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