esquire

Moffa, Sutton & Donnini, P.A.

3500 Financial Plaza, Suite 330

Tallahassee, Florida 32312

(eServed)

Mark S. Urban, Esquire

Office of the Attorney General

The Capitol, Plaza Level 01

Tallahassee, Florida 32399

(eServed)

Mark S. Hamilton , General Counsel

Department of Re venue

Post Office Box 6668

Tallahassee, Florida 323 14 - 6668

(eServed)

James A. Zingale , Executive Director

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314 - 6668

(eServed)

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.