One is in the value of intangible property … Welcome to the Florida Revenue Law Library. 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. Further, if they utilize such a trust, they must remember to transfer their interests in the corporate general partner to the FLITE trust. We have defended Florida businesses against the Florida Department of Revenue since 1991 and have over 100 years of cumulative sales tax experience within our firm. 1 Fla. Stat. Florida Department Of Revenue, Florida Tax Florida Business Corporate Tax, Florida Personal Income Tax, Florida Sales Tax Rates Taxes Florida businesses pay each year: Florida corporations (C corps) Florida corporate net income tax rate = 5.5% Federal corporate tax rate = 15% to 35%. r. 12C-2.004(1) (1998). After the rules were issued, many practitioners reduced the time periods to three months and lesser periods. 173, §7. A revised handbook will be distributed at this seminar that will provide guidance on Florida Documentary Stamp Tax (Florida Statutes, Chapter 201) and Florida Intangibles Tax (Florida Statutes, Chapter 199) issues in a variety of situations involving the extensions of credit by lenders located in Florida. The intangibles tax is a local tax levied on gross earnings received from intangible property such as savings accounts, stocks, bonds, accounts receivable, and mortgages. The “intangible tax” is a nonrecurring tax on intangible personal property levied on obligations for payment of money which are secured by a mortgage or other liens upon real property located in the state of Florida. Florida Intangible Personal Property Tax - A Summary Intangible Personal Property Tax -- Chapter 199, F.S. The tax is due … • FLITE Trust Duration A point not specifically discussed in the DOR’s rules or the statutes is the length of time that the assets transferred into the FLITE trust must remain. Use a Florida Business Tax Application (Submit online or download form DR-1) for: a change in legal entity. Canceling Tax Accounts Using the Florida Department of Revenue’s Website. However, at the time that this article was sent for publication, the TAA has not yet been published. Every corporation or person who is a legal resident of Florida or who manages or controls intangible personal property having a taxable situs in this state, must file an Intangible Personal Property Tax Return (form DR-601I and DR-601C), available from local Department of Revenue … If the taxpayer is single, the taxpayer’s local corporate fiduciary, other Florida family members, or some other trusted person may serve as trustee. The terms of the trust must give the spouse all of the income (i.e., mandatory income); thus, the surviving spouse has a current right to income. Ron DeSantis signed legislation adopting the version of the Internal Revenue Code (IRC) in effect as of Jan. 1, 2019, and addressing Florida’s treatment of Global Intangible Low-Taxed Income (GILTI). The fastest way to cancel a tax account is through the Florida Department of Revenue’s website. The Good, The Bad, and The Unknown The good news is that the rate has been reduced to one mill and is anticipated to be reduced even lower (i.e., for those taxpayers who do not wish to voluntarily avoid the tax). Lester B. • 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. It was often referred to as “the wealth tax,” since affected taxpayers held stocks, bonds and other financial instruments. 4 In the event that there was more than one trustee, then the determination of whether the trust was sitused in Florida depended upon who had management and control of the assets. 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. Today, the Department of Revenue Executive Director Jim Zingale issued two emergency orders related to sales & use tax and property taxes. Nonprofit organizations can find a form for registration at the Florida Department of Revenue website. This assumes that the client wishes to go through the cost and work associated with terminating the old FLITE trust and creating a new FLITE trust. 33/12 : Final 12A-1.005 Admissions: 1272366: Effective: 06/28/2005 The legislation extends corporate income and bank franchise tax rate relief and refunds resulting when collections exceed forecasts. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of … Florida Intangible Personal Property Tax - A Summary Intangible Personal Property Tax -- Chapter 199, F.S. 74, No. A Florida corporation would be the general partner, and the senior family members (or their revocable trusts) would be the initial limited partners. Fla. Laws ch. r. 12C-2.002 (1998), which provides comprehensive lists. However, when the DOR promulgated new rules governing trusts that are designed to avoid the FIT,15 it added the regulatory provision that taxes grantors.16 Under the DOR’s rule, it appears that a grantor could not be a trustee of a FLITE trust, without subjecting the trust’s assets to taxation. 10 November 2000 Pg 34 Lester B. File your Local Intangibles Tax Return with your County Clerk on or before April 15. 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. 18 See Fla. Admin. ET, at 1-800-352-3671 (in Florida only) or 904-488-6800. • QTIP and Other Trusts The typical QTIP trust is drafted to provide all income to the surviving spouse and remainder to the decedent spouse’s descendants (usually on a per stirpes basis). (3) No later than 7 working days after the end of each week, each clerk shall transmit to the department all nonrecurring intangible taxes collected during the preceding week, together with a report certifying the amount of tax collected with respect to all instruments upon which the tax was paid. You can find statutes, rules and other legal information about general tax, property tax and child support in our newly redesigned Library. 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 skeleton is all that remains of the once dreaded and costly FIT. • The FLITE Trust Even before the recent statutory change, the FLITE trust was used to avoid the FIT. 15 Fla. Admin. The structure of the partnership would be no different than an out-of-state limited partnership. Florida Revenue Law Library. Thus, a partnership could create and fund a FLITE trust to avoid any FIT that the partnership would otherwise be subject. Read employee reviews and ratings on Glassdoor to decide if Florida Department of Revenue is right for you. 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. Florida's fee amount for this tax is $.20 per $100 or $2 per $1,000 of lended money. All rights reserved. See generally Fla. Stat. General. Code r. 12C-2.006(3). Intangible tax is calculated on the loan amount shown in the note. If either is missing, then there is no “beneficial interest.”. §199.175 (1999); Fla. Stat. 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. Code Ann. An example of this is the Rabbi trust, which is typically created by corporations. •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. Yes, all die, but may not have to pay taxes, at least not the Florida intangible tax. 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. 199.023(7)(1999); see supra note 6 and accompanying text. The rate is effective for wages paid on or after January 1, 2021. Welcome to the Florida Revenue Law Library. As a result of recent changes to the Florida Intangibles Tax (FIT), the legislature has all but repealed the FIT. The reason for reducing the rate, as opposed to repealing the tax, is that it allows the tax regime to stay in place, in the event that there is a revival of the tax. As discussed above, there is no clear statutory provision that taxes a grantor of a trust. Mr. Law received his J.D. It has no special meaning. Depending upon the year, the rate was graduated depending upon whether the taxpayer was an individual or an entity, and whether the individual was married or single. Of course, this required that the taxpayer owned, managed, or controlled taxable intangible assets1 on January 12 of any particular year. Thus, it illustrates that the IRS contemplated that any entity, whether a corporation or partnership, may create grantor trusts. 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. Examples of this would include the qualified terminable interest property (QTIP) trust,20 the typical applicable credit trust (also sometimes still referred to as the credit sheltered trust, the $600,000 trust, or the family trust),21 GST-exempt dynasty type trusts, and charitable remainder trusts. See TIP Here The FICPA is aware of the challenges this poses to our members and their clients. Florida has enacted legislation providing a deduction for global intangible low-taxed income (GILTI), retroactive to January 1, 2018. • Other Trusts Not Subject to the FIT Other implications of repealing the trustee provisions are enormous. There is really no concern about the trustee—or is there? Explore our new Financial Education Program. Account Management. Who knows what the legislature will do? Not all intangible taxes have been repealed. The minimum reemployment tax rate for 2021 will be .0029 (.29%), or $20.30 per employee per year. §§199.032 and 199.052 (1999); and 2000 Fla. Laws ch. However, with the repeal of the trustee provisions, one could argue that this would effectively make obsolete the part of the rule in which a grantor could not act as trustee. Further, by definition, the trust could not give the surviving spouse a §2041 power, otherwise it would not qualify as a QTIP trust. The purpose of this article is not to delve into that minutia. Unless the personal representative can quickly transfer assets from the probate estate to the trust estate, the assets would be probably be subject to the FIT, because a will typically does not provide that the personal representative could create a FLITE trust. (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). Code r. 12C-2.006 et seq. ; A tax is also levied on notes, bonds, mortgages, liens, and other written obligations to pay that are filed or recorded in Florida. In the main menu bar click on the General Taxes tab. Most individuals pay this tax each year on a routine basis in the same way they pay their annual federal income tax obligation. §199.023(7) (1999). 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)? 5050 W. Tennessee St. Tallahassee, FL 32399. The same would hold true for the applicable credit trust and the GST-exempt dynasty type trusts. The only way to do this properly is by having non-Florida persons control the partnership. Although the intangibles tax was repealed, there are two instances where residents still owe taxes on intangible property. The Florida constitution reserves all revenue from property taxes for local … Other planners and banking institutions call the trusts different names. This writer understands that there may be a TAA, which will clarify this issue. The Florida Intangible Tax–The Real Voluntary Tax Vol. It should also be noted that the senior generation members should use a FLITE trust for their other taxable assets. See Fla. Stat. Small Business Administration - Florida State of Florida Agencies The State of Florida imposes an annual tax of 2 mills ( i.e., two-tenths of a percent) on the value of all intangible personal property which has a taxable situs in Florida. To avoid the FIT, simply have the Florida limited partnership create a FLITE trust in which the partnership is the grantor and the beneficiary of the trust. The other good news is that the tax is essentially voluntary, and can be avoided by using either the FLITE trust or an out-of-state limited partnership. In 2006, the Florida legislature repealed most parts of the tax effective January 1, … Additionally, the FDOR provides a comprehensive a list on its website at http://sun6.dms.state.fl.us/dor/taxes/ippt.html . Property >> FL Dept Rev Tax Forms Florida Department of Revenue Form Ordering Options Use the ordering system below to get paper forms mailed to you. Code Ann. The legislation extends corporate income and bank franchise tax rate relief and refunds resulting when collections exceed forecasts. One should not let the proverbial tax tail wag the proverbial non-tax dog! Is the right to receive the property at the end of a specified period not an intangible asset? He is a board-certified wills, trusts and estates lawyer. 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. State sales tax needs to be paid for internet or other out-of-state purchases, even if no tax … Thus, under the old rules, the QTIP trust would be subject to the FIT; whereas, under the new rules, the trust would not be taxed. This appears to be a good solution for the married taxpayers. 11 The prohibited powers are enumerated at Fla. Admin. A possible solution is to use a Florida limited partnership and combine it with a FLITE trust. Moreover, some modest exemptions were provided (again depending upon the taxpayer s status). Florida Revenue Law Library. Overview. On April 6, 2020, Governor DeSantis directed the Department of Revenue to issue an Emergency Order suspending the state’s documentary stamp tax on notes and written obligations made pursuant to Title I of the CARES Act. • Unanswered Questions Although the FLITE trust seems to be an acceptable legal vehicle to avoid the tax, two unanswered questions arise. The maximum reemployment tax rate for 2021 is fixed in statute and will remain at .0540 (5.4%). Will it repeal the tax? So go ahead, make a taxpayer’s day: Explain how the FLITE trust will allow the taxpayer to legally avoid the FIT. 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. Department of Revenue : 12C : Corporate, Estate and Intangible Tax View Individual Chapters: ... Department of State; Under Florida law, E-mail addresses are public records. 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. However, caution should be used in drafting such provisions, especially in long-term trusts. Before the legislative change, the statute made reference to “foreign” trusts. A revised handbook will be distributed at this seminar that will provide guidance on Florida Documentary Stamp Tax (Florida Statutes, Chapter 201) and Florida Intangibles Tax (Florida Statutes, Chapter 199) issues in a variety of situations involving the extensions of credit by lenders located in Florida. The category hierarchy is displayed in a list. Overview Florida has enacted legislation providing a deduction for global intangible low-taxed income (GILTI), retroactive to January 1, 2018. a change of ownership. ~ From the Rules Regulating The Florida Bar, The American Influence on International Commercial Arbitration: Doctrinal Developments and Discovery Methods. 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. 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