Under Florida's 1996 intangible tax, were assets contributed to an out-of-state limited partnership or the partners' interests taxable?

Plain-English summary

Florida found no 1996 intangible-tax liability for the transferred portfolio, the out-of-state partnership holding it, or the residents' partnership interests.

Florida residents contributed part of their investment portfolio to an out-of-state limited partnership and received limited-partnership interests. The partnership kept its office, telephone, books, records, and annual meetings outside Florida. Its corporate general partner was formed outside Florida, and the partnership was not registered with the SEC.

The Department said the residents no longer owned, managed, or controlled the transferred assets. The partnership-owned portfolio had no Florida taxable situs, and the residents' limited-partnership interests were exempt under the cited non-SEC rule.

What this means for you

• The transfer had to move ownership, management, and control of the portfolio to the partnership.
• The partnership's operational facts were outside Florida.
• SEC registration was the stated dividing line for the limited-partnership-interest exemption.

Common questions

Q: Did the Florida residents pay intangible tax on the transferred assets?
A: No.

Q: Did the out-of-state partnership pay Florida tax on the portfolio?
A: No, because the ruling found no Florida taxable situs.

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

Citations and references

• Fla. Stat. § 199.032 — annual intangible tax
• Fla. Stat. § 199.175 — 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 96C2-037

Original ruling text

Apr 01, 1996

Re: Technical Assistance Advisement No. 96(C)2-037
Intangible Tax - Partnership Interest
XXX (Taxpayers)
XXX (Partnership)

Dear :

Your letter dated February 20, 1995, requesting a Technical
Assistance Advisement has been received by this office. The
issues to be addressed in this advisement are: (a) whether the
Taxpayers will be subject to Florida intangible tax on the
portfolio of assets which will be contributed to the Partnership
in XXX; (b) whether the Taxpayers will be subject to Florida
intangible tax on their interest in the Partnership, and (c)
whether the Partnership will be subject to the Florida
intangible tax on the Portfolio which will be contributed by the
Taxpayers.

Statement of the Facts

The Taxpayers are residents of the State of Florida and
currently own various investments (portfolio). The Partnership
is an out of state limited partnership. The Taxpayers and other
individuals are limited partners. A corporation, which was
formed under the laws of XXX, is the general partner. The
Partnership received part of the Taxpayers' portfolio. In
exchange the Taxpayers received a limited interest in the
Partnership. The Partnership will not be registered with
Securities and Exchange Commission (SEC), nor will it be subject
to any regulation by the SEC. It maintains its office space and
telephone service in XXX along with the books and records.
Annual Partnership meetings are conducted outside the State of
Florida.

Provision of the Law

Section 199.032, F.S., imposes an annual tax of 2 mills on

all intangible property that is owned, managed or controlled by
a person domiciled or having a taxable situs in Florida.

Section 199.175, F.S., provides that intangible personal
property shall have taxable situs in this state when it is
owned, managed, or controlled by any person domiciled in this
state.

Regarding the taxability of any interest in a Partnership,
s. 199.185 (1)(c), F.S., provides that a partner's interest in a
partnership, whether general or limited, is exempt, with the
exception of any interest as a limited partner in a limited
partnership registered with the SEC, pursuant to the Securities
Act of 1933.

Conclusion

Once the portion of the portfolio is transferred to the
out-of-state Partnership, the Florida Taxpayer will no longer
have ownership, management or control of the transferred assets.
Therefore, the Taxpayer will not be subject to the tax on the
assets in the portfolio which were transferred to the
Partnership. In addition, the Partnership will not be liable for
tax on the assets it owns in the portfolio because such assets
have no taxable situs in this State. Finally, since the
Partnership is not registered with the SEC, the Taxpayers'
interest in the Partnership will not be subject to the Florida
intangible tax.

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,

Celestine Grantham
Senior Tax Specialist
Tax Policy and Dispute Resolution
Office of General Counsel

CG/mh