Did a Florida investment adviser create Florida intangible-tax situs for a Texas partnership when the adviser could recommend but not implement investments?

Plain-English summary

Florida ruled that the adviser's limited Florida role did not give the Texas partnership's intangible property Florida taxable situs.

The proposed investment partnership and its corporate general partner would be formed and maintain their offices in Texas. The corporation alone would manage the partnership. Its non-Florida president would make investment decisions, and the partnership would implement them at its Texas business location.

The Florida investment adviser would keep a working record of partnership assets and give advice to the corporate general partner. Those records were not the entities' permanent books, and the adviser could neither implement recommendations nor make investment decisions.

Because advice without decision or implementation authority was not management or control of the partnership's intangibles, the Department found no Florida tax consequence from the adviser's involvement.

What this means for you

• Investment advice was distinguished from authority to decide or execute transactions.
• The out-of-state office, decision-maker, permanent records, and implementation location supported the result.
• Giving a Florida adviser actual discretionary authority could materially change the situs analysis.

Common questions

Q: Did the Florida adviser create taxable situs? A: No.

Q: What authority did the adviser lack? A: Authority to make or implement investment decisions for the partnership or general partner.

Q: Where were decisions implemented? A: At the partnership's business location in Texas.

Citations and references

• Fla. Stat. § 199.052(1) — return requirement for Florida-situs intangible property
• Fla. Stat. § 199.175(1), (2) — domicile, management or control, and business situs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-070

Original ruling text

Jul 25, 1996

Re: Technical Assistance Advisement 96(C)2-070 Intangible Tax - Filing Requirement Sections 199.052 & 199.175, F.S. XXX (Individual #1) XXX (Individual #2) XXX (Individual #3)

Dear :

Your letter of April 11, 1996, requesting a Technical Assistance Advisement on the taxability of a non-Florida partnership, having its principal place of business in the state of its creation, has been received and examined by this office. The scenario presented for consideration is summarized below:

Individuals #1 and #2 are residents of the State of Georgia. Individual #3 is a resident of the State of Florida. Both Individuals #2 and #3 are daughters of Individual #1. The Trust is a marital trust of which Individual #1 is the sole beneficiary. Individuals #1 and #2 are co-trustees of the Trust. The marital Trust was created pursuant to the dispositive provisions of a revocable trust previously established by the spouse of Individual #1, who was a resident of the State of Florida.

The parties are contemplating the creation of a limited Partnership to be formed under the limited partnership laws of the State of Texas, and also, to maintain its office in the State of Texas. The Partnership would be an investment partnership engaging in the business of buying and selling marketable securities. The limited partners of the Partnership would be Individual #1 and the Trust. These limited partners would own ninety-seven percent (97%) limited partnership interest in the Partnership.

The parties are also contemplating the creation of a Subchapter S Corporation to be formed under the corporate laws

of the State of Texas. The Corporation would maintain its corporate office in the State of Texas. Individuals #2 and #3 would each own 50% of the outstanding stock of the Corporation. The Corporation would own a three-percent (3%) general partnership interest in the Partnership. As the sole general partner of the Partnership, the Corporation would have the sole responsibility for management of the Partnership. Individuals

2 and #3 would be directors and officers of the Corporation. Individual #2 would be the President of the Corporation. In her capacity as President, Individual #2 would make decisions regarding the purchase and sale of investments by the Partnership. The decisions made by Individual #2 would be implemented by the Partnership at its business location in the State of Texas.

In her capacity as President of the Corporation, Individual

2 would retain the services of an Investment Advisor. The latter would be located in the State of Florida and would have a business situs in the State of Florida. The Investment Advisor would retain a record of the assets belonging to the Partnership. These records would not be the permanent books and records of the Partnership or the Corporation, but would be used by the Investment Advisor in determining the investment advice to be given to the Corporation. The Investment Advisor would have no authority whatsoever to implement its investment advice or to otherwise make any investment decisions on behalf of the Corporation or the Partnership.

REQUESTED ADVISEMENT

Based upon the information above, you have requested technical advice on the following statement:

Under these facts, will the involvement of the Investment Advisor, in providing investment advice to the Corporation, which is the general partner of the Partnership, cause the intangible property owned by the Partnership to be subject to Florida's intangible tax?

DISCUSSION OF LAW

Section 199.052(1), F.S., states that every person who, on January 1 of each year, owns or has management or control of intangible property having a taxable situs in this state must file a return and pay the tax.

Section 199.175, F.S., states that intangible personal property shall have a taxable situs in this state when it is owned, managed, or controlled by any person domiciled in this state on January 1 of the tax year. This section goes on to state that a person domiciled in this state means a natural person who is a legal resident of this state or a corporation, partnership or trust that has established a commercial domicile in this state. A commercial domicile is established in this state when the entity maintains its principal office in the state where executive or management functions are performed or the course of business operations is determined.

Subsection 199.175 (2), F.S., states that intangible personal property shall have a taxable situs in this state when it is deemed to have a business situs in this state and it is owned, managed or controlled by a person transacting business in this state. The subsection provides that business is transacted in this state when it is regularly transacted from an office, plant, home or other business location in this state or by employees, representatives or agents of the business with customers in this state.

CONCLUSION

Section 199.175(1), F.S., states that if an individual residing in Florida has management or control of intangible property belonging to an entity domiciled outside of Florida, the intangible property over which the resident of Florida exercises management or control will be subject to intangible tax in this state. However, according to the facts presented, the Investment Advisor would only retain the record of assets belonging to the Partnership and use such records and books to determine the investment advice to be given to the Corporation. The Investment Advisor would neither have authority to implement its investment advice nor make investment decisions on behalf of the Corporation or the Partnership. Such a limited involvement

of the Investment Advisor would not cause the intangible property owned by the Partnership to be subject to Florida's 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 confidential information, we request you notify the undersigned in writing within 15 days of any deletions you wish made to the request or this response.

Sincerely,

Moses O. Daramola
Senior Tax Specialist
Tax Policy & Dispute Resolution
Office of General Counsel

MOD/md