Impact Fee Challenge
The Florida Association of Counties, the Florida League of Cities, the Florida School Boards Association, and 10 counties (Alachua, Collier, Gilchrist, Lake, Lee, Levy, Nassau, Pasco, Sarasota, and St. Lucie) have filed suit challenging HB 227 (2009), relating to impact fees. The complaint argues that HB 227 is an unconstitutional, unfunded mandate and that it violates the separation of powers doctrine of the state Constitution. HB 227 shifts the burden of proof to the local government when impact fees are challenged in court and heightens the standard of that proof. The bill further prohibits the judiciary from using a deferential standard in reviewing the challenged impact fees.
These changes allow the judiciary to act as a legislative body, second guessing the policy decision of local lawmakers. The local governments, in the complaint, asks the court to declare HB 227 to be unconstitutional and void because the Florida Senate failed to achieve a 2/3 vote, making the bill a law that cannot be enacted under Article VII of the Florida Constitution (the unfunded mandates provision). And the law also appears to violate the separation of powers provisions of the Constitution. HB 227 will have a deferential effect on local governments and ultimately local taxpayers around the state. The law will increase the prevalence and cost of litigation while also stifling creative but reasonable customized features to an impact fee program.
Impact fees are designed so that new growth, not existing residents, pay for new infrastructure that is needed to accommodate the new growth. The elimination of a differential standard on the legislative findings on a local government in an impact fee ordinance in court allows the judiciary to second guess decisions already made by elected commissions and city councils. Finally, the fact that the bill failed to achieve a 2/3 vote in the Senate is an infringement of the Constitutional protections from unfunded mandates. You can link to a copy of the complaint here and the state's motion to dismiss here. The motion to dismiss was denied but the state successfully took an appeal to the First District Court of Appeal. The court ruled that the local governments had named the wrong defendants and that they should have named the agency charged with enforcing the law that was challenged. You can link to the opinion here. The local governments' motion for rehearing was denied.
Tourist Development Tax - Use of Revenue
On September 2, 2011, Lee County filed suit against the Clerk, asking the court to declare the legality of using tourist development tax revenue to fund certain consultants' fees associated with beach renourishment projects. You can link to the complaint here.
Internet Travel Companies - Tourist Development Taxes
On November 3, 2009, six counties filed suit against certain internet travel companies, including Expedia and Orbitz, seeking a declaration that tourist development taxes were due and an enforcement of the collection of those taxes. (See Leon County v. Expedia, Case No. 09-CA-004319, Fla. Circuit Court, 2nd Judicial Circuit). The issue to be decided is whether the online companies should pay taxes on what they pay directly to hotels to buy the rooms or on the higher amount the companies charge customers. The counties in the original filing were: Flagler, Lee, Leon, Manatee, Pinellas, and Polk. Charlotte, Escambia, Hillsborough and St. Johns Counties have since voted to join the suit. In addition, on November 3, 2009, Attorney General Bill McCollum filed suit on behalf of the State of Florida, seeking similar relief. (See State of Fla. v. Expedia, Case No. 37-2009-CA-004303, Fla. Circuit Court, 2nd Judicial Circuit).
Prior to the filing of these suits, Broward, Orange, Monroe and Palm Beach had already filed individual suits – some several years ago. And Brevard County has recently filed its own suit as well. For reference, they are as follows:
Orange County v. Expedia, Inc. et al.
Case No. 48-2006-CA-2104-O, Fla. Circuit Court, 9th Judicial Circuit
On Thursday, January 20, the circuit court, in litigation brought by Orange County, denied the county’s motion for summary judgment, determining that neither the state statutory scheme nor the county’s ordinances require the online travel companies to pay tourist development taxes on the total consideration received by the online travel company for the rental of accommodations, as a matter of law. You can link to the opinion here. This case is in settlement discussions.
Anne Gannon v. Hotels.com, L.P.
Case No. 50 2009 CA 025919 XXXXMB, Fla. Circuit Court, 15th Judicial Circuit
The tax collector in Palm Beach filed suit against several internet hotel room reservation providers, seeking a declaratory judgment to enforce the collection of the tourist development tax by these providers. The tax collector argues that each of them is a merchant and/or a direct seller and reseller of the right to occupy hotel room and are "dealers" for purposes of the tourist development tax under sections 125.0104 and 212.0305, Florida Statutes. As such, the difference between the wholesale price and the retail price that these providers charged customers is subject to the tourist development tax and that the tax is due on the entire amounts collected by the providers for the rental and/or lease of hotel rooms, regardless of the amount actually remitted to any individual hotel.
Monroe County v. Priceline.com
Case No. 09-cv-10004-KMM, U.S. District Court, Southern Dist. of Fla.
Monroe County filed suit against several internet hotel room reservation providers for their failure to remit the tourist development taxes. The defendants obtain hotel rooms at wholesale rates, then resell them to customers at higher, retail rates. Although the defendants charge – and collect from – customers the tax amounts based on the higher retail rate, the defendants pay taxes only on the lower wholesale rate. This case is a class action suit. You can link to the complaint here and the order of certification here. The county, on behalf of the class of plaintiffs, entered into a settlement agreement with the defendants, requiring the defendants to pay the counties involved $6.5 million, requiring the counties to release all claims on taxes currently due and owing and adhering to a two year moratorium on the collection of tourist development taxes. You can link to the court-approved settlement agreement here.
The Broward County Suits
Broward County has been sued by Orbitz, Hotwire, Hotels.Com, Expedia and Priceline, individually. Each of these internet travel companies argue they are legally obligated to remit payment for tourist development taxes on the difference between the wholesale price and the retail price for hotel rooms.
Brevard County v. Priceline.org
Case No. 6-09-cv-1695-GAP-GJK, U.S. District Court, Middle District of Florida
Brevard County filed suit against several internet hotel room reservation providers for their failure to remit tourist development taxes. The defendants obtain hotel rooms at wholesale rates, then resell them to customers at higher, retail rates. Although the defendants charge – and collect from – customers the tax amounts based on the higher retail rate, the defendants pay taxes only on the lower wholesale rate.
Leon County v. Expedia
Case No. 37-2009-CA-004882, Fla. Circuit Court, 2nd Judicial Circuit
Leon County sued Expedia and other internet hotel room providers to collect the transient rental tax (a part of Florida's sales and use taxes under Chapter 212, Florida Statutes) and any local option sales taxes that are levied on the total rental that is charged for renting/leasing/letting/granting of a license to use any hotel room in Florida. The issue, again, to be decided is whether the online companies should pay taxes on what they pay directly to hotels to buy the rooms or on the higher amount the companies charge customers.
Osceola County Suits
Osceola performed audits under its tourist development tax ordinance of the online travel companies that are subject to the ordinance and levied assessments against the companies for unpaid, but due, tourist development taxes. The companies are challenging the ordinance and its enforcement as violating the commerce clause, the due process clause, the Internet Freedom Act, and the supremacy clause. In addition, the companies argue that the county breached confidentiality of taxpayer information by engaging outside counsel to conduct the audits and that fundamental bias existed in the assessment process because of the contingency fee arrangement with outside counsel. The companies asked the court to abate the assessment. The companies involved are Expedia, Hotels.com, Hotwire, Orbitz, Priceline and Travelocity. You can view the Expedia complaint here.