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