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Department of Revenue offers voluntary disclosure program.

If you represent a condominium association, homeowners group or other organizations that may have foreclosed to collect an unpaid maintenance or similar assessment, the Florida Department of Revenue has an offer that could save thousands of dollars in penalties.

The department is asking those groups to voluntarily disclose if they have unpaid documentary stamp tax liabilities. Even a single case where a fee of a few hundred dollars was not paid could result in thousands of dollars in fees and penalties.

DOR recently kicked off a campaign urging the voluntary disclosure after a West Palm Beach law firm filed hundreds of cases seeking to collect the unpaid doc stamps. The "qui tam" suits allow a private party to sue on behalf of the state for the uncollected liabilities, and share in unpaid fees, interest and various penalties.

Taxpayers can protect themselves from most of those extra charges as well as the qui tam suit by coming forward under the department's voluntary program, according to DOR Executive Director Jim Zingale.

"It's always good business to comply with tax law," Zingale said. "In this instance, coming forward to disclose a tax liability may be a bargain as well. By voluntarily disclosing tax owed, these associations could save their members thousands of dollars in extra costs."

Associations can become targets for qui tam suits when they foreclose to collect unpaid maintenance, recreational or other fees. For example, DOR said an association might typically sue a unit with an unpaid fee of $100 and an outstanding mortgage of $80,000.

State law requires that doc stamps be paid both on the amount bid at the foreclosure sale -- typically the assessment owed -- and on the outstanding mortgage, although this latter tax is many times not paid. In the above example, the association would owe 70 cents on the $100 assessment, but $560 on the mortgage.

In the South Florida cases, which affect about 850 associations and other groups, the defendants were asked to pay the unpaid tax plus an additional $5,000 in each foreclosure.

In one case, the West Palm Beach law firm demanded $5,612.50 in payment within 30 days when the tax owed was $612.50. If no payment was made, the law firm warned, the condo association could face a legal judgment for up to $10,000 plus three times the unpaid tax, penalty, interest and all expenses, including attorneys' fees. The plaintiffs would get to keep 25 to 30 percent of any proceeds from the lawsuit and would be able to recover its attorneys' fees as well. The state would get the rest.

If condo associations and other groups have not already been targeted for these lawsuits, they can resolve their tax liability at much lower cost by entering the Florida Department of Revenue's voluntary disclosure program, Zingale said. Those who have already been sued are not eligible for the program.
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Publication:Florida Bar News
Date:Oct 1, 2000
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