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

JVP/mh