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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