. " (j nSTATE OF FLORIDA, DEPARTMENT OF REVENUE

TALLAHASSEE, FLORIDA

CASE NO. 97-0335DOR 91~2o-FDF

Petitioner,

vs.

AFFORDABLE HOME OWNERSHIPCORPORATION

DEPARTMENT OF REVENUE,

)))))))))

~~·~~··_---~-~~--------~~--.~~------Respondent~--~)----~--~-----_. ~ ----- ~~_~ __~ . ~_

----------------)

FINAL ORDER

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THIS CAUSE came before the Department of Revenue for thepurpose of issuing a Final Order. The Administrative Law Judgeassigned by the Division of Administrative Hearings heard thiscause and issued a Recommended Order. A copy of that Order isattached to this Final Order. No exceptions to the RecommendedOrder were filed and there are no proposed substituted orders toconsider. The Department of Revenue has jurisdiction of thiscause.

STATEMENT OF THE ISSUE

The Department adopts and incorporates in this Final Order theStatement of the Issue in ehe Recommendea~Orae~

PRELIMINARY STATEMENT

Department adopts and incorporates in this Final Order thePreliminary Statement in the Recommended Order.

FINDINGS OF FACT

The Department adopts and incorporates in this Final Order theFindings of Fact in the Recommended Order.

CONCLUSIONS OF LAW

The Department adopts and incorporates in this Final Order theConclusions of Law in the Recommended Order.

Based on the foregoing, it is,

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ORDERED that the application of the Petitioner as a charitable\~ institution is denied and that the Petitioner be denied a'-.) consumer's certificate of exemption.

DONE AND ENTERED in Tallahassee, Leon County, Florida thisZ3rrL- day of October, 1997.

CERTIFICATE OF FILING

I HEREBY CERTIFY that the foregoing Final Order has been filedi~ th~ official records of the Department of ~evenue, this1--'3 rd day of October, 1997.

o 9~d~~~~Y CLERK

JUDICIAL REVIEW

Any party to this Order has the right to seek jUdicial reviewof the Order pursuant to section 120.68, F.S., by the filing of aNotice of Appeal pursuant to Rule 9.110, Florida Rules of AppellateProcedure, with the Clerk of the Department in the Office of theGeneral Counsel, Post Office Box 6668, Tallahassee, Florida 32314­6668, and by filing a copy of the Notice of Appeal, accompanied bythe applicable filing fees , with the appropriate District Court ofAppeal. The Notice of Appeal must be filed within 30 days from thedate this Order is filed with the Clerk of the Department.

Attachment: Administrative Law Judge's Recommended Order

C)

Copies furnished to:

LaTry J.SartinAdministrative Law JudgeDivision of Administrative HearingsThe DeSoto Building1230 Apalachee ParkwayTallahassee, FL 32399-1550

()

Rufus L. smith~ Executive Director, A.H.O.C.l,~) Affordable Home ownership corporation

Post Office Box 7347Lake city, FL 32055

Kevin J. ODonnellAssistant General CounselDepartment of RevenuePost Office Box 6668Tallahassee, FL 32314-6668

Linda Lettera~------~-----General--Counse±--~-~--~---~-----

Department of Revenue204 Carlton BuildingTallahassee, FL 32399-0100

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-------~-- --~ ----- -~-~ - ----~- - --~- - - ~-

State of Florida, .Division of Administrative HearingsCj

Sharyn L. SmithDirector and Chief Judge

. Ann ColeClerk of the Division

June 2, 1997

'.

The DeSoto Building. 1230 Apalachee Parkway

Tallahassee, Florida32399-3060

-----~­._------~-.- ----~--~-~._----_._-------- ----~

Linda LetteraGeneral CounselFlorida Department of Revenue204 Carlton BuildingTallahassee, FL 32399

-----filllNfl}-.<4- -19~T7~- -.---.-~~~.-:

~~

Re: Affordable Home Ownership Corporationvs. Department of RevenueDOAH Case No: 97-0335

Dear Ms. Lettera:

Enclosed is my Recommended Order and exhibits in the above­captioned case. Copies of this letter will serve to notify theparties that my Recommended Order and the record have beentransmitted this date.

As required by Section 120.57(1) (k), Florida Statutes, youare requested to furnish the Division of Administrative Hearingswith a copy of the Final Order within 15 days of its rendition.

Sincerely,

~2Administrative Law Judge.

LJS/aml

cc: Rufus L. SmithKevinJ. ODonnell, EsquireLarry Fuchs

Enclosures

(904)488-9675 • SUNCOM 278-9675 • Fax Filing (904) 921-6847

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, STATE OF FLORIDADIVISION OF ADMINISTRATIVE HEARINGS '.

Respondent.

Petitioner,

AFFORDABLE HOME OWNERSHIPCORPORATION,

)

)

)

)

)

vs. ) CASE NO. 97-0335-~---~------~----~---~--~--~--~-~~~-~~~--t-------~------------- ------~----.-~~---~------~---------~--- ~~-

STATE OF FLORIDA, DEPARTMENT )OF REVENUE, )

)

)

-------~--'--------)

RECOMMENDED ORDER

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

~ before Larry J. Sartin, a duly designated Administrative Law

Judge of the Division of Administrative Hearings, on April 1,

1997, in Lake City, Florida.

APPEARANCES

For Petitioner: Rufus'L. SmithExecutive DirectorAffordable Home Ownership CorporationPost Office Box 7347Lake City, Florida 32055

For Respondent: Kevin J. ODonnellAssistant General CounselDepartment of RevenuePost Office Box 6668Tallahassee, Florida 32314-6668

STATEMENT OF THE ISSUE

'The issue in this case is whether Petitioner, Affordable

Horne Ownership Corporation, is eligible for a consumer

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~ certificate of exemption as a charitable institution purs~ant to

section 212.08(7) (0), Florida statutes.

PRELIMINARY STATEMENT'

".

Petitioner, Affordable.Home Ownership Corporation, filed an

application for a consumer certificate of exemption as a

Statutes, with Respondent, the Department of Revenue. On or

about December 16, 1996, Respondent entered a Notice of Intent to

Deny informing Petitioner that the application for exemption had .......

been denied.

On or about January 9, 1997, Petitioner filed a pleading

titled IITaxpayer Opposing Denial ll requesting a formal

(~administra~ive hearing to contest Respondentls decision. The

request for.:'hearing was filed with the Division of Administrative

------Hearings on January 21, 1997. The matter was assigned to the

undersigned.

At the formal hearing, Petitioner presented the testimony of

Rufus Smith, Executive Director of Petitioner, and Selvin

McGahee, Program Director of Florida Non-Profit Housing, Inc.

Petitioner offered seven exhibits, which were accepted into

evidence. Petitioner was to file a copy of Petitioner's exhibit

5 .with Petitioner's proposed recommended order, but failed to do

so. Respondent called no witnesses. One exhibit was offered by

Respondent. The exhibit was accepted into evidence.

No transcript of the hearing was filed. Proposed orders

(-~were to be filed on or before April 21, 1997. Both parties filed

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c-J proposed orders on or before April 21, 1997. Those proposed

orders have been fully considered.

FINDINGS OF FACT

1. Petitioner, Affordable Home Ownership Corporation

(hereinafter referred to as HAHOH), is a Florida nonprofit

corporation.- -- ~- ~-~---

~-- - -------~~-----~---~--~ ----'---_._--------~~-~---~~------ -----~--------~~-----~------

2. Respondent, the Department of Revenue (hereinafter

referred to as the HDepartment H), is an agency of the State of

Florida. Among other·things, the Department is charged with

responsibility for implementing and administering Florida tax

laws, including Chapter 212, Florida Statutes.

3. During 1996, AHO submitted an application for an

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. exemption under Chapter 212, Florida Statutes, as a charitable

organization.

purpose is:

(1) To raise the economic, educational andsocial levels of the underprivileged residents ofLake City (Columbia County) , Florida, and itstrade area, who are substantially underemployedand have low income, by fostering and promotingcommunity-wide interest and concern for theproblems of such residents, and to. that end;

(a) Racial tension, prejudice, anddiscrimination of economic and otherwise may beeliminated; .

(b) Sickness, poverty and crime may be lessenedand;

(c) Educational and economic opportunities maybe expanded among the residents of Lake City(Columbia County), Florida, and its trade area.

(2) To expand the opportunities available tosaid residents to own, manage, and operate

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o busine$s enterprises in economicallyunderprivileged or depressed areas; to assistsaid residents and groups in developingmanagement skills necessary for the ~uccessful

operation of business enterprises; to providefinancial support for the successful operation ofbusiness enterprises by said residents and toassist said residents in obtaining such financialsupport from other sources.

-.

(3) To aid, support and assist by gifts,contributions or otherwise r other corporations,

-- --------'::.-- -communiey-cnesfS;-funas--ana f oundciFfoils organlzed--and operated exclusively for charitable r

religious, scientific, literary or educational. purposes, no part of the net earnings of whichinures to the benefit of any private shareholdersor individuals r and no sUbstantial part of the

.activities of w~ich is carrying on propaganda r orotherwise attempting to influence legislation.

o

(4) To do any and all lawful activities whichmay be necessary, useful or desirable for thefurtherance, accomplishment, fostering orattainment of the foregoing purposes, eitherdirectly or indirectly, and either along or in"conjunction or cooperat~on with others, whethersu~h others be persons or organizations of anykind or nature such as corporations, firms,

-----assocrat-rorrs-,-tru-st~-in::rcIEuEions, founaafions,or governmental bureaus, departments or agencies.

5 . The Department conceded in its proposed recommended

order that AHO meets the requirement for exemption in this matter

that it be designated a Section 501(c) (3) charitable organization.

by the United States Internal Revenue Service.

6. The services provided by AHO are provided without charge

to its clients. Those services include recruiting families who

are qualified for federal home loans who are committed and able

to provide their time and labor to construct their own housing.

AHO brings several such families together to share the labor and

effort necessary to build housing for each family. Each family(-)

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~ shares in the labor of constructing the home of each other family

in the group.

7. AHa assists the families prepare mortgage applications

necessary to receive federally subsidized loans and provides

credit counseling necessary for families to qualify for such

loans.-- -~ -~-- --~

-- - -8~. -~ Orice~a~Tamily-quarrfies-for-a -loa:n~-AHO-a-ssists-in-t-he---

selection of house plans, the selection of ~onstruction

materials, the organization of the family groups, teaches general

construction techniques and assists with all aspects of

completing construction of housing. AHa also assists in

bookkeeping necessary to administer mortgage loans.

9. AHa does not act as a geheral contractor. Nor does AHa

provide construction labor or materials, or the funds necessary

for construction.

lO. AHa receives administrative grants through the state's

Housing Finance Agency as a Community Housing Development

Organization. AHa's expenses in providing its services are

entirely expenses of the organization. AHa's total expenditures

are for its day-to-day operations. No funds are expended

directly for clients.

CONCLUSIONS OF LAW

ll. The Division of Administrative Hearings has

jurisdiction of the parties to, and the subject matter of, this

. proceeding. Section l20,57, Florida Statutes (l996 Supp.).

()

5

() 12. Section 212.084, Florida Statutes, authorizes the

Department to issue tax exemption certificates valid for five

years to qualified institutions, organizations and individuals."

13. A tax exemption certificate may be issued by the

Depart.ment to any institution, organization or individual that

const:i"tutes a religious, charitable, scientific, educational, or

.--'.

Florida Statutes.

14. In this matter, AHO is seeking a tax exemption'

certificate as a "charitable institution". A "charitable...'~

institution" is defined in Section 212.08(7) (o)2.b., Florida

Statutes, in pertinent part, as follows:

b. "Charitable institutions" means onlynonprofit corporations qualified as nonprofitpursuant to s. 501 (c) (3), United States InternalRevenue Code of 1954, as amended, and othernonprofit entities, the sole or primary functionof~wh-j.ch~j.s-t;e-~~0v-:icle-,-or-to-ra-±-se-furids-f-or---------c--------jorganizations which provide, one or more of thefollowing services if a reasonable percentage ofsuch service is provided free of charge, or at asubstantially reduced cost, to persons, animals,or organizations that are unable to pay for suchservice:

(I) Meqical aid for the relief of disease,injury, or disability;

(II) Regular provision of, physical necessitiessuch as food, clothing, or shelter;

(III) Services for the prevention of orrehabilitation of persons from alcoholism or drugabuse; the prevention of suicide; or thealleviation of mental, physical, or sensoryhealth proplems;

(j(IV) Social welfare services including

adoption placement, child care, community carefor the elderly, and other social welfareservices which clearly and substantially benefit

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a client population which is disadvantaged orsuffers a handicap;

(v) Medical research for the relief ofdisease, injury, or disability;

(VI) Legal services; or

(VII) Food, shelter, or medical care foranimals or adoption services, crueltyinvestigations, or education programs concerninganimals;

and the term includes groups providing volunteerstaff to Qrganizations designated as charitableinstitutions under this sub-subparagraph;nonprofit organizations the sole or primarypurpose ,of which is to coordinate, network, orlink other institutions designated as charitableinstitutions under this sub-subparagraph withthosepersons,animals, or organizations in needof their services; and nonprofit national, state,district, or other governing, coordination; Qradministrative organizations the sole or primarypurpose of which is to represent or regulate thecustomary activities 9f other institutionsdesignated as charitable institutions under sub­subparagraph.

Statutes, are to be strictly construed against a taxpayer seeking

such an exemption. See Capital City country Club v. Tucker, 613

So.2d 448, (Fla. 1993); Szabo Food Services, Inc. v. Dickenson,

286 So.2d 529 (Fla. 1973); and Asphalt Pavers, Inc. v. Department

of Revenue, 584 So.2d 55 (Fla. 1st DCA 1991) .

16. AHO had the burden of proving in this case that it

comes within the definition of a 11 charitable institution" as

defined in Section 212.08(7) (0)2.. b., Florida Statutes. See

Department of Banking and Finance v. Osborne Stern and' Company,

670 So.2d 932, 934 (Fla.l996).

7

C) 17. In order to qualify for an exemption under Section

212,08(7) (0)2.b., Florida Statutes, AHa was required to prove at

hearing:

a. It is either a Section 501(c) (3) charitable organization

or other nonprofit organization; and

b. It's sole or primary function is to provide, or raise

funds for organizations which provide at least one of the seven

services specifically designated in Section 212.08(7) (0)2.b.,

Florida Statutes, AND a reasonable percentage of the service is

provided free of charge, or at a substantially reduced cost to

the recipients of the service who are unable to pay for the

service ..

o 18. The Dep~rtment conceded that AHa meets the first

requirement for exemption. Jl...HO did not prove, however, that it

_____ meets the second requireme_u_t .,--------------'--------------------1

19. Rule 12A~1.001(3) (g)3.e., Florida Administrative Code,

provides the following definition of IIsole or primary function ll:

IISole or primary function ll means that acharitable organization, excluding hospitals,must establish and support its function asproviding or raising funds for services asoutlined in subparagraphs 1. and 2. above, byexpending in excess of 50.0 percent of thecharitable organization's operationalexpenditures towards 'qualified charitableservices', as defined in subparagraph 2.a. - g.,within the charitable institution's most recentfiscal year.

20. Petitioner failed to offer proof that, during the most

recent fiscal year, in excess of 50.0 percent of its expenditures

(j were made.to provide one of the seven services designated in

Section 212.08(7) (o)2.b., Florida Statutes, or toward raising

8

Cj funds for organizations which provide at least one of the seven

services.

21. The evidence in this case proved that 100% of AHO's

expenditures have been made solely for its admini'strative costs.

It did not expend any of its funds directly to provide shelter or

any of the other seven designated services. Nor did it pay any

----of-T6;;--Tunos-Fo-anyofner--6rganizal:ion-provi-ding-'snel-t-er-or-any- -' ----------.

of the other seven designated services.

22. The services provided by AHO to its. clients, while

meritorious, do not constitute th~ specific serv.ices spe~ified in

Section 212.08(7) (b)2.b., Florida Statutes. AHO has not,

therefore, proved that it's "sole or primary function" is the

provision of charitable service.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a Final Order be entered by the Department

of Revenue denying the certificate of exemption sough by

Affordable Home Ownership Corporation.

DONE and ORDERED this 2nd day of June, 1997, in Tallahassee,

Florida.

(j

TIN~~~ative Law Judge

Divislon of Administrative HearingsThe DeSoto Building1230 Apalachee ParkwayTallahassee r Florida 32399-3060(904) 488-9675 SUNCOM 278-9675Fax Filing (904) 921-6847

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~OPIES FURNISHED TO:

Filed with the Clerk 'of the­Division of Administrative Hearingsthis 2nd day of June, 1997.

Rufus L. SmithExecutive Director, A.H.O.C.Affordable Home Ownership CorporationPost Office Box 7347 . . __

-------La:K'e- C:rf.y,--FT6r:raa---32055

Kevin J. ODonnellAssistant General CounselDepartment of RevenuePost Office Box 6668Tallahassee, Florida 32314-6668

Linda LetteraGeneral CounselDepartment of Revenue204 Carlton BuildingTallahassee, FL 32399

_0 Ilarry FuchsExecutive DirectorDepartment of Revenue

------rO-4-CarTt-on BullaJ.'~n~g~--------------

Tallahassee, FL 32399-0100

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15days from the date of this recommended order. Any exceptions tothis recommended order should be filed with the agency that willissue the final order in this case.

Case No. 97-0335

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