Did a post-January 1 distribution of intangible assets to a Florida charitable trust retroactively create Florida intangible tax?

Plain-English summary

A distribution of securities to the Florida trust after January 1 did not retroactively subject those assets to Florida intangible tax for the period before the trust owned them. The Department made no determination, however, about where the distributing limited partnership was domiciled.

The Florida-domiciled trust represented that it contributed at least 95% of its income to organizations exempt under Internal Revenue Code section 501(c)(3). On that representation, Florida found the trust exempt from annual intangible tax for 2000 under section 199.185(4).

What this means for you

The ruling separated the assets' ownership and situs on the relevant January 1 from the recipient trust's later ownership. It separately tested the trust's own exemption through its charitable-income distribution percentage.

Common questions

Q: Did the later distribution retroactively tax the trust? No.

Q: Did Florida decide whether the limited partnership was outside Florida? No.

Q: Why was the trust exempt for 2000? It represented that at least 95% of its income would go to section 501(c)(3) organizations.

Citations and references

• Fla. Stat. §§ 199.032 and 199.052(1) — annual intangible tax and January 1 filing framework
• Fla. Stat. § 199.185(4) — charitable-trust exemption
• Internal Revenue Code § 501(c)(3) — qualifying recipient organizations
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00C2-001

Original ruling text

SUMMARY

QUESTION: Does the distribution on intangible personal
property to a Florida trust after January 1, of the tax
year effect the trust exempt status as a charitable trust?

ANSWER - Based on Facts Below: Intangible property not
owned by a person domiciled or conducting business in
Florida is not subject to Florida intangible tax. The fact
that the property is distributed to a Florida domiciliary
after January 1 of the tax year will not cause the tax
retroactively apply to the recipient of the intangible
property.

Jan 21, 2000

RE: Technical Assistance Advisement No. 00(C)2-001
Intangible Tax - Trust - Charitable Exemption
s. 199.185(1), F.S.
XXX (Trust)

Dear :

Your letter of October 11, 1999, has requested a Technical
Assistance Advisement on the application of the intangible tax
to a trust contributing at least 95 percent of its income to
organizations exempt from federal income tax under section
501(c)3 of the Internal Revenue Code.

The request is based upon the following information:

Trust is created under the laws of and is domiciled in the
State of Florida. Trust maintains its principal office and
place of business in the State of Florida. The books and
records are located at its principal business location in
Florida and are maintained by the employees. Trust files
its Florida intangible personal property tax return as a
fiduciary filer.

Trust contributed cash to a 100 percent owned company
during XXX. Company is organized as a corporation under
the laws of a state other than Florida. Company's sole
place of business is in the state of incorporation. Trust
and Company formed a limited partnership in which Company
is the General Partner and Trust is the limited partner.
The Limited Partnership was formed under the laws of a
state other than Florida and is legally and commercially
domiciled in the state in which it was formed. Trust
obtained its limited partner interest by contributing
securities to the partnership during calendar year XXX. On
or about XXX, the Limited Partnership will distribute the
securities portfolio to Trust.

Annually, Trust contributes 95 percent of its income to an
organization that is exempt from federal income tax under
section 501(c)3 of the Internal Revenue Code.

Statutory Provisions

Section 199.052(1), F.S., requires that every person
domiciled in this state on January 1 of each year must file an
intangible personal property tax return and list all of their
taxable intangible personal property that has a taxable situs in
this state.

Section 199.185(4), F.S., states that a charitable trust
that pays at least 95 percent of its income to organizations
exempt from federal income tax pursuant to s. 501(c)3 of the
Internal Revenue Code, shall be exempt from the tax imposed in
s. 199.032, F.S.

Requested Ruling

1. Does the distribution to Trust of intangible assets
   after January 1, 1999, impact the taxability of the
   intangible assets during the period they were held by
   the Limited Partnership?

2. Is Trust subject to Florida intangible tax on January

1, 2000?

Conclusions

Intangible property not owned by a person domiciled or
conducting business in Florida is not subject to Florida
intangible tax. We render no determination as to where the
Limited Partnership is domiciled. The fact that the property is
distributed to a Florida domiciliary after January 1 of the tax
year will not cause the tax to retroactively apply to the
recipient of the intangible property.

As for the taxability of Trust for the year 2000, based
upon the statements made in the request for technical advice,
that the Trust will contribute 95 percent of more of its income
to an organization exempt from federal income under Section
501(c)3 of the Internal Revenue Code, Trust will not be liable
for the intangible tax for the year 2000.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response, your request
and related backup documents are public records under Chapter
119, F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

J.V. Parramore, Jr.
Tax Law Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel

JVP/mh