Did a Nevada limited partnership owe Florida intangible tax when its Florida general partner made all securities investment decisions from Florida and it had no office elsewhere?

Plain-English summary

The Florida Department of Revenue concluded that the foreign limited partnership had a Florida taxable situs and owed intangible personal property tax on its securities. Its Florida-resident general partner made the investment decisions from Florida, and the partnership had no office or business location outside the state.

The partnership was organized under Nevada law to hold, invest, and manage marketable securities for its general and limited partners. It was not publicly traded or registered with the SEC.

Florida was the center of management

The general partner decided when the partnership would buy and sell securities. About 89% of investment activity was placed through a New York investment counselor, but the general partner communicated the instructions from Florida. The remaining activity was conducted through Florida offices of two companies.

The partnership also maintained a Florida bank account. The general partner received most partnership mail, kept the checkbook, bank statements, and broker statements, and participated in partnership meetings by telephone from Florida.

Investment decisions were not ministerial

Chapter 199 excluded ministerial and processing functions from "management" or "control." A ministerial function did not involve discretion or judgment.

The general partner's securities purchase and sale decisions required discretion. The Department therefore treated those actions as management and control performed on behalf of the partnership.

The partnership acquired a Florida commercial domicile

A partnership could acquire commercial domicile where it maintained its chief or principal office and performed executive or management functions. With no office or business location elsewhere, the Florida general partner's location functioned as the partnership's principal office.

That commercial domicile gave the securities a Florida taxable situs. The partnership had to file a Florida Intangible Property Tax Return and pay tax on its intangible assets.

What this means for you

Investment partnerships

State of formation does not determine tax situs by itself. The location of discretionary portfolio management and the entity's actual principal office can be more important.

Florida general partners and family offices

Making buy-and-sell decisions, keeping core records, managing bank accounts, and conducting meetings from Florida can establish a Florida management center for the entity.

Partnerships using out-of-state advisers

Executing most trades through a New York or other out-of-state adviser did not prevent Florida situs when the controlling instructions originated with the Florida general partner.

Common questions

Q: Where was the partnership organized?
A: Nevada.

Q: Did it have an office outside Florida?
A: No office or other business location outside Florida was identified.

Q: Who made the investment decisions?
A: The Florida-domiciled general partner.

Q: Why were those decisions not ministerial?
A: Buying and selling securities required discretion and judgment.

Q: What was the result?
A: The partnership had Florida commercial domicile and taxable situs and had to file and pay intangible tax.

Citations and references

• Fla. Stat. § 199.023(3) and (13) — partnership as a person and definition of ministerial function
• Fla. Stat. § 199.052 — return filing by persons owning, managing, or controlling Florida-situs intangibles
• Fla. Stat. § 199.175(1) and (1)(a)3. — taxable situs and commercial domicile

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 05C2-003

Original ruling text

SUMMARY
QUESTION: In the situation of a foreign limited partnership that maintains no office outside of Florida, where the
General Partner, domiciled in Florida, makes investment decisions regarding purchase and sale of securities from a
Florida location, will intangible tax be owed by the partnership that was formed to hold, invest, and manage
marketable securities for the benefit of the general and limited partners?
ANSWER - Based on Facts Below: Yes, the foreign limited partnership is subject to the Florida intangible personal
property tax, since it has a taxable situs in this state. The General Partner is exercising management and control on
behalf of the partnership by making investment decisions for the partnership regarding purchase and sale of
securities. Because the executive or management decisions are performed from a Florida location and there are no
offices or other locations of the partnership conducting business outside of Florida, the General Partner is considered
to be maintaining a principal office in this state thereby giving the partnership commercial domicile per
199.175(1)(a)3., F.S., resulting in Florida taxable situs.

April 6, 2005

Re: Technical Assistance Advisement No. 05C2-003
Intangible Personal Property Tax - Florida Taxable Situs
Sections 199.023, 199.052, 199.175, F.S.
XXX ("Partnership")
XXX ("General Partner")
XXX ("Company 1")
XXX ("Company 2")
XXX ("Company 3")
Dear:
This is in response to your recent request for a Technical Assistance Advisement dated February 17, 2005,
regarding application of intangible tax as it relates to Florida taxable situs.
FACTS AS PRESENTED BY PETITIONER
The Partnership was organized XXX, under Nevada law. The Partnership is duly registered in Nevada and was
granted a Certificate of Limited Liability Partnership by Nevada dated XXX. The Partnership is not publicly traded nor
registered with the Securities and Exchange Commission.
The Partnership was formed to hold, invest, and manage marketable securities for the benefit of the general and
limited partners.

Pertinent facts related to the Partnership activities are as follows:

1. The Partnership maintains a bank account in Florida.
2. The Partnership investment activity is conducted as follows:
   a. Approximately 89% of the investment activity is conducted through Company 1. Instructions on investment activities
   are communicated by the general partner to an investment counselor in New York by telephone or letter.
   b. Approximately 9% of the investment activity is conducted through a Florida office of Company 2.
3. Approximately 2% of the investment activity is conducted through a Florida office of Company 3.
4. The General Partner is domiciled in Florida.
5. The General Partner makes investment decisions for the Partnership, including decisions regarding purchases and
   sale of securities.
6. The General Partner receives most of the Partnership mail at her Florida address.
7. The General Partner maintains the Partnership checkbook at her Florida address.
8. The General Partner receives and maintains copies of the Partnership bank statements and broker statements at
   her Florida address.
9. The Partnership meetings are conducted by telephone in Florida.
   Requested Ruling
   Your correspondence requests a determination whether the securities owned by the Partnership are subject to the
   annual Florida Intangible Personal Property Tax. Your letter further requests a determination that intangible personal
   property owned by the Partnership does not have a Florida taxable situs and is, therefore, not subject to Florida
   Intangible Personal Property Tax. The Partnership is a foreign limited partnership as described in s. 620.102(4), F.S.,
   and it is your opinion that the Partnership conducts no commercial activities in the State of Florida. You assert that the
   investment and bookkeeping activities of the General Partner are performed in a fiduciary capacity, and do not
   constitute activities that would cause the Partnership or its intangible personal property to acquire Florida taxable
   situs. Your letter then goes on to cite Sections 199.175(1), F.S., 199.175(1)(a), F.S., and 199.175(2)(a), F.S., in
   support of your opinion that the Partnership has no business situs or commercial domicile in Florida. Additionally, ss.
   620.9101-920.9105, F.S., were cited as support for your position that the Partnership is not subject to Florida
   Intangible Personal Property Tax.
   Discussion

Section 199.052, F.S., requires an intangible tax return to be filed by every corporation authorized to do business
in this State or doing business in this State and by every person, regardless of domicile, who on January 1 owns,
controls, or manages intangible personal property which has a taxable situs in this State. For purposes of Chapter
199, F.S., "control" or "manage" does not include any ministerial function or any processing activity. Per s.
199.023(13), F.S., the term "ministerial function" means "an act the performance of which does not involve the use of
discretion or judgment."
The critical question in this request is whether the intangible assets of the Partnership have a taxable situs in
Florida. Subsection 199.175(1), F.S., provides for the determination of the taxable situs of intangible personal property
of corporations and partnerships domiciled in Florida. Specifically, the intangible personal property will have a taxable
situs in this state when it is owned, managed, or controlled by any person domiciled in this state on January 1 of the
tax year. Section 199.175(1)(a)3., F.S., explains that, for purposes of Chapter 199, F.S., "any person domiciled in this
state" includes any person who has established a commercial domicile in this state. Per s. 199.023(3), F.S., the term
"person" includes a partnership. A business acquires commercial domicile in Florida when it maintains its chief or
principal office in this state where executive or management functions are performed.
DETERMINATION
It can be inferred from your request that the Partnership maintains no office or principal place of business outside
Florida. The General Partner, who is a Florida resident, is exercising management and control on behalf of the
company by making investment decisions for the Partnership regarding purchase and sale of securities. This is not a
ministerial function. The activities of the Partnership are conducted from the location of the Florida General Partner.
Because the executive or management decisions are performed from the Florida location and there are no offices or
other locations of the Partnership conducting business outside Florida, the General Partner is considered to be
maintaining the principal office in this state. This gives the Partnership a commercial domicile in Florida. Since the
Partnership has a commercial domicile in Florida, it has a taxable situs in this state and falls under the parameters of
s. 199.175(1), F.S. Consequently, the Partnership is required to file a Florida Intangible Property Tax Return and pay
the tax on its intangible assets.
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.
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 from that which is expressed in this
response.
You are further advised that this response, your request and related backup 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,
Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance and Dispute Resolution
JE/mh