Under Florida's 1996 intangible tax, did loan transfers, Florida servicing, or recourse give Delaware bank subsidiaries Florida nexus?

Plain-English summary

Florida found no Florida nexus for Delaware bank subsidiaries that received loan interests before year-end.

Florida regional banks transferred intangible property to their respective Delaware subsidiaries for promissory notes, then continued collecting principal and interest, processing payments, accounting, and keeping records. The regional banks had no discretionary authority, management, or control over the transferred loans.

The Department answered all four questions no: the subsidiaries had no Florida nexus, the transfer form did not create nexus, ministerial Florida servicing did not create nexus or taxable situs, and recourse to the regional banks did not create taxable situs. A reassignment after January 2 did not alter the stated January 1 structure.

What this means for you

• The Delaware entities had no Florida assets, agents, employees, or representatives.
• Servicing stayed limited to ministerial loan functions.
• Recourse and the participation-agreement form did not create situs on these facts.

Common questions

Q: Did the Delaware subsidiaries have Florida nexus?
A: No.

Q: Did Florida loan servicing create nexus?
A: No, because it was ministerial and excluded discretion, management, and control.

Q: Did recourse to the regional banks create taxable situs?
A: No.

Citations and references

• Fla. Stat. § 199.032 — annual intangible tax
• Fla. Stat. § 199.175 — Florida taxable situs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-017

Original ruling text

Feb 22, 1996

Re: TAA 96(C)2-017
Florida Intangible Tax - Taxable Situs
XXX ("Parent")
XXX ("Sub")
XXX Florida Subsidiaries ("Regional Banks")
XXX ("Delaware Subsidiaries")

Dear :

Your letter of December 6, 1995, requested a Technical
Assistance Advisement on the application of the intangible tax
to the above referenced matter. This response to your request
constitutes a Technical Assistance Advisement under Chapter
12-11, Florida Administrative Code, and is issued to you under
the authority of s. 213.22, Florida Statutes.

Discussion Of Facts and Circumstances

Parent is a Non-Florida bank holding company and the parent of
several other bank holding companies. Parent files a
consolidated Florida intangible tax return.

Sub is domiciled and organized under the laws of Florida. It is
the parent of numerous Regional Banks located in Florida. Some
Regional Banks own or will own a Delaware subsidiary organized
under the laws of Delaware.

It is contemplated that a transfer of intangible property from
certain Regional Banks to their respective Delaware
Subsidiaries, evidenced by a Master Participation Agreement,
will be made in exchange for a promissory note prior to or on
December 31. The Regional Banks will execute a servicing
agreement allowing them to perform certain ministerial functions
regarding the maintenance of the transferred intangible
property. On or after January 2, an Assignment Agreement will
be executed which will provide for the reassignment of the
intangible property to the respective Regional Bank from their

respective Delaware Subsidiary in exchange for the cancellation
of the original promissory note. Parent will file a
consolidated intangible tax return for the year and will
eliminate the intercompany receivables created by the original
transfer.

The Delaware Subsidiaries will not have any business assets,
agent, employee, or representative of any kind in Florida.

Each Regional Bank will perform ministerial activities for its
respective Delaware Subsidiary and will have no discretionary
authority, management or control regarding any of the loans
transferred to and owned by the Delaware Subsidiary. At the
discretion of the Delaware Subsidiaries, the Regional Banks will
continue to perform loan servicing functions, limited to
collection of principal and interest, processing, accounting,
and record-keeping related to the loans.

Questions Presented

1. Do the Delaware Subsidiaries have Florida nexus?
2. Does the form of loan transfer create Florida nexus for the
   Delaware Subsidiaries?
3. Do the rights and responsibilities bestowed upon the
   Regional Banks under the terms of the Servicing Agreement,
   with respect to maintenance of the intangible property,
   create either a Florida nexus for the Delaware Subsidiaries
   or a Florida taxable situs for the intangible property
   itself?
4. Does the fact that the loans are transferred to a Delaware
   Subsidiary with the right of recourse to the parent
   Regional Bank create Florida taxable situs for the
   intangible personal property?

Discussion and Law

For purposes of the annual tax imposed under s. 199.032, F.S.,
intangible personal property shall 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, as
provided in s. 199.175, F.S. Further, intangible personal

property has taxable situs in this state when it is deemed to
have business situs in Florida and it is owned, managed, or
controlled by a person transacting business in this state, even
though the owner may claim domicile elsewhere. Intangibles
shall be deemed to have business situs in Florida when they
receive the benefit and protection of Florida laws and courts
and they are derived from, arise out of, or are issued in
connection with business transacted in this state with a
customer in this state.

Conclusion

Based upon statutory provisions and the information provided in
your request, each question presented is answered in the
negative.

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
based 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,

Val Poliuto
Statutory Compliance Section

Control #24167
VJP/kk
Enclosure (Not included in TLL)