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