FLORIDA’S INTANGIBLE TAX

Every person who is a legal resident of Florida, or any person, regardless of domicile who has "management or control" of intangible personal property that has acquired a "taxable situs" in Florida, shall file a return with the Department of Revenue. An annual tax of 1.0 mill is imposed on each dollar of the just valuation of all intangible personal property which has a taxable situs in this state, with certain exceptions. Therefore, $10,000,000 of intangible personal property will trigger a $10,000 tax.

Intangible personal property will 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.

The two most common vehicles used to avoid the intangible tax are an out-of-state limited partnership or a trust.

If an item of intangible personal property, which would otherwise be subject to the annual tax, is transferred to a corporation or partnership organized under the laws of another state and domiciled in another state, the item does not have taxable situs in Florida if the laws of each applicable jurisdiction, including those governing formation an operation, have been complied with and the transfer is complete before January 1 of the tax year.

Neither the transferor, nor any person domiciled in Florida, can own the item or may exercise management or control of the item in Florida. All management and control of the item must occur outside of Florida, including communications and correspondence concerning the item.

If: (1) intangible assets are transferred to an out-of-state partnership (meaning that there is a conveyance of legal title and all ownership of, including all rights to control and manage the assets in Florida); (2) the transferor or any person domiciled in Florida can not exercise management or control of the assets; and (3) management and control does in fact occurs outside of Florida, the intangible assets will not have an intangible taxable situs in Florida.

Intangible personal property that is owned, managed, or controlled by a trustee of a trust is exempt from the intangible tax. This exemption does not exempt from annual tax a resident of this state who has a taxable "beneficial interest".

A resident has a "beneficial interest" in a trust if the resident has a vested interest, even if subject to divestment, which includes at least a current right to income and either a power to revoke the trust or a general power of appointment.

Each Florida resident with a beneficial interest in a trust is responsible for returning the resident’s equitable share of the trust’s intangible personal property and paying the annual tax on it.

The residence of the trustee is no longer the determining factor in considering whether the trust is subject to Florida’s intangible tax. Under the new statute, whether a Florida resident has a "beneficial interest" is the key issue for testing the applicability of the intangible tax.

It is unclear what will happen with the intangible tax. The tax has been decreased from 2 mills to 1 mill. However, as a result of the recent estate tax legislation, which will adversely affect the State of Florida’s revenue, the State of Florida will probably keep the intangible tax in tact and possibly increase it.

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