CEO 78-6 -- January 19, 1978

BUSINESS ENTITY'S SOURCES OF INCOME

NECESSITY OF AGGREGATING SOURCES OF INCOME TO A BUSINESS ENTITY WHEN ONE PERSON HAS INTERESTS IN THOSE SOURCES

To: (Name withheld at the person's request.)

Prepared by: Phil Claypool

SUMMARY:

Section 112.3145(3)(b), F. S. 1975, requires that, in making financial disclosure, one disclose "[a]ll sources of income to a business entity in excess of 10 percent of the gross income of a business entity in which the reporting person held a material interest and from which he received an amount which was in excess of 10 percent of his gross income during the disclosure period and which exceeds $1,500." The term "source" is defined to mean "the name, address, and description of the principal business activity of a person or business entity." Section 112.312(16), F. S. (1976 Supp.). Thus, a "source" may be either a person or a business entity, but it must be a source of income. Where the income of a reporting person's firm is derived from various individual clients -- whether a corporation, partnership, or individual -- rather than one from the one client who has interests in those partnerships or corporations, the statute does not require that such sources of income be aggregated in order to calculate the 10 percent threshold. Accordingly, in disclosing sources of income to business entities on one's statement of financial interests, it is not necessary to disclose the name of a client who has interests in several partnerships or corporations which also are clients of the business entity, no one of which individually provides 10 percent of the business entity's gross income but which collectively exceed that amount. Similarly, it is not necessary to disclose the name of the several partnerships and corporations which collectively provide over 10 percent of the business entity's gross income. However, voluntary disclosure of such clients as secondary sources of income would further the primary purpose of financial disclosure by disclosing a substantial economic interest which potentially could result in a conflict of interest.

QUESTION:

In disclosing the names of sources of income to business entities as required by s. 112.3145(3)(b), F. S., is it necessary to disclose the name of a business entity's client who has interests in several partnerships and corporations which also are clients of the business entity, none of which individually provides 10 percent of the business entity's gross income but which collectively exceed that amount?

Your question is answered in the negative.

In your letter of inquiry and in a telephone conversation with our staff, you advise that you recently have been appointed to the State Mobile Home Tenant-Landlord Commission and that you are a partner in an accounting firm. You also advise that one client of your firm has interests in several partnerships and corporations which are also clients of your firm, and that while the income from no one of these clients exceeds 10 percent of the gross income of the firm, the income from all of these clients, when aggregated, does exceed the 10 percent threshold. In addition, you state that your firm was engaged by various officers or partners of each entity in most cases, rather than by the person whose ownership links the entities.

The Code of Ethics for Public Officers and Employees provides that one's statement of financial interests shall include:

All sources of income to a business entity in excess of 10 percent of the gross income of a business entity in which the reporting person held a material interest and from which he received an amount which was in excess of 10 percent of his gross income during the disclosure period and which exceeds $1,500. The period for computing the gross income of the business entity is the fiscal year of the business entity which ended on, or immediately prior to, the end of the disclosure period of the person reporting. [Section 112.3145(3)(b), F. S. 1975.]

The term "source" is defined to mean "the name, address, and description of the principal business activity of a person or business entity." [Section 112.312(16), F. S. (1976 Supp.).]

Thus, a "source" may be either a person or a business entity, but it must be a source of income. In the situation you have described, your firm's income is derived from various individual clients -- whether corporations, partnerships or individuals -- rather than from the one client who has interests in those partnerships and corporations. In the absence of language which indicates a more specific legislative intent, we hesitate to read the provision to require that such sources of income be aggregated in order to calculate the 10 percent threshold.

Accordingly, we find that in disclosing sources of income to business entities on one's statement of financial interests, it is not necessary to disclose the name of a client who has interests in several partnerships and corporations which also are clients of the business entity, no one of which individually provides 10 percent of the business entity's gross income but which collectively exceed that amount. Similarly, it is not necessary to disclose the names of the several partnerships and corporations which collectively provide over 10 percent of the business entity's gross income. We are of the opinion, however, that voluntary disclosure of such clients as secondary sources of income would further the primary purpose of financial disclosure by disclosing a substantial economic interest which potentially could result in a conflict of interest.