Sunday, January 25, 2009

A CLOSET IS NOT ENOUGH [FLORIDA]

Owners of a homestead in Florida are entitled to a reduction in their ad valorem taxes under the Florida Constitution homestead exemption. Fla.Stats. § 196.061 provides that “[t]he rental of an entire dwelling previously claimed to be a homestead for tax purposes shall constitute the abandonment of said dwelling as a homestead…” (emphasis added).

In a recent Florida case, the taxpayer owned a condominium unit and claimed homestead exemption for it. The unit was put into a rental pool for multiple days at the condominium development. As part of the rental arrangement, the owner retained exclusive possession of a locked closet in the unit to safeguard possessions at the unit.

The State of Florida asserted that the rental constituted an abandonment of the homestead status under Fla.Stats. § 196.061, and thus the unit became fully taxable. The taxpayer countered that by not renting out the closet, he had not rented out the “entire” unit, and thus the statute creating abandonment did not apply.

The court applied the statute, after some rewriting of its plain meaning, and held that the homestead was abandoned.  The court noted that applying the word “entire” in its usual manner would be “grounded in a decontextualized literalism which overemphasizes the word “entire” and ignores its context” and also produces an unreasonable result. In other words, the legislature surely could not have meant “entire” to mean 100%, but something less when the circumstances warrant.

Of course, the legislature could have used words like “substantially all” instead of “entire” if that is what it had intended – but it is good to know that the courts will always help the legislature out when they can’t believe that the legislature intended what it actually wrote.

There are two interesting side notes in this case. First, it appears that the taxpayer was not really concerned about the few hundred dollars per year in ad valorem tax savings that the homestead exemption yields, but the loss of the “Save our Homes” limits on increasing annual ad valorem values (and thus taxes) that applies to homesteads. Second, the taxpayer had asserted that the scope of homestead can only be derived from the Florida Constitution, and not an interpretative or implementing statute of the legislature – this argument was also rejected by the court.

GREG HADDOCK, Nassau County Property Appraiser, and JAMES ZINGALE, Executive Director of the State of Florida Department of Revenue, Appellants, v. THOMAS W. CARMODY, Trustee, and THOMAS J. CARMODY, Trustee for the Mary K. Carmody Qualified Personal Residence Trust created January 31, 1999, Appellees, 34 Fla.L.Weekly D207b, 1st District. Case No. 1D08-241. Opinion filed January 21, 2009.

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