Were securities owned by a Nevada partnership taxable in Florida when all three general partners were Florida residents but decisions and implementation occurred elsewhere?

Plain-English summary

Florida found no intangible tax on the Nevada partnership's securities and no tax on the Florida residents' general-partnership interests.

Three Florida residents formed the Nevada general partnership and contributed publicly traded securities. The partnership's principal place of business, permanent records, and bank accounts were outside Florida. Quarterly partner meetings and investment decisions occurred in the Bahamas, while New York and North Carolina firms implemented trades.

The Department concluded that the partnership's securities were not owned, managed, or controlled by a Florida-domiciled person or by anyone transacting Florida business on January 1. The Florida residence of all three general partners did not override the partnership's separate out-of-state ownership and management facts.

The partners' interests were separately exempt because section 199.185(1)(c) exempted partnership interests other than an interest as a limited partner in an SEC-registered limited partnership.

What this means for you

• The location of partnership meetings, decisions, permanent records, accounts, and trade implementation supported the no-situs result.
• The partnership's assets and the residents' ownership interests required separate tax analyses.
• The exemption applied to these general-partnership interests regardless of the partners' Florida residence.

Common questions

Q: Were the partnership's securities taxable in Florida? A: No.

Q: Did the Florida residence of the general partners create situs? A: Not on the stated facts, because the partnership owned and managed the assets outside Florida.

Q: Were the partners' interests taxable? A: No. The Department applied the statutory partnership-interest exemption.

Citations and references

• Fla. Stat. § 199.052 — taxable-situs return requirement
• Fla. Stat. § 199.175 — domicile and business situs of intangible property
• 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 96C2-071

Original ruling text

Jul 23, 1996

Re: Technical Assistance Advisement No. 96(C)2-071 Intangible Tax - Taxable Situs Sections 199.052 and 199.175, F.S. XXX (Taxpayer A) XXX (Taxpayer B) XXX (Taxpayer C) XXX (Taxpayer D)

Dear :

Your letter requesting a Technical Assistance Advisement dated June 27, 1996, has been received by this office. The request deals with the taxation of intangible property transferred to a non-Florida partnership.

STATEMENT OF FACTS

Taxpayer A, Taxpayer B, and Taxpayer C are each residents of the state of Florida. In December of 1995, Taxpayers A, B, and C formed Taxpayer D and are the sole general partners of Taxpayer D. Taxpayer D is a general partnership formed pursuant to, and governed in accordance with, the laws of the state of Nevada. The Nevada partnership was formed for the purpose of investing in marketable securities and other similar investment assets. The partnership agreement forming Taxpayer D was executed by Taxpayers A, B, and C in the state of Nevada. Upon formation of Taxpayer D, Taxpayers A, B, and C each contributed, as capital contributions to Taxpayer D, certain publicly traded securities owned by Taxpayers A, B, and C. All documents pertaining to the transfer of these securities from Taxpayers A, B, and C were executed and delivered in the state of Nevada. The books, records, bank accounts and principal place of business of the partnership are currently maintained in the Bahamas and will, at all times, be maintained in the Bahamas or in a state or foreign jurisdiction other than the state of Florida.

Taxpayer D currently maintains its assets in two separate

accounts. One account is in a New York custodial brokerage account maintained by XXX ("Firm 1") in New York and the other is a North Carolina trust account maintained by XXX ("Firm 2")in North Carolina. All decisions of Taxpayer D pertaining to the purchase or sale of investment securities will be implemented by employees of Firm 1 in New York or Firm 2 in North Carolina and not by any employees, agents, or independent contractors of Taxpayer D in Florida.

Taxpayer D will conduct regular quarterly meetings of the Partners in the Bahamas. Also in attendance at these meetings will be a representative of Firm 1 and a representative of Firm

2. At these meetings the Partners, together with its investment
   advisors, will discuss the investments of the Partnership and analyze the performance of those investments for the preceding quarter. At these meetings, all decisions regarding the purchase and sale of marketable securities for the next quarter will be made and these decisions would thereafter be implemented by Firm 1 in New York and Firm 2 in North Carolina. In other words, Taxpayer D will not establish a commercial domicile in Florida since all decisions and actions pertaining to the business activities of Taxpayer D will be transacted from outside the territorial confines of the state of Florida.

Neither Taxpayer D, nor any partnership interests in Taxpayer D, will be registered with the Securities and Exchange Commission (the "SEC"), and Taxpayer D will not be subject to any regulation by the SEC.

ADVISEMENTS REQUESTED / CONCLUSIONS OF LAW

Based upon the scenario above, you have requested technical assistance on the following issues:

Question 1:

Will the securities owned by Taxpayer D be subject to the annual Florida intangible personal property tax imposed pursuant to chapter 199, Florida Statutes?

Response:

This issue is governed by the "taxable situs" provisions of ss. 199.052 and 199.175, F.S., which provides that the tax shall be paid on any intangible personal property that falls within the following two categories:

i) Any and all non-exempt intangible property that is owned, managed, or controlled by any person domiciled in this state as of January 1 of the tax year.

ii) Any and all non-exempt intangible property that is derived from, arises out of, or is issued in connection with business transacted in this state and which is owned, managed, or controlled by any person, regardless of domicile, that transacts business in this state.

For purposes of this provision of law "business transacted in this state" is defined under s. 199.175(2)(a), F.S., to be the regular conduct of business with customers in this state from a business location or through agents, employees, or representatives of any kind within this state.

Therefore, it is the Department's determination based on the facts before us, that the securities which are contributed to Taxpayer D and owned by Taxpayer D on January 1, 1996, would not be subject to the 1996 Florida intangible tax since they were not owned, managed, or controlled by a person domiciled in this state, or by any person transacting business in this state on that date.

Question 2:

Will the general partnership interests of Taxpayers A, B, or C in Taxpayer D be subject to the annual Florida intangible personal property tax imposed pursuant to Chapter 199, Florida Statutes?

Response:

This issue is governed by the provisions of s. 199.185(1)(c),

F.S., which provides all interests in a partnership except the interest of a limited partner in a limited partnership which is registered with the Securities and Exchange Commission are exempt from taxation. Thus, Taxpayers A, B, and C's interest in Taxpayer D will not be subject to the Florida intangible personal property tax since this interest is specifically exempt under the statute cited above.

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