• Other Trusts Not Subject to the FIT Other implications of repealing the trustee provisions are enormous. Please Note: Do NOT send the Intangibles Tax Return to the Kansas Department of Revenue. Code r. 12C-2.0061. To overcome the FIT issue, one could provide for discretionary income. Mr. Law is coeditor of this column with Michael D. Miller. 20.2041-1(b)(2). • Funding of Revocable Trusts The new statutory change makes funding revocable trusts before death or the funding of revocable trusts immediately upon death more important. 19 Fla. Stat. 173, §14. Nothing in Florida’s statutes or Administrative Code provides that the use of a FLITE trust is limited to individuals. This writer understands that there may be a TAA, which will clarify this issue. In calculating the intangible tax due, the just value of a lessee’s leasehold estate or possessory interest reported on the tax return is determined by the rent payments for the remaining term of the lease, at the Federal Reserve – Atlanta – discount rate on the last business day of the previous year, plus 1%. 203 (b) Amounts considered compensation include deferred compensation, value of board, rent, housing, lodging, and other benefits or services furnished to employees by the taxpayer in return for personal services provided that such amounts constitute income to the recipient under the Federal Internal Revenue Code. 199.292 Disposition of intangible personal property taxes.— All intangible personal property taxes collected pursuant to this chapter, except for revenues derived from the annual tax on a leasehold described in s. 199.023 (1) (d), Florida Statutes 2005, shall be deposited into the General Revenue Fund. Tax Department response to novel coronavirus (COVID-19) As New York State continues to respond to COVID-19, the Tax Department is listening to taxpayers and remains ready to assist them with a wide range of tax-related services. Chapter 199, Florida Statutes (F.S. 33/12 : Final 12A-1.005 Admissions: 1272366: Effective: 06/28/2005 a change of business location address from one Florida county to another. For returning users, enter your user profile credentials to log in and begin or complete the Florida Business Tax Registration application. The bigger issue to address is whether the use of a FLITE trust in combination with a family limited partnership would trigger any adverse federal income tax ramifications. If the taxpayer is married, the spouse could serve as trustee. Code r. 12C-2.006(4) (1998). Florida Department of Revenue Refund Sub-Process PO BOX 6470 Tallahassee, FL 32314-6470 Fax: 850-410-2526 For further information regarding the DR-26, the documentation required to process the refund, or to check on an application after it has been submitted, call us at 850-617-8585. However, in this case, since a limited liability company interest is analogous to an interest in a corporation (as opposed to an interest in a partnership), the senior taxpayer’s interest in the limited liability company should be transferred to that taxpayer s personal FLITE trust. See generally Fla. Stat. The Department of Revenue (DOR) provides critical services to millions of individuals, businesses and families throughout Florida, including general tax administration, child support services and property tax oversight. What is known is that some old adages are not always true. 9 See, e.g., Technical Assistance Advisement Nos. Florida Department of State Florida Department of State - Division of Corporations Business License. The intangible tax on leases of government-owned real property and the one-time intangible tax on notes secured by a mortgage on Florida real property are still in effect. Perhaps, in that case, the “right to income” provision would be satisfied. Not all states require intangible tax on loans, and those that do can vary in the amount. However, the trust by definition is irrevocable at the decedent spouse’s death. Care, however, should be taken with those trusts that may not be GST exempt, or those trusts that give the beneficiary a general power of appointment. Department of Economic Opportunity Reemployment Tax - formerly Unemployment Tax New Hire Reporting Center. §199.185 (1999); and Fla. Admin. Share: On March 26, 2020, the Florida Department of Revenue issued Emergency Orders delaying sales tax and property tax payments for some businesses. One should not let the proverbial tax tail wag the proverbial non-tax dog! Tax, Intangible Personal Property - Florida's intangible personal property tax is an annual tax based on the current market value, as of January 1, of intangible personal property owned, managed, or controlled by Florida residents or persons doing business in Florida. For trusts, unlike other entities, the determination of whether a trust had a taxable situs in Florida was based upon whether 1) the trustee had a Florida situs,4 or 2) the trust had a Florida resident who had a taxable beneficial interest.5, The New Law The new law, which became effective July 1, 2000,6 reduces the tax rate from 1.5 mill to 1 mill (i.e., a one-third reduction of the rate). Thus, a partnership could create and fund a FLITE trust to avoid any FIT that the partnership would otherwise be subject. This is not evident by simply reading the statute. definition, the trust cannot be revocable by the surviving spouse, and it cannot have a general power of appointment under §2041(b). Before the legislative change, the statute made reference to “foreign” trusts. If the senior family member is a Florida resident, it would be very difficult for the senior member to give up control for intangible tax purposes, yet retain control of the partnership otherwise. Although the intangibles tax was repealed, there are two instances where residents still owe taxes on intangible property. See also Technical Assistance Advisement 96(C)2-142; however, note that this TAA was issued before the new rules were promulgated. New users must create a user profile with a username and password to begin or complete the registration application. The fastest way to cancel a tax account is through the Florida Department of Revenue’s website. It is the author’s opinion that practitioner should draft a FLITE trust(s) that could be used year after year; it would be in the client’s best interest. Code r. 12C-2.006(4)(a)– (d) (1998). The rate is imposed on annual wages of up to $7,000 per employee. Up until 2007, Florida imposed an intangible tax, also referred to as a Florida stamp tax, on all sorts of investments. General. To be effective, if the trust is held for the surviving spouse, it cannot be revocable and it cannot give the surviving spouse ( i.e., typically the income beneficiary) a general power of appointment as such term is defined under §2041 of the Code. §§199.032 and 199.052 (1999); and 2000 Fla. Laws ch. See TIP Here The FICPA is aware of the challenges this poses to our members and their clients. Canceling Tax Accounts Using the Florida Department of Revenue’s Website. Florida's intangible personal property tax is an annual tax based on the current market value, as of January 1, of intangible personal property owned, managed, or controlled by Florida residents or persons doing business in Florida. 5050 W. Tennessee St. Tallahassee, FL 32399. q. File your Local Intangibles Tax Return with your County Clerk on or before April 15. Although the primary focus of this article is to address the use of the trusts (the FLITE13 trust) for tax avoidance purposes, a brief mention of the issues surrounding the use of a limited partnership is warranted. •Grantor as Trustee An issue arises whether a grantor of a FLITE trust could create a trust in which he or she is the trustee. Making the FLITE trust a grantor trust for income tax purposes should avoid any adverse federal income tax consequence. See generally Fla. Stat. The Florida constitution reserves all revenue from property taxes for local … In a FLITE trust, the trustee of a trust must transfer the property back to the grantor (or the grantor’s revocable trust) at the end of a specified period. One is in the value of intangible property … However, at the time that this article was sent for publication, the TAA has not yet been published. Law Tax As a result of recent changes to the Florida Intangibles Tax (FIT), the legislature has all but repealed the FIT. Intangible tax is calculated on the loan amount shown in the note. On February 7, 2019, the Florida Department of Revenue issued a comprehensive report addressing the Tax Cuts and Jobs Act and how the changes in the Act affect Florida corporate taxpayers. Accordingly, some believe that the period should be no shorter than a month. • The FLITE Trust Even before the recent statutory change, the FLITE trust was used to avoid the FIT. Even though there is some reference in the Administrative Code to the masculine gender, the rules were never designed to apply only to individuals. However, the DOR, in its recent promulgation of the rules applicable to the FIT, has indicated that when a grantor retains the right to revoke a trust, the grantor would be subject to the FIT.10 As indicated above, before the recent statutory change, from a purely statutory analysis, the trust’s assets could only be taxed through the trustee or the beneficiary, and not through the grantor. 21 These trusts are created to take advantage of using a decedent’s applicable credit amount under §2010 of the Internal Revenue Code. However, there is no authority for this position and, as with all opinions, there are exceptions. © 2021 The Florida Bar. Typically, the trust was drafted to meet the safe harbor requirements under the recently promulgated Administrative Code rules.14 Under the old law, the trusts were drafted in a manner to prohibit any Florida trustee from owning, managing, or controlling the trust, and to prohibit any beneficiary from having a beneficial interest in the trust. This obviously will not avoid the FIT; however, it will be properly structured for estate tax purposes. Florida Intangible Personal Property Tax (Individual and Joint) ... For More Information From the Florida Department of Revenue: For forms and general information, call Taxpayer Services, Monday-Friday, 8 a.m. to 5 p.m. 3 Most recently, in 1999, the tax was 2 mill, in 2000 it was 1.5 mill, and now, as a result of a statutory change, it is 1 mill. The Old Law In general, a taxpayer (which includes individuals, corporations, partnerships, limited liability companies, estates and trusts) was subject to the tax if the taxpayer had a taxable situs in Florida. Examples: 1. Clearly, this is not a problem when the grantor is not a beneficiary of the trust. 209), Laws 2006). 13 The FLITE Trust s name was simply derived from the Florida Intangible Tax Exempt Trust. Recall that in order to avoid the FIT, the partnership has to be an out-of-state limited partnership and no Florida resident could effectively manage or control the partnership. Small Business Administration - Florida State of Florida Agencies Intangible tax is calculated at the rate of 2 mills on each dollar of the just valuation of the note or other obligation for the payment of money which are … The purpose of the article is not to enumerate the lists of intangible personal property. From a practitioner’s standpoint, under the new statutory regime the old FLITE trust should be revised to permit a Florida resident to act as trustee. The control as trustee may be tantamount to giving the beneficiary/trustee the current right to income. Visit the Florida Department of Revenue website. Florida Intangible Personal Property Tax - A Summary Intangible Personal Property Tax -- Chapter 199, F.S. This, however, often conflicts with the desire of the senior family member, who is a Florida resident, and who does not want to relinquish control. Welcome to the Florida Revenue Law Library. The new law deleted this provision; thus, it is unnecessary to go into detail how the rules worked. ; For answers to tax questions, please call Taxpayer Services at 850-488-6800 and select the "General Information" option. It should be noted that Treasury Regulations §1.671-2(e), written in 1956, provides that the term grantor “includes” a corporation. On June 28, 2019, Florida Gov. As a result of recent changes to the Florida Intangibles Tax (FIT), the legislature has all but repealed the FIT. • Right to Revoke A question arises whether having the naked power to revoke a trust without a “current right to income” would create a beneficial interest in a Florida beneficiary. Moreover, some modest exemptions were provided (again depending upon the taxpayer s status). ‘To inculcate in its members the principles of duty and service to the public, to improve the administration of justice, and to advance the science of jurisprudence.’ The reason for this is that there were many TAAs that permitted a four-month trust. Is there a concern that a grantor may be deemed to have a beneficial interest by the fact that a creditor may be able to reach the corpus of an irrevocable trust created by the grantor for the grantor’s benefit (e.g., a FLITE trust)? 7127) which amended Florida’s tax laws affecting the corporate income tax. a change of ownership. The rate is effective for wages paid on or after January 1, 2021. Florida ' s intangible personal property tax was an annual tax on the market value of intangible property, such as stocks, bonds, and mutual fund shares, owned by Florida residents and businesses. You note that s. 195.084(1) provides that all records and files of the Department of Revenue useful to the property appraiser shall be made available upon his request; pursuant to s. 199.222, F.S., however, all annual intangible personal property tax returns filed with the department are confidential as provided in s. 213.053, F.S. There is no clear authority to allow this, but also there is none that does not allow this. Explore our new Financial Education Program. 11 The prohibited powers are enumerated at Fla. Admin. Under Tax Information, click on Reemployment (Unemployment Tax). There is really no concern about the trustee—or is there? This is supported by some of the language in a few Florida Department of Revenue technical assistance advisements (TAAs) and some of the language in the now partially obsolete safe harbor rules.9 For example, in a typical education trust for a grandchild, the trustee (not the grandchild) has the discretion to distribute income to the grandchild until a specified age (e.g., 18 or 21), and thereafter the income must be distributed. The report also provides estimates of the fiscal impact of certain provisions of the TCJA. Code r. 12C-2.006 et seq. Additionally, the FDOR provides a comprehensive a list on its website at http://sun6.dms.state.fl.us/dor/taxes/ippt.html . Individual having taxable assets valued at $300,000.00. The simple reason for this is that, upon death, the beneficiaries of the trust would have no “beneficial interest”; thus, trust assets would not be subject to the FIT. ch. Further, by definition, the trust could not give the surviving spouse a §2041 power, otherwise it would not qualify as a QTIP trust. Browse Categories. ~ From the Rules Regulating The Florida Bar, The American Influence on International Commercial Arbitration: Doctrinal Developments and Discovery Methods. PTR-1 Report of Intangible Tax Collections (46.57 KB) • Using Last Year’s FLITE Trust For those taxpayers who used FLITE trusts last year, a question arises whether they can use the same trust again this year.17 The short answer is “most probably.” There are two caveats. §§199.052(5) (1999) and 199.023(7) (1999). View COVID response. (b) Natural persons filing an individual or joint return are subject to the tax rate of $1.00 per thousand dollars (1 mill) of just value of intangible property in excess of $250,000.00 ($500,000.00 for a married couple filing a joint return). It was often referred to as “the wealth tax,” since affected taxpayers held stocks, bonds and other financial instruments. The Florida Business Tax Application form (DR-1) is available online or can be downloaded and printed. The legislation extends corporate income and bank franchise tax rate relief and refunds resulting when collections exceed forecasts. Florida Intangible Personal Property Tax - A Summary Intangible Personal Property Tax -- Chapter 199, F.S. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of … The skeleton is all that remains of the once dreaded and costly FIT. The purpose of this article is not to delve into that minutia. Florida's fee amount for this tax is $.20 per $100 or $2 per $1,000 of lended money. Thus, it may not be possible to replace the current out-of-state trustee with a Florida trustee. At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. The skeleton is all that remains of the once dreaded and costly FIT. An example of this is the Rabbi trust, which is typically created by corporations. For taxable years beginning within the 2018 and 2019 calendar years, all taxpayers that file a Florida corporate income/franchise tax return (including the short form) are required to provide additional information to the Department. 18 See Fla. Admin. Essentially, the legislature has reduced the rate by one-third, completely removed trusts from the FIT roles, and created a voluntary tax for most other taxpayers. The bad news is that for those who have been advising clients for over the past five years that “there should be no other changes,” along comes an unexpected change. Thus, it illustrates that the IRS contemplated that any entity, whether a corporation or partnership, may create grantor trusts. Is the right to receive the property at the end of a specified period not an intangible asset? There have been some informal rumblings that the tax would be repealed sometime in the next year or two. In general, many estate planners provide the surviving spouse with the income interest, and the remainder either is held in further trust for descendants or is distributed to the descendants outright. • Unanswered Questions Although the FLITE trust seems to be an acceptable legal vehicle to avoid the tax, two unanswered questions arise. Fla. Stat. ), imposes nonrecurring intangible tax on obligations to pay money to the extent the obligation is secured by a mortgage or lien on Florida real property. The rationale for this is that under §2041 and the Treasury Regulations promulgated thereunder, arguably a grantor cannot give himself or herself a general power of appointment.12 Thus, it seems that this second prong should not apply to cases to determine whether a grantor has a beneficial interest in a trust. Employer Links. Simply put, would one have an “income interest” coupled with a power to revoke or a §2041 power, if he or she is the grantor and trustee? Before the specified age, the grandchild would not have a current right to income and, therefore, the grandchild would not have a taxable beneficial interest, even though the grandchild may have a testamentary general power of appointment. You can find statutes, rules and other legal information about general tax, property tax and child support in our newly redesigned Library. If the beneficiary and the grantor are different, one merely reviews the trust provisions to determine if the beneficiary has a current right to income coupled with the §2041 power. Florida has enacted legislation providing a deduction for global intangible low-taxed income (GILTI), retroactive to January 1, 2018. What remains is that the trust assets are subject to the FIT if a Florida resident had a taxable beneficial interest in the trust.7 • The Beneficial Interest Test A Florida resident has a beneficial interest in a trust if such person has a current right to income, and, either 1) a power to revoke the trust, or 2) a general power of appointment, as defined in IRC §2041(b)(1).8 As discussed in more detail below, although not enumerated in the statutes or administrative rules, I believe that the right to revoke test applies to situations in which grantors are also beneficiaries, and that the §2041 requirement applies to situations in which the grantor is not the beneficiary. 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