Under Florida's 1996 intangible tax, what happened when Florida corporations assigned receivables to a foreign limited partnership?

Plain-English summary

Florida did not tax receivables that two Florida corporations had assigned before year-end to a foreign limited partnership.

The partnership's principal office, business operations, management, books, records, bank accounts, mail, and partner meetings were all outside Florida. A foreign corporate general partner had exclusive control, while the Florida corporations were limited partners with no management authority. The partnership bore the receivables' economic risk and owned them on January 1 before returning them on January 12.

The partnership and its general partner therefore had no Florida filing liability, and the corporations did not report the transferred receivables on their January 1 returns. Their limited-partnership interests were also exempt because the partnership was not registered with the SEC.

What this means for you

• The ruling focused on who owned and controlled the receivables on January 1.
• The foreign partnership's operations and management stayed entirely outside Florida.
• The limited-partnership-interest exemption depended on the partnership not being SEC-registered.

Common questions

Q: Did the foreign partnership have to file a Florida intangible-tax return? A: No.

Q: Did the Florida corporations report the transferred receivables? A: No, because the partnership owned and controlled them on January 1.

Q: Were the corporations' limited-partnership interests taxable? A: No, because the partnership was not registered with the SEC.

Q: Did returning the receivables on January 12 change the January 1 result? A: No.

Citations and references

• Fla. Stat. § 199.052(1) — filing based on ownership, management, or control
• Fla. Stat. § 199.175 — Florida taxable situs
• Fla. Stat. § 199.185(1)(c) — partnership-interest exemption
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-022

Original ruling text

Mar 01, 1996

Re: Technical Assistance Advisement No. 96(C)2-022 Intangible Tax - Taxable Situs Sections 199.052 and 199.175, F.S. XXX ("Corporation A") XXX ("Corporation B")

Dear:

Your recent letter requesting a Technical Assistance Advisement has been received by this office. The request deals with the taxation of intangible property transferred to a non-Florida entity.

FACTS

The facts that you have provided to the department are as follows:

The taxpayers are commercially domiciled in Florida. Prior to December 31, 1995, the taxpayers assigned their receivables to a Delaware limited partnership in exchange for an interest as a limited partner in the Partnership. The Partnership will not be registered with the Securities and Exchange Commission ("SEC"), nor will it be regulated by the SEC. The principal place of business of the Partnership is in a foreign country. All management functions relating to the Partnership since its formation have been performed, and its business operations have been conducted, outside of Florida. No books, records or bank accounts of the Partnership are maintained in Florida. The Partnership receives its mail in a foreign country. Any meetings of the partners of the Partnership will be held outside of Florida. The partnership neither transacts nor intends to transact any business in Florida.

The sole general partner of the Partnership is a foreign corporation, whose address is in a foreign country. The General Partner has the exclusive right, power and authority to

supervise, control and manage the Partnership and all assets owned by the partnership, including the accounts receivable assigned to it by Corporation A and Corporation B. The limited partners have no part whatsoever in the control, management, direction or operation of the Partnership or it assets and have no power to bind the Partnership.

The accounts receivable transferred by the Taxpayers to the Partnership remained the property of the Partnership, and not of the Taxpayers, from the date the receivables were transferred to the Partnership until January 12, 1996. During this period of time, neither Taxpayer exercised any discretion or judgement as to the quality of these accounts receivable or otherwise exercised any control or authority over them. The economic risk of loss with respect to these accounts receivable was born solely by the Partnership during this time period. On January 12, 1996, the Partnership assigned to Corporation A and Corporation B all rights, title and interest in the accounts receivable which each of them had previously assigned to the Partnership.

ISSUES

Based on the facts as stated above, four rulings have been requested on the following issues:

1. Is the Partnership required to file a 1996 Florida
   Intangible Personal Property Tax Return?
2. Is the General Partner required to file a 1996 Florida
   Intangible Personal Property Tax Return?
3. Are either of the Taxpayers required to report the value of
   the accounts receivable previously transferred by them to the Partnership prior to December 31, 1995, on their 1996 Florida Intangible Personal Property Tax Returns?
4. Are either of the Taxpayers required to report the value of
   their interest as limited partners in the Partnership on their 1996 Florida Intangible Personal Property Tax Returns?

LAW AND DISCUSSION

Subsection 199.052(1), F.S., requires that every person domiciled in this state that owns, manages, or controls intangible property having a business situs in the state, must file an intangible tax return. Section 199.175, F.S., states that intangible property shall have a taxable situs in this state when it is owned by a person domiciled in this state or it arose out of business transacted in this state by employees, agents or representatives of any kind from a location within this state or with customers in this state. Paragraph 199.185(1)(c), F.S., provides that the interest of a partner in any partnership is exempt from the intangible tax when the partnership is not registered with the Securities and Exchange Commission.

CONCLUSION

Until the Taxpayers transfer the receivables, the receivables are subject to the intangible tax. The Partnership formed in a foreign state will not be subject to Florida's intangible tax, as it will have no taxable situs in Florida. The Taxpayers as partners of a partnership will have no tax liability on their interest in the partnership. Therefore, the transaction as structured will result in no intangible tax liability for the foreign partnership, and the Taxpayers will have no tax liability on the receivables after the receivables are transferred to the foreign partnership.

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,

Mary Ella Ingram
Tax Law Specialist
Tax Policy and Dispute Resolution

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