Circuit court or administrative forum, which is the best strategy?
Careful analysis of the question raised above usually reveals that one size does not fit all, or put another way, it depends. But that is why good representation is so important for both clients and tax professionals (CPA’s or enrolled agents as well as lawyers). When confronted with a tax bill it is important not to delay (discussed herein) and to make a good choice in representation. Like most legal issues, especially those involving tax, knowing your options or knowing a professional who knows these options can make a real difference.
Review of details in choosing a forum to contest a Florida tax assessment includes familiarity with certain over-arching criteria. These include but are not limited to:
1) how long it will take to gather evidence and witnesses to go to court (evaluation of how complete is your evidence);
2) the amount of time anticipated for presentation of the case at trial;
3) the amount in controversy;
4) discerning what aspects of the case can be characterized as “contested issues” and dollar amounts related to those issues (in contrast to uncontested amounts)
5); financial ability to pay contested issues
6) statutory venue and strategy if it is anticipated that an appeal may be necessary, and;
7) whether agency policies or regulations are involved in the contested issues.
Each of these criteria may, depending on the facts, be important in choosing the forum. An evaluation of each of these items should be undertaken before choosing the forum.
Key statutory provisions which should not be overlooked
Section 72.011(1)(a) F.S. gives a right to challenge a tax assessment, fee, surcharge, penalty. or refund denial “by filing an action in circuit court; or, alternatively the taxpayer may file a petition under the applicable provisions of chapter 120”. Chapter 120 is entitled the “Administrative Procedures Act”. These provisions are often overlooked when trying to decide how to contest a tax refund denial or tax assessment. The language in Chapter 72.011 F.S. empowers a person subject to a tax assessment to select which forum they wish to contest their assessment. Given this choice of forum, various aspects of preparation (listed above) must be evaluated such as how long it will take to gather evidence and witnesses (including any expert testimony desired) to go to court, the amount of time perceived to be required to present the case at trial and whether agency policies or rules are involved in the adverse decision by the agency. .
Advantages of the (DOAH) Administrative Hearing.
There are various important advantages to choosing to present the tax dispute case in this administrative forum (the Division of Administrative Hearings (DOAH)). This venue allows for participation and presentation of testimony from more than one location via video link appearances for remote witnesses. This is an efficiency not generally available in Florida’s circuit court system. Naturally this saves both time and money for taxpayers contesting an assessment because a witness can testify live via a video link without travel to the county where the circuit court is located. In addition, this venue produces a much quicker hearing of the issues. For example, generally, upon referral from an agency to the Division, a hearing is scheduled between 30 and 90 days from the issuance of the initial scheduling order. This scheduling order offers the parties an opportunity to agree in advance on suggested hearing dates and if no agreement can be reached specific hearing dates can be requested unilaterally. This time frame can be a strategic advantage if the Petitioner is well prepared to explain its position and document it from day one. In addition, by statute a “Recommended Order” must be completed not less than 30 days of the hearing or receipt of a hearing transcript by the Administrative Law Judge assigned to the case. Note however, the Recommended Order connotes that the agency, rather than the ALJ has the statutory authority to issue the “Final” Order (which can be viewed as a disadvantage). The Final Order is subject to specific statutory and judicial limitations on any departure from the Recommended Order by the agency.
Still another advantage to the administrative forum relates to identification of contested issues and associated dollar amounts. Unlike filing in circuit court, Section 120.80 (14) requires that “ the taxpayer shall pay to the applicable department the amount of taxes, penalties, and accrued interest assessed by that department which are not being contested by the taxpayer.” Put another way, this statutory language requires up -front payment only for uncontested issues after choosing the administrative hearing forum. The choice of the administrative proceeding forum avoids payment of not only contested taxes but related, penalties and interest until resolution of the matter by judgment. In contrast, circuit court challenges require payment of contested assessments including penalties and interest (absent posting of a bond or waiver by the agency Executive Director). Failure to pay the appropriate sums into a court registry (for contested part of an assessment) or timely post a bond may result in dismissal with prejudice because failure to make this payment deprives the court of jurisdiction to hear the case if the time has expired under Section 72.011 F.S.
Real property tax assessments have a separate choice of forum
While a choice of forum is given by Florida law in Chapter 72 for many types of Florida taxes and fees (enumerated therein) this Chapter does not address local taxation. If you wish to contest a property tax assessment made by a county, you must be guided by Chapter 192 through 196 Florida Statutes. These Chapters generally deal with various aspects of local property taxation. These laws contain a parallel jurisdictional statute to Section72.011. It is located in Section 194.171. This statutespecifies that “ [t]he circuit courts have original jurisdiction at law of all matters relating to property taxation.”. While Chapter 120 (DOAH) is not available for these cases, there does exist a separate dispute resolution forum in the property tax area, the Value Adjustment Board or VAB. Section 194.015 describes these boards, based in each county, and their composition and use. The VAB in each county consists of two members of the county commission, one member of the school board, and two citizen members. See § 194.015, Fla. Stat. The VAB process is a formal adversarial proceeding. See: Section 194.034 F.S. Use of the VAB is not a precondition to filing directly in circuit court. If the VAB proceeding is chosen, but the Taxpayer is unhappy with the outcome of the VAB hearing, then the she may appeal to the circuit court. See § 194.036(2)-(3), Fla. Stat. Whether an original action in circuit court or an “appeal” of a value adjustment board decision, the circuit court hears the case “de novo.” See id. at § 194.036(3); Williams v. Law, 368 So. 2d 1285, 1286-87 (Fla. 1979)
Time Frames of Importance (Final means Final)
It is important to comply with time limitations for challenging assessments of tax, fees or denials of refund applications. Section 72.011(1)(a) F.S. gives a right to challenge a tax assessment, fee, surcharge, penalty. Likewise, for property tax cases, Section 194.171 specifies time limits. Section 72.011 (2) F.S. states the limitation this way: “n action may not be brought to contest an assessment of any tax, interest, or penalty assessed under a section or chapter specified in subsection (1) more than 60 days after the date the assessment becomes final.” An assessment notice from a Florida agency will have attached a “Notice of Rights” or another similarly named notice. This notice must identify when an agency views the assessment as final. Determining finality in some cases can be somewhat tricky so focus upon this detail is very important. Indeed, it is the key to determining how much time remains available to timely challenge an unfavorable decision by the tax authorities.
Sixty days is also the limit used in Section 194.171 F.S. which keys the 60 day limitation to VAB date of rendition of a decision or 60 days from the date of assessment is certified for collection under Section 193.122(2) F.S. However, take note that not all tax contest limitations allow for 60 days to take action. One such example is found in Section 213.67. It gives specific time limits in garnishment actions following receipt of a notice of intent to levy. This is a much shorter 21day period rather than a 60 day period of time to file a challenge.
Determining whether agency rules are part of the tax assessment decision
Discussion and analysis of Item No. 7 (whether agency policies or regulations are involved in the contested issues.is beyond this focus of this article but needs specific and careful attention. At this juncture it is sufficient to observe that statutes imposing taxes do not always address specific details involving a particular industry or pattern of doing business. Such detail is often left up to the agencies through delegation of authority by the legislature. Taxing authorities are often delegated authority by statute to write regulations.to fill in the gap between a general statement in a tax statute with rules or regulations which are designed to explain the agency’s view of the scope of a tax statute and/or the scope of exemption from tax. Understanding how agency rules apply to a tax statute or exemption requires careful analysis of both the specific authority in a statute for an agency rule and how the statute was interpreted by the agency. Section 120.57 (1) ( e ) F.S. prohibits an agency decision ( aka “agency action”) which is based upon an unadopted rule or a rule which consists of an “invalid exercise of delegated agency authority”. Recognizing when an invalid exercise of delegated agency authority exists in the context of a taxing statute or tax exemption requires a thorough understanding of the statute and implicated agency rules. Consultation with an attorney familiar with these issues and familiar with tax administration can make a difference in your case.
About the Firm: Formed in 1991, the Law Offices of Moffa, Sutton, & Donnini, P.A. is a law firm with a primary practice area of Florida tax controversy and a heavy emphasis on Florida sales and use tax. With offices in Fort Lauderdale, Tampa, and Tallahassee, the firm defends business owners against the Florida Department of Revenue from the initial audit notice through administrative protest and litigation as well as collections, revocations, and criminal investigations.
About the Author: James (Jim) F. McAuley is an experienced attorney, joining the firm in 2015 after an exemplary career with the state of Florida. Holding the Florida Bar board certification as a specialist in State and Federal Administrative Law, Mr. McAuley represented the State of Florida for more than 20 years in the area of state and local taxation and administrative law with an emphasis on litigation. Mr. McAuley is Board Certified by the Florida Bar in the area of State and Federal Government Administrative Practice. Mr. McAuley holds the highest rating given to lawyers by Martindale Hubbell (Av) and has maintained that rating for more than 15 years. He is also a published legal author in both State taxation and Administrative law. He is an alumni & author of the Nova Law Review (Fall 2007). You can read more about Mr. McAuley in his firm bio.
ADDITIONAL RESOURCES
Choice of Forum in Defending Against a Florida Tax Assessment - Part I, published January 13, 2019, by James McAuley, Esq.
FLORIDA SALES TAX INFORMAL WRITTEN PROTEST, published November 17, 2018, by James Sutton, CPA, Esq.
Post-Wayfair – Can You Afford to Wait to Register?, published August 8, 2018, by James Sutton, CPA, Esq.
BURDEN OF PROOF & PERSUASION IN FL TAX CASES, published May 31, 2015, by James McAuley, Esq.