It is the tax case heard round the state in 2024: Billmatrix Corp., Checkfree Services Corp., Fiserv Automotive Solutions Inc., ITI of Nebraska, Inc., XP Systems Corp., and Carreker Corp., v. State of Florida, Department of Revenue.

After three years of litigation and a win on Motion for Summary Judgment by the Plaintiffs, the Florida Department of Revenue filed a Motion for Compulsory Judicial Notice and Motion to Dismiss for Lack of Subject Matter Jurisdiction on the basis of a procedural technicality and had the entire case thrown out! On November 25, 2024, the First DCA issued a PCA (Per Curiam. Affirmed.)  upholding the dismissal. How did this happen?

In section 72.011(3), Fla. Stat., Plaintiffs challenging tax assessments in circuit court are required to either (1) tender into the registry of the court with the complaint the amount of the contested assessment or (2) file with the complaint a cash bond or surety bond for the amount of the contested assessment. There are two exceptions to this rule. The first is when the Department’s executive director provides a written waiver of the requirement. The second exception is when Plaintiffs file motions for alternative security at the same time as they file the complaint. 

In Florida, as in other states, paying or posting bond for the entire assessment prevents many taxpayers from being able to challenge assessments in the first place. Instead, these taxpayers often file in the Division of Administrative Hearings where only the uncontested portion of an assessment need be paid. Regardless, the ability to pay was not alleged as a reason for failure to comply in this case. Rather, the dispute was whether this requirement had been waived by the Department’s executive director. 

The Department’s Motion for Compulsory Judicial Notice asked the court to acknowledge the Section 72.011(3) requirements. Meanwhile, the Department’s Motion to Dismiss for Lack of Subject Matter Jurisdiction argued that  (1) subject matter jurisdiction is never waived; (2) the court may consider facts outside the complaint to determine whether it has subject matter jurisdiction; (3) failure to comply with section 72.011(3) at the beginning of the case bars the exercise of jurisdiction; (4) plaintiffs cannot avoid the jurisdictional bar by characterizing their claims as an action for declaratory relief; and (5) the legislature emphasized the mandatory nature of section 72.011(3) by imposing a mandatory penalty for failure to comply. 

In response, Plaintiff filed a belated Motion for Alternative Security Arrangement along with Plaintiff’s Response to the Department’s Motion for Compulsory Judicial Notice and Motion to Dismiss for Lack of Subject Matter Jurisdiction. The response was, as you may expect, highly critical of the Department. It argued the Department admitted the court had jurisdiction in the case in its written Answer filed in response to the original Complaint three years earlier. It also noted the Department allowed the case to proceed through three years of litigation until raising this issue for the first time, evidencing their change in stance after allegedly waiving the requirement prior to the start of the case.

The background gave more insight into how this situation came about in the first place. Plaintiff’s counsel had been working with the Deputy General Counsel at the Department, who is now retired, in hopes of coming to a resolution on the corporate income tax apportionment issue that was the basis of the underlying case. As the deadline to file a Complaint arose, Plaintiff’s attorney reached out to the Deputy General Counsel at DOR to discuss a the security arrangement. Apparently, due to the pandemic, an informal agreement was reached orally. “The clear message was ‘we’ll get it worked out,'” Plaintiff argued. 

Unfortunately, that was not the case. Not only did DOR request the case be dismissed but also argued for the statutory penalty of 25% of the tax due. It appears that request may have been dropped at hearing, however. Ultimately, the judge issued an Order Granting Department’s Motion for Compulsory Judicial Notice, Denying Plaintiff’s Motion for Alternative Security Arrangement, and Granting in Part, and Denying in Part, Department’s Motion to Dismiss for Lack of Subject Matter Jurisdiction in the Department’s favor. Although he ruled in favor of the Department and dismissed the case for all Plaintiffs except for the one that had an overpayment of tax due and therefore was not required to pay or post bond for the assessment, it is clear the judge was unhappy with the Department as well. He expressed “consternation with the actions of the Department which appear to have led both this Court and the Plaintiffs astray and resulted in needless expense.” 

However, consternation didn’t provide any relief for the Plaintiffs who had to appeal the order to the First DCA. On November 25, 2024, without a word of opinion on the matter, the Order was Affirmed, and what was such a loud message to Florida tax lawyers ended on a very quiet note. 

It is hard not to feel bad for the attorney who clearly knew about the requirement, discussed it with DOR, had a longstanding relationship with the Deputy General Counsel who waived the requirement, and had no reason for three years of litigation to think anything was wrong. However, in recent years, the Department of Revenue has been increasingly aggressive in litigation and particularly on procedural issues. On one hand, a universal front from DOR will eventually, after a transition period, become predictable as all taxpayers understand they operate not based on relationships in Tallahassee but rather on a level playing field. On the other hand, it is important to have a positive relationship with the Department of Revenue because increasingly cases that could be resolved over a few phone calls are exhausting the resources of both sides. 

Will the trend continue? “Gotcha” litigation tactics don’t make anyone look good. More importantly, they prevent the resolution of important tax issues. Was the Billmatrix apportionment question solved? Not in that case! After three years and an enormous waste of resources, the problem remains for others to fight in new cases. All the while, the Florida Department of Revenue is issuing corporate income tax audit notices and operating in quite a gray area when Billmatrix had already won on the substantive issue prior to the dismissal. This can’t be something the Department wants to happen over again. In this case, winning litigation doesn’t look like a win for DOR. Instead, it’s just another chance to do this all over again while more corporate income tax assessments rack up. Another bite at the apple might be just what the Department wants, though, and if that was the goal – they earned it. After all, rules are rules.  

Additional Articles by the SALTy Orange at Moffa Tax Law: 

Florida Supreme Court Upholds Property Tax Exemption

Florida Department of Revenue and IRS Relief for Florida Taxpayers Affected by Recent Hurricanes

Florida Department of Revenue Adopts 2024 Internal Revenue Code – But What are the New FL Tax Credits?

Understanding Florida’s Sales Tax on Services: Implications and Considerations