Did a portfolio transferred by Florida residents to an out-of-state limited partnership have Florida intangible-tax situs in 1997?

Plain-English summary

The Florida Department of Revenue concluded that neither the Florida-resident couple, the out-of-state limited partnership, nor its out-of-state corporate general partner owed 1997 Florida intangible tax on the transferred investment portfolio. It also found their partnership interests exempt from the tax.

The couple planned to contribute the portfolio to the partnership by December 31, 1996. As of January 1, 1997, they would no longer own, manage, or control it. The partnership and corporate general partner were formed and commercially domiciled outside Florida, conducted no Florida business, and had no Florida employees, agents, assets, books, records, or bank accounts. Management decisions and daily implementation occurred outside Florida.

Those facts meant the portfolio lacked Florida taxable business situs. Separately, the ruling applied section 199.185(1)(c)'s exemption to the taxpayers' and corporation's partnership interests because the partnership was not registered with the Securities and Exchange Commission.

What this means for you

Florida residents contributing investments to a partnership

For the 1997 tax year addressed, completing the contribution before January 1 meant the residents no longer owned the portfolio on the tax measurement date. But the ruling warned that the result would change if they retained authority, as officers of the corporate general partner, to manage or control partnership activities on that date.

Out-of-state partnerships and corporations

The no-tax result depended on genuine non-Florida domicile and operations: no Florida business, people, assets, records, accounts, or management. A Florida business situs under the cited statute could change the outcome even for an entity claiming domicile elsewhere.

Accountants and estate planners

Keep the portfolio and partnership-interest analyses separate. The portfolio lacked Florida situs under sections 199.032 and 199.175, while the partnership interests received a specific statutory exemption under section 199.185(1)(c).

Common questions

Q: Did the Florida residents owe 1997 intangible tax on the portfolio? A: No, because they would not own, manage, or control it on January 1, 1997 after contributing it to the partnership.

Q: Did the partnership or corporate general partner owe tax on the portfolio? A: No. Neither entity was domiciled in Florida, and the portfolio lacked Florida taxable business situs.

Q: What retained power could have changed the residents' result? A: The Department said its answer would change if the residents, as officers of the corporate general partner, had authority to manage or control partnership activities on January 1, 1997.

Q: Were the partnership interests taxable? A: No. The ruling applied section 199.185(1)(c)'s exemption because the partnership was not registered with the SEC.

Q: Can another investor 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 court interpretations may produce a different result.

Citations and references

• Fla. Stat. § 199.032 (tax on intangible personal property with Florida situs)
• Fla. Stat. § 199.052 (return requirement)
• Fla. Stat. § 199.175(1), (2) (domicile and business situs)
• Fla. Stat. § 199.185(1)(c) (exemption for specified partnership interests)
• Fla. Stat. § 213.22 (technical assistance advisements)
• Fla. Stat. ch. 119 (public records)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-142

Original ruling text

Dec 18, 1996

Re: Technical Assistance Advisement No. 96(C)2-142 Intangible Tax - Taxable Situs Sections 199.052 and 199.175, F.S. XXX (Taxpayers) YYY (Corporation) ZZZ (Partnership)

Dear :

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

STATEMENT OF FACTS

The Taxpayers, husband and wife, are residents of the State of Florida and own various investments (hereinafter referred to as the "Portfolio").

The children of the Taxpayers are equal shareholders and own 100% of XXX Corporation. XXX Corporation (hereinafter referred to as "the Corporation"), is formed under the laws of the state of XXX and is commercially domiciled in that state. The Corporation has elected to qualify as a Subchapter S corporation. The Corporation transacts no business in the State of Florida and has no employees, agents, representatives or assets of any kind located in Florida. The books, records and bank accounts of the Corporation will be maintained outside Florida.

The shareholders of the Corporation are residents of a state other than Florida. One of the children of the Taxpayers will serve as Chairman of the Board and President of the Corporation. The Taxpayers will serve as Secretary and Treasurer of the Corporation. The Corporation will hold regular meetings at its office in XXX. All decisions regarding the activities of the

Corporation will be made outside of Florida. In addition, the day to day implementation of management's decisions will be carried out by an employee of the Corporation outside of Florida.

The Taxpayers and the Corporation have formed the XXX Partnership (hereinafter referred to as "the Partnership"), a XXX limited partnership with the Taxpayers being limited partners and the Corporation being the general partner. The Taxpayers have contributed cash and/or securities to the Partnership in exchange for their limited partnership interest and the Corporation has contributed cash and/or securities in exchange for its general partnership interest. The Partnership is not registered with the Securities and Exchange Commission pursuant to the Securities Act of 1933.

The Partnership also transacts no business in the State of Florida and has no employees, agents, representatives or assets of any kind located in Florida. The books, records and bank accounts of the Partnership will be maintained outside of Florida. The Partnership will hold regular annual meetings at its office in XXX and these meetings will be attended by an officer of the Corporation. All decisions regarding the activities of the Partnership will be made and all executive management functions relative to these activities will be made outside of Florida by the non-Florida Chairman of the Board / President of the Corporation. The day to day activities of the Partnership will likewise be implemented by an employee of the Partnership outside of Florida.

On or before December 31, 1996, the Taxpayers will contribute the Portfolio to the Partnership as an additional capital contribution. The Portfolio will be valued at its fair market value at the time of the contribution.

PROVISIONS OF LAW

Section 199.032, F.S., imposes tax on all intangible personal property which has a taxable situs in this state. Section 199.052, F.S., requires that all persons owning intangible property having a taxable situs in this state on January 1 of

the tax year file an intangible tax return. Section 199.175(1), F.S., states that intangible property shall have a taxable situs in this state when it is owned, controlled, or managed by a person who is legally or commercially domiciled in this state. Furthermore, Section 199.175(2), F.S., provides that intangible property that arises out of, or is issued in connection with, business transacted in this state, with customers in this state, through employees, agents or representatives of any kind, by persons claiming a domicile elsewhere also has a taxable situs in this state. Finally, paragraph 199.185(1)(c), F.S., provides that the interest of a partner in any partnership is exempt from the intangible tax when the partnership is not registered with the Securities and Exchange Commission

REQUESTED ADVISEMENTS / CONCLUSIONS OF LAW

Based on the facts as stated above, rulings have been requested on the following issues:

Question 1:

Are the Taxpayers subject to the 1997 Florida intangible personal properly tax on the Portfolio?

Response:

No. Since the Taxpayers will not own, manage, or control the Portfolio as of January 1, 1997, they will not be subject to the 1997 tax on this property. However, our answer to this question would change, if the Taxpayers, as officers of the corporate general partner of the Partnership, are in any way vested with the authority to manage or control the activities of the Partnership on January 1, 1997.

Question 2:

Is the Partnership subject to the 1997 Florida intangible personal property tax on the Portfolio?

Response:

No. Since the Partnership will not be domiciled in the State of Florida on January 1, 1997, and since the Portfolio lacks a taxable business situs in Florida, the Partnership will therefore not be subject to the 1997 tax on this property.

Question 3:

Is the Corporation subject to the 1997 Florida intangible personal property tax on the Portfolio?

Response:

No. Since the Corporation will not be domiciled in the State of Florida on January 1, 1997, and since the Portfolio lacks a taxable business situs in Florida, the Corporation will therefore not be subject to the 1997 tax on this property.

Question 4:

Are the Taxpayers or the Corporation subject to the 1997 Florida intangible personal property tax on their partnership interests.

Response:

No. Partnership interests of the type that are at issue here are specifically exempted from the tax under paragraph 199.185(1)(c), F.S.

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
Office of General Counsel

GDT/