STATE OF FLORIDA, DEPARTMENT OF REVENUE TALLAHASSEE, FLORIDA

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1 STATE OF FLORIDA, DEPARTMENT OF REVENUE TALLAHASSEE, FLORIDA FRIENDS HOUSING AND CARE, INC., a Florida corporation, Petitioner, DOR 98-2-FOF vs. DOAH Case No DEPARTMENT OF REVENUE, Respondent. FINAL ORDER This cause came on before the Department of Revenue for the purpose of issuing a Final Order. The Administrative Law Judge assigned by the Division of Administrative Hearings heard this cause and issued a Recommended Order. A copy of the Recommended Order is attached to this Final Order. Petitioner timely filed exceptions to the Recommended Order. In accordance with Rule , F.A.C., exceptions two through eight, as indicated below, are specifically rejected. Exception one is adopted. For the reasons expressed herein, the Department adopts the Administrative Law Judge's Recommended Order in toto. The Department has jurisdiction of this cause. STATEMENT OF THE ISSUE The Department adopts and incorporates by reference the Administrative Law Judge's Statement of the Issue of the Recommended Order as if fully set forth herein. PRELIMINARY MATTERS The Department adopts and incorporates by reference the Administrative Law Judge's Preliminary Matters of the Recommended Order as if fully set forth herein except that the spelling of three of the Petitioner's witnesses' names has been

2 corrected as instructed by Petitioner in its first exception. FINDINGS OF FACT The Department hereby adopts and incorporates by reference the Findings of Fact set forth in paragraphs 1 through 27 of the Recommended Order as if fully set forth herein. CONCLUSIONS OF LAW The Department hereby adopts and incorporates by reference the Conclusions of Law set forth in paragraphs 28 through 34 of the Recommended Order. RULINGS ON EXCEPTIONS 1. Petitioner has filed an exception to the spelling of some of Petitioner's witnesses' names in the Preliminary Matters section, page 2, of the Recommended Order pointing out that an "I" is missing from Mr. Hallman's name, a "t" is missing from Mr. Brantingham's name and the "r" in LeRoy was not capitalized. This exception is accepted and these changes are incorporated into the Final Order. The corrected spelling of the witnesses names are as follows with the corrections noted in bold type: "Herbert Hallman," George LeRoy," and "James Brantingham. 2. Petitioner's second exception objects that paragraph 1. of the Recommended Order did not state that Petitioner obtained federal 501(c)(3) status because it was a religious institution and church. This exception is rejected on the grounds that it is irrelevant and that the evidence does not support such a finding. The exemption for "religious institutions" provided in section (7)(o)2.b., Florida Statutes, does not provide for exemption to entities which have been determined by the IRS to be "religious institutions" or "churches." Thus, whether or not the IRS viewed Petitioner as a "religious institution" or a "church" would be irrelevant to the issue of whether or not Petitioner meets the requirements of Florida law to obtain Florida's "religious institutions" exemption from state sales tax. Petitioner's exception is also rejected because it is unsupported by credible evidence. Respondent's Composite Exhibit

3 2 contains a copy of the IRS 501(c)(3) letter to Petitioner. This letter does not state the basis for the granting of the 501(c)(3) status, nor does the record contain any other evidence from the IRS which supports Petitioner's assertion. The Administrative Law Judge's Finding of Fact in paragraph I of the Recommended Order is fully supported by the record and the weight of the evidence. Therefore, this exception is rejected. 3. Petitioner's third exception argues that the Administrative Law Judge should have found that the business purposes "are entirely consistent with the religious faith and practice of the Religious Society of Friends The Administrative Law's Finding of Facts in paragraph 3 of the Recommended Order is fully supported by the record and the weight of the evidence. Therefore, this exception is rejected in toto. 4. Petitioner states that paragraph 7 in the Recommended Order is a "false statement" and that the purpose of the project was a "religious activity." The audited financial statements are in the record as Respondent's Composite Exhibit 2. This Exhibit shows that the finding in paragraph 7 of the Recommended Order is entirely correct. Petitioner's first sentence in its fourth exception is therefore rejected as being unsupported by the evidence. The second and last sentence in Petitioner's fourth exception is also rejected as being unsupported by competent substantial evidence. Petitioner's fourth exception is hereby rejected in toto. 5. Petitioner maintains in its fifth exception that the last sentence in paragraph 11 of the Recommended Order "is a false statement." This exception is rejected as contrary to Petitioner's marketing brochure, Respondent's Composite Exhibit 1 at page one wherein it states that "Woodmere at Jacaranda is a non-denominational community..." The first sentence of Petitioner's fifth exception is hereby rejected as contrary to the evidence. The remainder of Petitioner's fifth exception is also rejected as unsupported by competent substantial evidence. Therefore, Petitioner's fifth exception is rejected in toto. 6. Petitioner's sixth exception states that paragraph 13 in the Recommended Order is "a false statement" and that there was

4 no evidence that Petitioner will charge a monthly condominium fee to cover maintenance. Petitioner further asserts that "there would be a not-for-profit condominium association incorporated for the purpose of enforcing the Declaration of Condominium and charging fees thereunder." This exception is in direct conflict with Petitioner's witness William Martin's testimony at the hearing [Transcript at page 67] and is otherwise rejected as unsupported by the record and the weight of the evidence. 7. Petitioner's seventh exception objects to the last sentence in paragraph 16 of the Recommended Order. The last sentence is fully supported by the newsletter, which was accepted into evidence as Petitioner's Composite Exhibit 2. Petitioner's seventh exception is rejected in toto as the Administrative Law Judge's recommendations and findings are fully supported by the record and by the weight of the evidence. 8. Petitioner's eighth and last exception states that paragraph 19 of the Recommended Order is "a false statement." Petitioner's eighth exception is rejected in toto as the Administrative Law Judge's recommendations and findings are fully supported by the record and by the weight of the evidence. CONCLUSION The Department, based upon the Statement of the Issue, Preliminary Matters, Findings of Fact, and Conclusions of Law, set forth by the Administrative Law Judge in his Recommended Order and adopted herein, sustains the denial of Petitioner's application for consumers certificate of exemption. Based on the foregoing, it is, ORDERED, Petitioner's application for consumers certificate of exemption is hereby DENIED. ENTERED in Tallahassee, Leon County, Florida this 23rd day of March, State of Florida DEPARTMENT OF REVENUE

5 L.H. FUCHS EXECUTIVE DIRECTOR NOTICE OF RIGHT OF JUDICIAL REVIEW A party who is adversely affected by this Final Order is entitled to judicial review pursuant to Section , Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing one copy of the Notice of Appeal with the Agency Clerk of the Department of Revenue in the Office of the General Counsel, P.O. Box 6668, Tallahassee, Florida , and by filing a copy of the Notice of Appeal, with applicable filing fees with the appropriate District Court of Appeal. The Notice of Appeal must be filed within 30 days from the date of issuance of the Final Order to be reviewed. I HEREBY CERTIFY that the foregoing FINAL ORDER in FRIENDS HOUSING AND CARE, INC. vs. DEPARTMENT OF REVENUE has been filed in the official records of the Florida Department of Revenue this 24th day of March, JUDY LANGSTON AGENCY CLERK Attachment: Administrative Law Judge's Recommended Order Copies furnished to: William R. Cave Administrative Law Judge Division of Administrative Hearings The DeSoto Building, 1230 Apalachee Parkway Tallahassee, FL Nick Roknich, Esq. Roknich & Gibson Second Street, Suite 901 Sarasota, FL

6 Linda Lettera General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL Ruth Ann Smith Assistant General Counsel Department of Revenue Post Office Box 6668 Tallahassee, FL State of Florida Division of Administrative Hearings February 25, 1996 Linda Lettera, Esquire General Counsel 2540 Shumard Oak Boulevard Tallahassee, Florida Re: Friends Housing and Care, Inc., vs. Department of Revenue DOAH Case No Dear Ms. Lettera: Enclosed is the Recommended Order issued in the referenced case. Also enclosed are the Petitioner's exhibits 1-5 and the Respondent's exhibits 1-5 submitted for admission in evidence and the transcript. Copies of this letter will serve to notify the parties that the Recommended Order and the record have been transmitted on this date. As required by Section (1)(k), Florida Statutes, you are requested to furnish the Division of Administrative Hearings a copy of the Final Order within 15 days of its rendition.

7 Sincerely, WILLIAM R. Cave Administrative Law Judge WRC/cw Enclosures cc: Larry Fuchs, Executive Director Nick Roknich, Esquire Ruth Ann Smith, Esquire STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS FRIENDS HOUSING AND CARE, INC., Petitioner, vs. Case No DEPARTMENT OF REVENUE, Respondent. RECOMMENDED ORDER Upon due notice, William R. Cave, an Administrative Law Judge for the Division of Administrative Hearings, held a formal hearing in this matter on October 23, 1997, in Sarasota, Florida. APPEARANCES For Petitioner: Nick Roknich, Esquire Dunlap, Moran, Roknich, and Gibson, P.A Main Street, Suite 700 Sarasota, Florida For Respondent: Ruth Ann Smith, Esquire Department of Revenue Post Office Box 6668

8 Tallahassee, Florida STATEMENT OF THE ISSUE Does Petitioner qualify for a consumer's certificate of exemption as a "church" as defined in Rule 12A-1.001(3)(c), Florida Administrative Code, or as a "religious institution" as defined in Section (7)(o)2.a., Florida Statutes? PRELIMINARY MATTERS On September 9, 1996, Petitioner Friends Housing and Care, Inc., filed an Application for Consumer's Certificate of Exemption with Respondent Department of Revenue (Department) By a Notice of Intent to Deny dated April 28, 1997, the Department advised Petitioner that its application for a sales tax exemption certificate had been denied on the basis that Petitioner did not meet the requirements for "religious institutions" as defined by Section (7)(o)2.a., Florida Statutes. By this notice the Department also notified Petitioner of its right to protest the Department's determination. Petitioner timely filed its Request for Administrative Hearing challenging the Department's denial. By letter dated May 28, 1997, the Department forwarded the Petitioner's request to the Division of Administrative Hearings (Division) for the assignment of an Administrative Law Judge and for the conduct of a hearing. At the hearing, Petitioner presented the testimony of William Martin, Herbert Halman, George Leroy, Americus Woodward, Dr. Ronald Jones, and James Braningham. Petitioner's Exhibits 1 through 5 were received as evidence. The Department presented the testimony of David Young and Robert Norring. The Department's Exhibits 1 through 5 were received as evidence. A transcript of the proceeding was filed with the Division on November 14, An unopposed request by Petitioner for an extension of time to file proposed findings of fact and conclusions of law was granted with the understanding that any

9 time constraint imposed under Rule , Florida Administrative Code, was waived in accordance with Rule 60Q (2), Florida Administrative Code. The parties timely filed their proposed findings of fact and conclusions of law under the extended time frame. FINDINGS OF FACT Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: 1. Friends Housing and Care, Inc. (Petitioner), is a non- profit corporation exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. 2. Petitioner has filed under the fictitious name statute and is doing business under the name Woodmere at Jacarande. 3. Petitioner's Amended Articles of Incorporation dated October 25, 1996, state Petitioner's purposes as follows: (a) To provide elderly families, elderly persons, and handicapped persons housing and related facilities and services specially designed to meet the physical, social, psychological, economic and spiritual needs of the aged and contribute to their health, financial security, happiness and usefulness in longer living. (b) To plan, construct, operate, maintain, and improve housing and related facilities and services for elderly families and elderly persons. (c) To acquire by gift or purchase, hold, sell, convey, assign, mortgage, or lease any property, real or personal, necessary or incident to the provisions of housing and related facilities and services for elderly families and elderly persons. (d) To borrow money and issue evidence of indebtedness in furtherance of any or all of the objects of its business;

10 and to secure loans by mortgage, pledge, deed or trust, or other lien. (e) To engage in any kind of activity, and enter into, perform and carry out contracts of any kind, necessary or in connection with, or incidental to the accomplishment of any one or more of the nonprofit purposes of the corporation. (f) To conduct educational or scientific research on a nonprofit basis and to cooperate with foundations, educational institutions, and research centers in promoting same, with the aim of increasing knowledge and enhancing life in our society. (g) To foster and encourage spiritual life and bring the human spirit into intimate relation with the Divine Spirit, to provide definite, organized opportunity for the development of spiritual values and for the renewal of our strength in accordance with generally accepted faith and practice of the Religious Society of Friends. 4. Note 1 of Petitioner's audited financial statements containing the independent auditor's report dated January 8, 1997, states that Petitioner "... was created by Friends (Quakers) to plan and develop a Not-for-Profit Condominium Retirement Community in Florida to meet the needs of Friends and others who wish to retire or live in a Quaker-sponsored retirement community in Florida..." 5. Note 3 to the same financial statements indicates.that Petitioner's operations have been devoted to raising capital, obtaining financing, purchasing land and beginning construction on the planned retirement community. 6. As reflected in the unaudited financial statement dated April 30, 1997, of the total reflected year-to-date expenses of $820,681: $299,548 went to architectural fees; $71,985 was spent for engineering fees; $84,265 was spent for pre-construction management fees; and $40,331 went to advertising. Only $200 was directed to worship expenses.

11 7. Neither the audited financial statements nor any of the notes thereto indicate that Petitioner is engaged in any religious activities or worship services. 8. Petitioner's retirement community will comprise 32.7 acres, with a 3.7 acre easement. There will be about 700 condominiums constructed on this acreage. Currently, it is anticipated that the first condominiums will be available for occupancy sometime in Thus, currently there are no residents residing at the Petitioner's retirement community. 9. Petitioner will be constructing an 80,000 square foot commons building which will contain an "auditorium chapel", consisting of approximately 5,500 square feet. This building has not been constructed. The "auditorium chapel" will be used for "religious purposes and multiple purposes." It is anticipated that both silent and program services of the Friends (Quaker) faith will be held in the chapel. Other religious faiths would also be included. 10. There will also be located within the commons building a 6,000 square foot dining facility, 4,000 square foot library, a gift shop, beauty and barber shops, post office, banking facility, game rooms, and lounge area. 11. Petitioner sells its condominiums to members of the general public of retirement age, regardless of their religious affiliation or even if they have no religious affiliation. Purchasers do not have to be members of the Friends (Quaker) faith. In fact, the retirement community will be a "nondenominational community." 12. The price of the condominiums ranges from about $82,000 for a one-bedroom (676 square foot) unit, to well over $200,000 for a large (2100 square foot) unit. 13. In addition to the sales price, Petitioner will charge its residents a monthly condominium fee to cover maintenance. An activity or club fee will also be charged by Petitioner to cover residents, social activities and transportation costs. If a

12 resident needs medical attention, Petitioner will provide the care and bill the resident's insurance company for the cost of the care. 14. Several witnesses testified that the meetings held at Petitioner's location were held under the name "Woodmere Friends Fellowship," while other witnesses testified that the meetings held at Petitioner's location were held under the name "Woodmere Fellowship." 15. The newspaper advertisements or other published advertisements advertising meetings at Petitioner's location did not refer to "Woodmere Friends Fellowship" or "Woodmere Fellowship." An advertisement appearing in "Quaker Life", in June 1997, indicated that "All Friends Fellowship" was located at Woodmere at Jacaranda. 16. A newsletter from Petitioner dated January 1997, stated that "Friends Inter-Faith Fellowship" was begun at Woodmere information Center and that several prospective residents from the Venice/Englewood area had "voiced interest in having a meeting in this area. Presently, these meetings are being held every Sunday evening at 6:30 p.m. Additionally, this newsletter stated that these meetings were consistent with Petitioner's federally-recognized religious affiliation. However, Petitioner is never identified as a church or religious institution in this newsletter. 17. By letter dated February 17, 1997, William R. Martin, Petitioner's Chairman, advised the Department that "[o]ur Worship group is being identified as the Woodmere All Friends Fellowship." 18. In an advertisement dated February 1, 1997, Woodmere at Jacaranda, a Quaker-sponsored, resident-owned retirement community, invites interested people to attend a fellowship hour at 6:00 p.m. the first and third Sunday of each month. This advertisement does not refer to Petitioner as a church or religious institution. 19. The bulletins, advertisements, newsletters, and other

13 evidence submitted by the Petitioner do not refer to Petitioner as a church or religious institution. 20. The hours of operation posted on the doors to Petitioner's premises indicate that Petitioner is open Monday through Friday from 9:00 a.m. to 5:30 p.m., and Saturday from 9:00 a.m. to 1:00 p.m. There were no hours listed for Sunday. Additionally, there was nothing to indicate that worship service or religious activities were being conducted by Petitioner on its premises. 21. Although there are meetings being held at Petitioner's location where religious services or activities are being conducted on a somewhat regular basis, there is insufficient evidence to show that Petitioner is responsible for, and conducting, those religious services or activities. 22. Petitioner's sole purpose is not to provide free transportation services to church members, their families, and other church attendees. 23. Petitioner is not a state, district, or other governing or administrative offices the function of which is to assist or regulate the customary activities of religious organizations or members. 24. Petitioner does not own or operate a Florida television station whose programs are of a religious nature. 25. Petitioner does not provide regular religious services to Florida state prisoners. 26. Friends Housing and Care, Inc., d/b/a Woodmere at Jacaranda is a Quaker-sponsored, resident-owned, retirement community whose primary function is the development and marketing of a retirement community to members of the general public, regardless of religious affiliation. 27. Petitioner intends to use its sales tax exemption primarily to purchase building materials, including those building materials for the condominiums which it produces for

14 sale to the general public, regardless of their religious affiliation. CONCLUSIONS OF LAW 28. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this proceeding pursuant to Sections (1), Florida Statutes. 29. Section (7)(o)2.a., Florida Statutes, provides in pertinent part: 2. The provisions of this section authorizing exemptions from tax shall be strictly defined, limited, and applied in each category as follows: a. "Religious institutions" means churches, synagogues and established physical places for worship at which nonprofit religious services and activities are regularly conducted and carried on. The term "religious institutions" includes nonprofit organizations the sole purpose of which is to provide free transportation services to church members, their families, and other church attendees. The term "religious institutions" also includes state, district, or other governing or administrative offices the function of which is to assist or regulate the customary activities of religious organizations or members. The term "religious institutions" also includes any nonprofit corporation which is qualified as nonprofit pursuant to s. 501(c)(3), Internal Revenue Code of 1986, as amended, which owns and operates a Florida television station... The term "religious institutions" also includes any nonprofit corporation which is qualified as nonprofit pursuant to s. 501(c) (3), Internal Revenue Code of 1986, as amended, which provides regular services to Florida state prisoners Rule 12A-1.001(3)(c), Florida Administrative Code, provides in pertinent part: (3)(c) "Church" means a religious institution having an

15 established physical place of worship where persons regularly assemble for worship and instructions for religious purposes Tax exemptions must be strictly construed against the taxpayer seeking the tax exemption. Asphalt Pavers, Inc., vs. Department of Revenue, 584 So.2d 55 (1st DCA Fla. 1991) State Department of Revenue vs. Anderson, 403 So.2d 397 (Fla. 1981) Green vs. Pederson, 99 So.2d 292, 296 (Fla. 1957). Thus Petitioner has the burden to show clearly that it is entitled to a sales tax exemption as a "church" or "religious institution. 32. To demonstrate that it is entitled to a sales tax exemption as a "church" or "religious institution", the Petitioner must show that it meets all the criteria for that sales tax exemption. See Gainesville Amateur Radio Society, Inc. vs. DOR, DOAH Case No (Final Order dated July 31, 1995) 33. Here, Petitioner has failed to meet its burden to show that it is a "religious institution" as defined by statute or a "church" as defined by rule. 34. Assuming arguendo that Petitioner actually holds its own worship services or religious meetings, consideration of the "total picture" of Petitioner's organization and operations would require a denial of Petitioner's application for sales tax exemption. See National Christian Network, Inc. vs. Department of Revenue, DOAH Case No (Final Order dated December 17, 1985). The record clearly shows that Petitioner's primary function is the development and marketing of a retirement community to members of the general public, regardless of religious affiliation. RECOMMENDATION Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a final order denying Petitioner's application for sales tax exemption. DONE AND ENTERED this 25th day of February, 1998, in Tallahassee, Leon County, Florida.

16 WILLIAM R. CAVE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida (850) SUNCOM Fax Filing (850) Filed with the Clerk of the Division of Administrative Hearings this 25th day of February, COPIES FURNISHED: Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida Linda Lattera General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida Nick Roknich, Esquire Dunlap, Moran, Roknich, and Gibson, P.A Main Street, Suite 700 Sarasota, Florida Ruth Ann Smith, Esquire Department of Revenue Post Office Box 6666 Tallahassee, Florida NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

17 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.

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