What was Florida's intangible-tax treatment when a Florida corporation transferred its trust interest before January 1 to a Delaware subsidiary and received an intercompany note?

Plain-English summary

The transferred trust interest was not subject to Florida intangible tax for either corporation under the described year-end transaction.

The Florida credit corporation assigned the beneficial interest before January 1, so it no longer owned that interest on the annual measurement date. The Delaware subsidiary had no Florida taxable situs, and the trust's situs followed the trustee's location outside Florida, so the buyer also had no Florida liability on the interest.

The note the Delaware subsidiary gave the Florida parent was taxable standing alone. But when the parent and subsidiary filed as an affiliated group on a consolidated intangible-tax return, the note was eliminated as an intercompany account receivable.

What this means for you

The ruling treated January 1 ownership, the trust's outside-Florida situs, the buyer's lack of Florida situs, and consolidated-return treatment as separate parts of the analysis.

Common questions

Q: Was the Florida seller taxed on the trust interest? A: No. It had transferred the interest before January 1 and no longer owned it on that date.

Q: Was the Delaware buyer taxed on the acquired interest? A: No. The trustee was outside Florida and the buyer had no Florida taxable situs.

Q: Was the intercompany note exempt by itself? A: No. The ruling said it was taxable, but eliminated it when the parent and subsidiary filed the described consolidated return.

Citations and references

• Fla. Stat. § 199.032 — annual intangible tax
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95C2-026

Original ruling text

Aug 07, 1995

Re: Technical Assistance Advisement TAA 95(C)2-026 Intangible Tax - Business Situs XXX (Credit Corporation) XXX (Service Corporation) XXX (Processing Services) XXX (Trustee)

Dear :

This office has received your request for a Technical Assistance Advisement for the referenced corporation. Your request is based upon the information and documentation provided. Below is a summary of pertinent information contained in your request:

Credit Corporation is a Florida Chartered corporation in the business of making guaranteed student loans. During 1989 Credit Corporation established a trust naming Trustee as trustee of the trust. Processing Services was hired by Trustee to perform booking services, recording income and expenses that accrue to Credit Corporation. The purpose of the trust is to make, hold and sell Federal Family Education Loans (FFELP) made pursuant to the Federal Higher Education Act of 1965. The FFELP loans are insured by two guarantors, the Florida Department of Education Office of Student Financial Assistance (FLOSFA) and United Student Aid Funds, Inc. (USAF). Legal title to the loans will be held by Trustee pursuant to the trust agreement. Credit Corporation, the current income beneficiary of the trust, has a general power of appointment and a right to revoke the trust.

In December 1994 Credit Corporation established Service Corporation, a wholly owned Delaware corporation, with its principal office in Delaware. During December 1994, Credit Corporation assigned all of its beneficial interest in trust to Service Corporation with respect to loans that are

insured by USAF. Service Corporation will give Credit Corporation a note in exchange for the assignment of beneficial interest in the trust. In January 1995 Service Corporation assigned back to Credit Corporation the beneficial interest in the trust and Credit Corporation gave back the note it had received from Service Corporation. For 1995 intangible tax purposes Credit Corporation, Service Corporation and Processing Services have elected to file as an affiliated group of corporations.

Based upon the information summarized above, three issues have been raised for response. Each issue appears below and is followed by our response to that issue.

1. Will Credit Corporation be subject to the intangible
   tax levied pursuant to s. 199.032, F.S., on the trust interest it sells to Service Corporation prior to January 1?

Response:

Credit Corporation is subject the intangible tax only on the taxable intangibles it owns on January 1 of each year. The interest in the trust sold to Service Corporation is no longer taxable to Credit Corporation.

2. If Credit Corporation and Service Corporation file a
   consolidated return will the note from Service Corporation to Credit Corporation be subject to the intangible tax levied by s. 199.032, F.S.?

Response:

The note given by Service Corporation to Credit Corporation is subject to the intangible tax. If a consolidated return is filed by Credit Corporation as parent and Service Corporation is included within the consolidated group, the note will be eliminated from taxation as an intercompany account receivable.

3. To what extent is the trust interest purchased by Service Corporation subject to the intangible tax levied by s. 199.032, F.S.?

Response:

The beneficial interest purchased by Service Corporation will not be subject to the intangible tax in Florida. The situs for the trust is Trustee's location outside of Florida. Service corporation has no taxable situs within Florida. Having no taxable situs it has no liability for the intangible tax.

In summary, if a Florida domiciliary assigns its beneficial interest in a trust to a person having no taxable situs in Florida, then the beneficial interest in trust is no longer subject to Florida's intangible tax. If there is a parentsubsidiary relation between the corporations exchanging the beneficial interest and the note, the note will be eliminated if the corporations file a consolidated intangible tax return.

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 and your request are public records under Chapter 119, F.S., which are subject to disclosure to the public under the conditions of s. 213.22, F.S. Your name, address, and any other details which might lead to identification of the taxpayer must be deleted by the Department before disclosure. In an effort to protect the confidentiality of such information, we request you notify the undersigned in writing within 15 days of any deletions you wish made to the

request or the response.

Sincerely,

J.V. Parramore, Jr.
Tax Law Specialist
Technical Assistance

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