Under Florida's 1996 intangible tax, did receivables transferred to an out-of-state limited partnership escape the January 1 assessment?

Plain-English summary

Florida did not require the Florida corporation to report approximately $11 million of receivables transferred to a Delaware limited partnership before January 1, 1996.

The partnership's principal place of business, management, operations, records, bank accounts, and mail were outside Florida. Its non-Florida general partner had exclusive control, while the Florida corporation held only a limited-partnership interest and had no management authority. The partnership bore the risk of loss through January 1 and transferred the receivables back on January 5.

Because the partnership and general partner were not domiciled in Florida and the receivables were not owned, managed, or controlled in Florida on January 1, neither had to file a 1996 Florida intangible-tax return for them, and the Florida corporation did not report the receivables. Its limited-partnership interest was exempt because the partnership was not registered with the SEC.

What this means for you

• Ownership and control on the January 1 assessment date determined the ruling's result.
• The Department relied on the non-Florida general partner's exclusive authority and the limited partner's lack of control.
• The January 5 transfer back did not change the January 1 ownership facts addressed by the ruling.

Common questions

Q: Did the Delaware partnership have to file a Florida return? A: No.

Q: Did the Florida corporation report the transferred receivables? A: No, because it did not own, manage, or control them on January 1.

Q: Was the corporation's partnership interest taxable? A: No, because the partnership was not registered with the SEC.

Citations and references

• Fla. Stat. § 199.052(1) — return filing for taxable intangible property
• Fla. Stat. § 199.175 — taxable situs
• Fla. Stat. § 199.185(1)(c) — non-SEC partnership-interest exemption
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-047

Original ruling text

Apr 16, 1996

Re: Technical Assistance Advisement No. 96(C)2-047 Intangible Tax - Taxable Situs Sections 199.052 and 199.175, F.S. XXX (the "Taxpayer") XXX (the "Limited Partnership")

Dear

Your letter requesting a Technical Assistance Advisement dated January 23, 1996, has been received by this office. The request deals with the taxation of intangible property transferred to a non-Florida entity.

STATEMENT OF FACTS

The Taxpayer is a Florida corporation organized on September 1, 1985. The Taxpayer is both commercially and legally domiciled in Florida. On December 26, 1995, the Taxpayer transferred approximately $11,000,000 in accounts receivable to the Limited Partnership. In exchange for the accounts receivable, the Taxpayer received an interest as a limited partner in the Limited Partnership. There are and have been no other limited partners in the Partnership.

The Limited Partnership is a Delaware limited partnership organized on December 22, 1995. The Limited Partnership is not, nor does it intend to be, registered or regulated by the United States Securities and Exchange Commission.

Consistent with the requirements of the limited partnership agreement, the principal place of business and address of the Limited Partnership shall always be outside the State of Florida. All management functions relating to the Limited Partnership since its formation have been performed, and its business operations have been conducted, outside of Florida. No books, records and bank accounts of the Limited Partnership are maintained in Florida. The Limited Partnership receives its

mail outside of Florida. The Limited Partnership neither transacts, nor intends to transact, any business in Florida.

The sole General Partner of the Limited Partnership is a natural person who resides outside of Florida. Pursuant to the limited partnership agreement, the General Partner possesses the exclusive right, power, and authority to supervise, control and manage the Limited Partnership and all assets owned by the Limited Partnership, including the transferred accounts receivable. The limited partnership agreement further states that the Taxpayer, as a limited partner of the partnership, shall have no right whatsoever in the control, management, direction or operation of the Limited Partnership or its assets and shall have no power to bind the Limited Partnership.

The transferred receivables remained the property of the Limited Partnership, and not of the Taxpayer, from the date of transfer to the Limited Partnership until January 5, 1996. During this period of time, the Taxpayer did not exercise any discretion or judgement as to the quality of the transferred receivables. The economic risk of loss with respect to the transferred receivables was borne solely by the Limited Partnership during this time period. On January 5, 1996, the Limited Partnership assigned all rights, title and interest in the transferred receivables to the Taxpayer.

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. Is the Taxpayer required to report the value of the
   transferred receivables on its 1996 Florida Intangible Personal Property Tax Return?

4. Is the Taxpayer required to report the value of its interest in the Limited Partnership on its 1996 Florida Intangible Tax Return?

LAW AND DISCUSSION

s. 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. s. 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. s. 199.185(1)(c), F.S., provides that any interest in a limited partnership which partnership is not registered with the Securities and Exchange Commission is exempt from taxation.

Neither the Limited Partnership nor the General Partner will be required to file a 1996 Florida Intangible Personal Property Tax Return since neither was domiciled in the State of Florida as of January 1, 1996. The Taxpayer is not required to report the transferred receivables on its 1996 Florida Intangible Personal Property Tax Return since, as of January 1 of that year, such receivables were not owned, managed, or controlled by a person domiciled in this state, or by any person transacting business in this state. The Taxpayer is not required to report the value of its interest in the Limited Partnership on its 1996 Florida Intangible Personal Property Tax Return since this item is exempt from taxation.

This response constitutes a Technical Assistance Advisement under section 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 section 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 section 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,

George D. Turner
Senior Tax Specialist
Tax Policy & Dispute Resolution

GDT