Were securities held by an out-of-state investment partnership, or its Florida residents' general-partnership interests, subject to Florida intangible tax?

Plain-English summary

Florida concluded that neither the investment securities nor the two Florida residents' general-partnership interests were subject to the annual intangible tax.

The residents had formed an out-of-state partnership to invest in marketable securities and similar assets. All partnership operations and quarterly meetings occurred outside Florida, and outside brokerage firms and banks managed the investment accounts. The Department therefore found that the securities lacked Florida taxable situs.

The partners' ownership interests were separately exempt. Section 199.185(1)(c) exempted a general or limited partnership interest, except for an interest as a limited partner in a limited partnership registered with the Securities and Exchange Commission. The entity here was not SEC-registered, and the taxpayers held general-partnership interests.

What this means for you

Florida residents investing through partnerships

The ruling analyzed the partnership's assets separately from the partners' ownership interests. The securities result depended on the partnership's operations and management remaining outside Florida; the ownership-interest result depended on the statutory partnership exemption.

Partnership managers and investment advisers

Document where meetings, banking, brokerage management, and other operations occur. Those facts supported the Department's finding that the securities had no Florida taxable situs.

Accountants and tax professionals

Identify the exact ownership interest and registration status. The statutory exception described in the ruling concerned a limited-partner interest in an SEC-registered limited partnership, which was not the arrangement presented.

Common questions

Q: Were the partnership's marketable securities subject to Florida intangible tax? A: No. The Department found that the securities lacked Florida taxable situs.

Q: Did the partners' Florida residence make the securities taxable? A: Not on these facts. The partnership's operations, meetings, brokerage management, and banking were all outside Florida.

Q: Were the Florida residents' general-partnership interests taxable? A: No. The Department applied the partnership-interest exemption in section 199.185(1)(c).

Q: Was the partnership registered with the SEC? A: No. The facts expressly said it would not be registered with the SEC.

Q: Can another partnership rely on this TAA? A: Not automatically. The advisement states that it binds the Department only under the facts and circumstances described in the request, and later legal changes or judicial interpretations may produce a different result.

Citations and references

• Fla. Stat. § 199.032 — annual tax on intangible property owned, managed, or controlled by a person domiciled or having taxable situs in Florida
• Fla. Stat. § 199.175 — Florida taxable situs
• Fla. Stat. § 199.185(1)(c) — partnership-interest exemption and the stated SEC-registered limited-partnership exception
• Fla. Stat. § 213.22 — Technical Assistance Advisements
• Fla. Stat. ch. 119 — public records

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-129

Original ruling text

Dec 09, 1996

Re: Technical Assistance Advisement No. 96(C)2-129 Intangible Tax - Partnership Interest - Investment Securities Sections 199.185, 199.175 & 199.052, F.S. XXX (Taxpayer "A") XXX (Taxpayer "B") XXX (Taxpayer "C")

Dear :

This is in response to your letter dated October 7, 1996, requesting a Technical Assistance Advisement on the referenced issue.

Statement of the Facts

Taxpayer A and Taxpayer B each reside in the State of Florida. Taxpayer A and B formed an out of state partnership, Taxpayer C. The partnership was formed for the purpose of investing in marketable securities and other similar investment assets. All business operations of the partnership occur outside the State, including quarterly business meetings. The investment accounts are managed by a brokerage firm and banks, which operate outside Florida. The partnership will not be registered with the Securities and Exchange Commission (SEC).

Request for Advisement

Will the securities owned by Taxpayer C be subject to annual Florida Intangible Tax? If so, who is required to file the return and remit the tax?

Will the general partnership interest of Taxpayers A and B in Taxpayer C be subject to the annual Florida Intangible Tax?

Provision of the Law

Section 199.032, F.S., imposes an annual tax of 2 mills on all intangible property that is owned, managed or controlled by a person domiciled or having a taxable situs in Florida.

Section 199.175, F.S., provides that intangible personal property shall have taxable situs in this state when it is owned, managed, or controlled by any person domiciled in this State.

Regarding the taxability of any interest in a Partnership, s. 199.185 (1)(c), F.S., provides that a partner's interest in a partnership, whether general or limited, is exempt, with the exception of any interest as a limited partner in a limited partnership registered with the SEC, pursuant to the Securities Act of 1933.

Conclusion

Since the securities will not have a taxable situs in this State, no annual Florida intangible tax will be due. Additionally, the general partnership interest will not be subject to 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 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,

Celestine Grantham
Senior Tax Specialist
Tax Policy and Dispute Resolution
Office of General Counsel

CG/mh