98-002207 Haitian American Community Foundation, Inc. vs. Department Of Revenue Status: Closed Recommended Order on Tuesday, December 1, 1998.

Summary: Applicant failed to establish entitlement to sales tax exemption.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HAITIAN-AMERICAN COMMUNITY )

FOUNDATION, INC., )

)

Petitioner, )

)

vs. ) Case No. 98-2207

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

__________________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case

on September 18, 1998, by video between Tallahassee and Fort

Lauderdale, Florida, before Claude B. Arrington, a duly

designated Administrative Law Judge of the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Edy Sanon, Executive Director

Haitian American Community Foundation, Inc.

3740 North Andrews Avenue

Fort Lauderdale, Florida 33309-5262

For Respondent: William B. Nickell, Esquire

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314-6668

STATEMENT OF THE ISSUES

Whether Petitioner is entitled to a consumer's certificate

of exemption from sales tax as a "charitable institution" as that

term is defined by Section 212.08(7)(o)2b., Florida Statutes.

PRELIMINARY STATEMENT

Petitioner requested a formal administrative hearing

following Respondent's denial of Petitioner's application for a

consumer's certificate of exemption from sales tax. Petitioner

asserted that it was entitled to the exemption because it was a

charitable institution. The matter was referred to the Division

of Administrative Hearings, and this proceeding followed.

The parties stipulated to certain facts which have been

incorporated herein. At the formal hearing, Edy Sanon,

Petitioner's executive director, represented his organization and

testified on its behalf. Petitioner presented one exhibit, a

letter from the Internal Revenue Service, which was accepted into

evidence. Respondent presented no witnesses and no exhibits.

No transcript of the proceedings has been filed. The

Petitioner and Respondent filed proposed recommended orders,

which have been duly considered by the undersigned in the

preparation of this Recommended Order. Attached to the

Petitioner's proposed recommended order were certain documents

that were described by Petitioner as being "new exhibits." Those

exhibits were not offered at the formal hearing and have not been

considered in the preparation of this Recommended Order. In

addition, Petitioner proposed in its Proposed Recommended Order

that certain facts, not reflected by the parties pre-hearing

stipulation, be incorporated as findings of fact because the

parties stipulated to those facts. Those facts are not supported

by the record of this proceeding and have not been incorporated

as findings of fact herein. 1/

FINDINGS OF FACT

1. Petitioner is a nonprofit organization incorporated

under the laws of the State of Florida as a corporation.

Petitioner has applied to Respondent for a certificate of

exemption from sales and use tax based on its claim that it is a

"charitable institution" within the meaning of, and pursuant to

the provisions of, Section 212.08(7)(o)2.b., Florida Statutes. 2/

2. The Internal Revenue Service has determined that

Petitioner is exempt from federal income tax under Section 501(a)

of the Internal Revenue Code as an organization described in

Section 501(c)(3).

3. Edy Sanon, Petitioner's executive director, testified in

general terms as to the services performed by Petitioner to

persons of Haitian descent. Based on that general testimony, it

cannot be determined with any degree of certainty the precise

services performed by Petitioner. Mr. Sanon testified that his

organization provides translation services and referral services

that assist Haitian immigrants in adjusting to life in the United

States, becoming employable, and obtaining services from various

government agencies.

4. Petitioner engages in fund raising and searches for

governmental grants for a center where people can come for help.

The extent of its resources expended on fund raising was not

established.

5. Mr. Sanon testified that Petitioner provides its

services free of charge and that it served approximately 800

clients last year.

6. Chapter 212, Florida Statutes, imposes a tax on sales,

use and other transactions. Respondent is the agency of the

State of Florida charged with administering Chapter 212, Florida

Statutes, and its duties include the issuance of certificates of

exemption from tax pursuant to Section 212.08(7)(o), Florida

Statutes.

7. Pursuant to its rule-making authority, Respondent has

adopted Rule 12A-1.001, Florida Administrative Code, to implement

the provisions of Section 212.08(7)(o), Florida Statutes.

8. Although Petitioner has been recognized as a nonprofit

organization by the Internal Revenue Service, Petitioner must

receive a certificate of exemption from Respondent to be exempt

from Florida's tax on sales, use, and other transactions imposed

by Chapter 212, Florida Statutes.

9. The provisions of Section 212.08(7)(o), Florida

Statutes, and Rule 12A-1.001, Florida Administrative Code,

provide the criteria for the exemption sought by Petitioner.

10. Section 212.08(7)(o), Florida Statutes, provides, in

pertinent part, an exemption from sales tax as follows:

(o) Religious, charitable, scientific,

educational, and veterans' institutions and

organizations.

1. There are exempt from the tax imposed

by this chapter transactions involving:

* * *

b. Sales or leases to nonprofit religious,

nonprofit charitable, nonprofit scientific,

or nonprofit educational institutions when

used in carrying on their customary nonprofit

religious, nonprofit charitable, nonprofit

scientific, or nonprofit educational

activities . . .

* * *

2. The provisions of this section

authorizing exemptions from tax shall be

strictly defined, limited, and applied in

each category as follows:

* * *

b. "Charitable institutions" means only

nonprofit corporations qualified as nonprofit

pursuant to s. 501(c)(3), 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:

* * *

(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 . . . 3/

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

implements the provisions of Section 212.08(7)(o), Florida

Statutes, and provides, in pertinent part, as follows:

(g)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.

* * *

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:

I. "Persons unable to pay" means persons

whose annual income is 150 percent or less of

the current Federal Poverty Guidelines . . .

* * *

d. "Substantially reduced cost" means the

normal charge, market price, or fair market

value to a purchaser or recipient, diminished

in an amount of considerable quantity.

e. "Sole or primary function" means that a

charitable institution, excluding hospitals,

must establish and support its function as

providing or raising funds for services as

outlined in subparagraphs 1. and 2. above, by

expending in excess of 50.0 percent of the

charitable institution's operational

expenditures towards "qualified charitable

services", as defined in subparagraph

2.a. - g. within the charitable institution's

most recent fiscal year.

12. Petitioner established that it is a nonprofit

organization.

13. Petitioner did not present any financial data at the

formal hearing. In the absence of that financial information, it

cannot be found that Petitioner disburses more than fifty percent

of its expenditures to provide or raise funds for a provider of a

statutorily listed service. The absence of that information is

fatal to Petitioner's application. 4/

14. The unchallenged testimony of Mr. Sanon was sufficient

to establish for the purposes of this proceeding that Petitioner

does not charge for its services. Petitioner did not establish

at the formal hearing the ability of any of its client to pay a

reasonable fee for the services provided by Petitioner.

15. The general testimony of Mr. Sanon failed to establish

that the translation, referral, and other services provided by

Petitioner are "social welfare services" within the meaning of

Section 212.08(7)(o)2.b., Florida Statutes. 5/

CONCLUSIONS OF LAW

16. The Division of Administrative Hearings has

jurisdiction of the parties to and the subject of this

proceeding. Section 120.57(1), Florida Statutes.

17. Tax exemptions are matters of legislative grace. It is

a well-recognized rule of law that tax exemptions must be

strictly construed against the taxpayer seeking them and in favor

of the state. An applicant for an exemption must show clearly

that he is entitled under the law to the exemption. The law

providing the exemption is to be strictly construed. Sebring

Airport Authority v. McIntrye , 642 So. 2d 1072 (Fla. 1994);

Capital City Country Club v. Tucker , 613 So. 2d 448 (Fla. 1993);

Asphalt Pavers, Inc. v. Dept. of Revenue , 584 So. 2d 55 (Fla. 1st

DCA 1991); State Dept. of Revenue v. Anderson , 403 So. 2d 397,

399 (Fla. 1981); Green v. Pederson , 99 So. 2d 292, 296 (Fla.

1957).

18. Petitioner has the burden to prove by competent,

substantial evidence that it meets all of the criteria for the

exemption set forth by statute and rule. The evidence presented

by the Petitioner at the formal hearing did not meet that burden.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that Respondent enter a final order that

denies Petitioner's application for a certificate of exemption.

DONE AND ENTERED this 1st day of December, 1998, in

Tallahassee, Leon County, Florida.

___________________________________

CLAUDE B. ARRINGTON

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 1st day of December, 1998.

ENDNOTES

1/ The undersigned entered an Order Requiring Response on

November 5, 1998, that gave the Petitioner the opportunity to

provide any authority that would permit it to file additional

exhibits after the close of the formal hearing. Petitioner was

unable to provide such authority and the undersigned knows of

none. The Order also required the parties to confer and to file

a statement as to whether their pre-hearing stipulation was

incomplete. From the separate responses filed by the parties, it

cannot be concluded that the factual stipulation contained in the

Pre-hearing Stipulation was incomplete.

2/ Section 212.08(7)(o), Florida Statutes, provides an exemption

from sales tax to religious, charitable, scientific, educational,

and veterans' institutions and organizations. Petitioner is not

and does not claim to be a scientific, religious, or educational

institution.

3/ There are seven categories of services contained in the

statute. The only category that Petitioner claims to provide is

social welfare services.

4/ Even if the "new exhibits" submitted by Petitioner with its

proposed order are considered to have been appropriately filed,

those exhibits are not self-explanatory and do not establish

Petitioner's entitlement to the subject exemption.

5/ This finding should not be construed to be a finding that the

services provided by Petitioner are not social welfare services

within the meaning of Section 212.08(7)(o)2.b., Florida Statutes.

From his testimony, it cannot be determined exactly what

Petitioner does or for whom, and, consequently, it cannot be

determined that this criteria has been met.

COPIES FURNISHED:

Edy Sanon, Executive Director

Haitian-American Community

Foundation, Inc.

3740 North Andrews Avenue

Fort Lauderdale, Florida 33309

William B. Nickell, Esquire

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314-6668

Joseph Mellichamp, III, Esquire

Department of Legal Affairs

The Capitol

Tallahassee, Florida 32399

Linda Lettera, General Counsel

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314

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.