Did a Nevada investment subsidiary's intangible assets have Florida situs, and could intercompany accounts be excluded on a consolidated return?

Plain-English summary

The Florida Department of Revenue concluded that a planned Nevada investment subsidiary would not be subject to Florida intangible tax if all of its activities were conducted outside Florida and all decisions by its officers, employees, and directors were made outside the state.

The Florida parent and existing subsidiary planned to transfer investments to the Nevada corporation. That corporation would have Nevada office space, at least one Nevada-resident director, Nevada board meetings, and a Nevada-resident vice president/secretary accountable to the board, although its president would reside in Florida.

For the consolidated return, the parent's investment in subsidiaries remained an asset subject to Florida intangible tax. But qualifying intercompany accounts could be excluded if the parent and subsidiaries timely filed a Florida consolidated intangible-tax return. Filing the consolidated return did not by itself give Florida business situs to a corporation's intangible property.

What this means for you

Multistate corporate groups

Organizing an entity outside Florida was not the only condition. The ruling required its activities and decision-making to occur outside Florida as well.

Finance and tax teams

Distinguish an investment in a subsidiary from intercompany accounts. The ruling treated the investment as taxable while permitting elimination of intercompany accounts on a timely consolidated return.

Corporate officers and directors

The location of actual decisions mattered even though the planned subsidiary's president was a Florida resident.

Common questions

Q: Was Nevada incorporation alone enough to avoid Florida intangible tax?
A: No. The ruling conditioned the result on all corporate activities and decisions occurring outside Florida.

Q: Did a Florida-resident president automatically create Florida situs?
A: The ruling did not say so. Its conclusion instead required that all officer, employee, and board decisions be made outside Florida.

Q: Was the parent's investment in subsidiaries excluded from tax?
A: No. The Department called that investment an asset subject to Florida intangible tax.

Q: What could be eliminated on a consolidated return?
A: Qualifying intercompany accounts, if the consolidated return was timely filed.

Citations and references

• Fla. Stat. § 199.175(1) — Florida taxable situs and domicile
• Fla. Stat. § 199.052(10) — consolidated intangible-tax returns and elimination of qualifying intercompany accounts
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-151

Original ruling text

Dec 26, 1996

Re: Technical Assistance Advisement No. 96(C)2-151
Intangible Tax - Taxable Situs
XXX (Corporation A)
XXX (Corporation B)
XXX (Corporation C)

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 corporation not
legally domiciled in Florida.

FACTS PERTAINING TO ALL ISSUES

The facts that you have provided to the department are as
follows:

Corporation A is the owner of Corporation B. Both Corporation A
and Corporation B are legally and commercially domiciled in
Florida. Corporation A and Corporation B join in the filing of
a Florida consolidated intangible tax return.

Corporation B has an investment portfolio which includes the
stock of two publicly traded companies. Corporation B plans to
form Corporation C, to hold certain of its investments, which
company will be legally domiciled in Nevada. Corporation C will
obtain office space in Nevada for use by its employees and board
of directors.

The board of directors of Corporation C will have not less than
three members, and at least one will be a Nevada resident.
Board meetings will be held in Nevada. The president of
Corporation C will be a Florida resident. The vice
president/secretary of Corporation C will be a Nevada resident.
The vice president/ secretary of Corporation C will be fully
accountable to the board of directors and subject to termination

by it.

ISSUES

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

1. Will the intangible assets of Corporation C be subject to
   Florida intangible tax?
2. If Corporation C is included in Corporation A's
   consolidated intangible tax return, will Corporation A's
   "investment in subsidiaries" be excluded from the taxable
   base on its consolidated intangible tax return?

LAW AND DISCUSSION

For purposes of the annual tax imposed under chapter 199, F.S.,
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. As
provided in s. 199.175(1), F.S., "Any person domiciled in this
state" means: (a) any natural person who is a legal resident of
this state; (b) any bank or financial institution, company,
corporation, partnership, or other artificial entity organized
or created under the laws of this state, except a trust; or (c)
any person, including a trust, who has established a commercial
domicile in this state.

Subsection 199.052(10), F.S., provides for the filing of a
consolidated intangible tax return, and the elimination of
intercompany accounts of qualifying members of the consolidated
group. The filing of a consolidated return will not in itself
provide a business situs for intangible personal property held
by a corporation.

CONCLUSION

1. If all the activities of Corporation C are conducted, and
   if all decisions of its officers, employees, and board of
   directors are made outside the State of Florida, then
   Corporation C is not subject to the Florida intangible tax.

2. The investment in subsidiaries represents assets subject to
the Florida intangible tax. However, all intercompany
accounts can be excluded from taxation if Corporation A and
its subsidiaries timely file a Florida consolidated tax
return.

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,

Mary Ella Ingram
Tax Specialist
Tax Policy and Dispute Resolution