Mr. Law is coeditor of this column with Michael D. Miller. Who knows what the legislature will do? General. The unknown is what the legislature plans to do with the tax. Lester B. 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. After the amendment to the statutes, the only way to be taxed is if the beneficiary has a beneficial interest. 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)? ļ�0Jq�����xu9���_�t�\H:JJ����^��iN���٢���^����3"?x�:N�I~��w�����c?�X.��7E. The Florida Business Tax Application form (DR-1) is available online or can be downloaded and printed. Visit the Florida Department of Revenue website. The only way to do this properly is by having non-Florida persons control the partnership. 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). 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. A stamp tax of 70 cents per $100 of value is assessed on documents that transfer interest in Florida real estate, such as warranty deeds and quit claim deeds. Fla. Laws. Nonprofit organizations can find a form for registration at the Florida Department of Revenue website. §§199.032 and 199.052 (1999); and 2000 Fla. Laws ch. Florida, like many other states, uses federal taxable income as a starting point to determine Florida income for the purposes of corporate income tax. 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). ~ From the Rules Regulating The Florida Bar, The American Influence on International Commercial Arbitration: Doctrinal Developments and Discovery Methods. As discussed above, there is no clear statutory provision that taxes a grantor of a trust. Florida Revenue Law Library. from the University of Florida College of Law graduate tax program. Code r. 12C-2.006(4) (1998) 16 Id. 5050 W. Tennessee St. Tallahassee, FL 32399. Law is a shareholder at the firm of Myers, Krause & Stevens, Chartered, Naples. • The FLITE Trust Even before the recent statutory change, the FLITE trust was used to avoid the FIT. The skeleton is all that remains of the once dreaded and costly FIT. 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. As a result of the recent statutory change, the trust merely must prohibit a Florida resident from having a beneficial interest. ; For answers to tax questions, please call Taxpayer Services at 850-488-6800 and select the "General Information" option. 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. 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. 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. §199.032 (1999); Fla. Admin. Department of Economic Opportunity Reemployment Tax - formerly Unemployment Tax New Hire Reporting Center. The new law deletes the term “foreign.” See 2000 The structure of the partnership would be no different than an out-of-state limited partnership. • Other Trusts Not Subject to the FIT Other implications of repealing the trustee provisions are enormous. Florida has enacted legislation providing a deduction for global intangible low-taxed income (GILTI), retroactive to January 1, 2018. q. Please Note: Do NOT send the Intangibles Tax Return to the Kansas Department of Revenue. Mr. Law received his J.D. However, creating the new FLITE trust requires the opening of new accounts for the new trust and all of the formalities that are associated with creating and funding a new irrevocable trust. It should be noted that Treasury Regulations §1.671-2(e), written in 1956, provides that the term grantor “includes” a corporation. Today, the Department of Revenue Executive Director Jim Zingale issued two emergency orders related to sales & use tax and property taxes. 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. 14 Fla. Admin. “The department has now determined this warrant was filed in error,” the document says. 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. 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. Second, if the taxpayer wishes to use the trust but change the out-of-state trustee by selecting a Florida trustee, one should carefully review the trust to see if this is permissible. 1 Fla. Stat. Further, if they utilize such a trust, they must remember to transfer their interests in the corporate general partner to the FLITE trust. The reason for this is that there were many TAAs that permitted a four-month trust. 20.2041-1(b)(2). §199.052(1) (1999). • 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. Employer Links. 1 Notable provisions of the new law include: Updating Florida’s federal tax conformity date to the Internal Revenue Code (IRC) as in effect on January 1, 2019, Florida does have an "intangibles" tax on invested assets that might make muni funds attractive for very high-net-worth investors. If either is missing, then there is no “beneficial interest.”. 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. Small Business Administration - Florida State of Florida Agencies 21 These trusts are created to take advantage of using a decedent’s applicable credit amount under §2010 of the Internal Revenue Code. See also Technical Assistance Advisement 96(C)2-142; however, note that this TAA was issued before the new rules were promulgated. One of the tax benefits under the current federal tax laws is that the taxpayers could receive significant discounts for estate and gift tax purposes. 199.023(7)(1999); see supra note 6 and accompanying text. §199.052(5) and Fla. Admin. For returning users, enter your user profile credentials to log in and begin or complete the Florida Business Tax Registration application. 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. The tax is due even if the mortgage or lien is not recorded or filed in Florida. 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. However, caution should be used in drafting such provisions, especially in long-term trusts. In no event will the tax be calculated on an amount greater than the fair market value of the collateralized Florida real property. 7 The term “beneficial interest” is defined in Fla. Stat. However, the more recent rumor is that the tax may stay in place, but that the rate would be reduced to zero mill. It has no special meaning. 9 See, e.g., Technical Assistance Advisement Nos. 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. Account Management. 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. Documents in the Revenue Law Library are organized in categories. Planning to Avoid the Tax There are a number of vehicles that may be used to avoid the tax. 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 … a change of ownership. a change of business location address from one Florida county to another. 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%. 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. This writer understands that there may be a TAA, which will clarify this issue. ET, at 1-800-352-3671 (in Florida only) or 904-488-6800. The website provides information for any other forms that will need to be filed based on the type of business being registered. 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. Overview. §199.133, Fla. Stat. Not all intangible taxes have been repealed. The two most common are to use either an out-of-state limited partnership or a special trust designed to avoid the tax. 12 See Treas. 2. 98-000040 Barnett Banks, Inc., Successor By Merger To First Florida Banks, Inc. vs. Department Of Revenue; 88-004100 Murray Kramer Corporation vs. Department Of Revenue Taxation. Regs. Florida Department of State Florida Department of State - Division of Corporations Business License. • Unanswered Questions Although the FLITE trust seems to be an acceptable legal vehicle to avoid the tax, two unanswered questions arise. Code r. 12C-2.006 et seq. The answer to this issue is not crystal clear; thus, probably the safest approach is to have someone other than the grantor be trustee. 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. What is known is that some old adages are not always true. Thus, the author, siding on the side of conservatism, would advise the taxpayer not to be his or her own trustee of his or her FLITE trust. Law Tax As a result of recent changes to the Florida Intangibles Tax (FIT), the legislature has all but repealed the FIT. If you did not enter the correct mailing address when you originally registered with the Florida Department of Revenue, you can change this information at any time. The tax is due … Share: On March 26, 2020, the Florida Department of Revenue issued Emergency Orders delaying sales tax and property tax payments for some businesses. 2 The tax is assessed based upon the just value of assets owned on January 1 each year. A different case may arise if the trustee had full discretion to distribute income and the beneficiary and the trustee were one and the same person. Not all intangible taxes have been repealed. ‘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.’ To overcome the FIT issue, one could provide for discretionary income. The purpose of the article is not to enumerate the lists of intangible personal property. ; A tax is also levied on notes, bonds, mortgages, liens, and other written obligations to pay that are filed or recorded in Florida. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of … 13 The FLITE Trust s name was simply derived from the Florida Intangible Tax Exempt Trust. See generally Fla. Stat. It should also be noted that the senior generation members should use a FLITE trust for their other taxable assets. The Department of Revenue administers a variety of taxes, including the collection of the intangible tax that was largely repealed in 2007. For instance, if an individual owned taxable intangible assets and such person was a Florida resident, he or she would be subject to the FIT at the then prevailing rate of tax.3 With respect to trusts, special rules applied. It should be noted that many well-crafted trusts specifically prohibited the use of a Florida resident trustee. An example of this is the Rabbi trust, which is typically created by corporations. Florida's fee amount for this tax is $.20 per $100 or $2 per $1,000 of lended money. The report also provides estimates of the fiscal impact of certain provisions of the TCJA. The recurring Annual Intangibles Tax (Florida Statutes, Chapter 199) will not be addressed in this handbook. 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. The same would hold true for the applicable credit trust and the GST-exempt dynasty type trusts. 18 See Fla. Admin. He is a board-certified wills, trusts and estates lawyer. Under Tax Information, click on Reemployment (Unemployment Tax). The tactic lowered HCA’s 2005 Florida tax bill by more than $110,000 — a tiny savings for a company that earned $1.4 billion in profit that year. However, the trust by definition is irrevocable at the decedent spouse’s death. 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%. It would be unnecessary to transfer the limited partnership interests to the senior taxpayer’s personal FLITE trust, since limited partnership interests such as these are not subject to the FIT.19 • Limited Liability Company Assuming that the senior generation taxpayer chooses to use a Florida limited liability company for estate planning purposes, the limited liability company would also be able to use the FLITE trust. 33/12 : Final 12A-1.005 Admissions: 1272366: Effective: 06/28/2005 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. r. 12C-2.002 (1998), which provides comprehensive lists. §§199.032 and 199.052 (1998); Fla. Stat. It was often referred to as “the wealth tax,” since affected taxpayers held stocks, bonds and other financial instruments. 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. Making the FLITE trust a grantor trust for income tax purposes should avoid any adverse federal income tax consequence. 10 Fla. Admin. 17 This assumes that the trusts were properly crafted and that the trusts last for more than one year. Fla. Stat. In 2006, the intangibles tax rate was 50 cents for each $1,000 of property value. §199.175 (1999); Fla. Stat. 10 November 2000 Pg 34 Lester B. 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. One should not let the proverbial tax tail wag the proverbial non-tax dog! See TIP Here The FICPA is aware of the challenges this poses to our members and their clients. 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. Meet the Speakers retired from the Florida Department of Revenue Documentary Stamp Tax, Intangible Personal Property Tax and Ad Valorem taxation. One of the major hurdles that one has to deal with is the ability of the senior generation to maintain some form of control. • 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. 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. Code r. 12C-2.006(3). This, again, is mere speculation and is not the focus of the article. This is not evident by simply reading the statute. For help using this system, please call Taxpayer Services at 850-488-6800 and select the "Forms" option. The minimum reemployment tax rate for 2021 will be .0029 (.29%), or $20.30 per employee per year. If a revocable trust is funded before death, and, if the trust creates further trusts that would otherwise avoid the tax (e.g., applicable exemption trust and QTIP trust), then it would be very important to have the revocable trust funded before death (assuming that the decedent did not use a FLITE trust). 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. This obviously will not avoid the FIT; however, it will be properly structured for estate tax purposes. • Create a New FLITE Trust The better approach is to prepare new FLITE trusts for those who have old FLITE trusts. For instance, if the federal estate tax were repealed, the state death tax would effectively be repealed, and, thus, it would eliminate a huge base of tax from Florida’s treasury, the result of which may necessitate the revival of the FIT. Alternatively, if the revocable trust is not funded before death (i.e., assets are held in the taxpayer s individual name), then upon death, the assets become part of a probate estate. In 2006, the Florida legislature repealed most parts of the tax effective January 1, … §199.185 (1999); and Fla. Admin. The purpose of this article is not to delve into that minutia. 96C-2140, 96(C)-2108R, 96(C)2-130. • 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. 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. 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. Most individuals pay this tax each year on a routine basis in the same way they pay their annual federal income tax obligation. Code Ann. On June 28, 2019, Florida Governor Ron DeSantis signed House Bill 7127 (H.B. Regardless of the name, they essentially serve one major purpose—legal avoidance of the FIT. The rate is imposed on annual wages of up to $7,000 per employee. 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. 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. One could argue that the DOR’s regulatory rule is a mere extension of the beneficial interest rule in that it merely elaborates upon the statutory rule. 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. Thus, it illustrates that the IRS contemplated that any entity, whether a corporation or partnership, may create grantor trusts. • 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). A good rule of thumb is to have the assets in the FLITE trust for a sufficient period of time to reflect that the trustee acted like a trustee with respect to those assets. • 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. The legislation extends corporate income and bank franchise tax rate relief and refunds resulting when collections exceed forecasts. 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. The skeleton is all that remains of the once dreaded and costly FIT. 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. Intangible Recording Tax Forms (98.9 KB) Set of forms includes the Georgia Intangible Recording Tax protest form and claim for refund form. ch. Glassdoor has 170 Florida Department of Revenue reviews submitted anonymously by Florida Department of Revenue employees. definition, the trust cannot be revocable by the surviving spouse, and it cannot have a general power of appointment under §2041(b). The rate for these types of contracts is 35 cents per $100 of value. • Limited Partnerships Out-of-state limited partnerships may be used as an alternative to avoid the tax, provided, however, that all of the partnership’s formalities are adhered to. Read employee reviews and ratings on Glassdoor to decide if Florida Department of Revenue is right for you. Examples: 1. As a result of recent changes to the Florida Intangibles Tax (FIT), the legislature has all but repealed 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. Florida Department of Revenue. For taxpayers that do not currently have a FLITE trust, a new one may be warranted. 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. 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. Use a Florida Business Tax Application (Submit online or download form DR-1) for: a change in legal entity. 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. The rate is effective for wages paid on or after January 1, 2021. §§199.052(5) (1999) and 199.023(7) (1999). 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. Each category has a number that indicates how many documents are within that category. The Florida Intangible Tax–The Real Voluntary Tax Vol. An issue that muddies the water is what effect does what this author calls the “regulatory rule” have on this? (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. File your Local Intangibles Tax Return with your County Clerk on or before April 15. Code r. 12C-2.0061. 173, §1. 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. Fla. Laws ch. For more information, see the Department of Revenue's Tax … This column is submitted on behalf of the Tax Section, Marvin Gutter, chair. 19 Fla. Stat. There have been some informal rumblings that the tax would be repealed sometime in the next year or two. Department of Revenue - Businesses. Although the intangibles tax was repealed, there are two instances where residents still owe taxes on intangible property. 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Rules in 1998, the trust merely must prohibit a Florida resident from having a beneficial interest to the. Low-Taxed income ( GILTI ), or $ 2 per $ 1,000 of lended money fair market value of owned. Per year deduction for global intangible low-taxed income ( GILTI ), is... Or controlled taxable intangible assets1 on January 12 of any particular year 2000 Fla. Laws comprehensive a on! Help using this system, please call taxpayer Services at 850-488-6800 and select the `` Forms '' option a... Foreign. ” See 2000 Fla. Laws that taxes a grantor of a trust created the. Intangibles '' tax on loans, and those that do can vary in the future taxpayer... Clerk on or before April 15 applicable credit amount under §2010 of the trust by definition is at. Repealed in 2007 amount shown in the amount lien is not evident by simply the... Two most common are to use a FLITE trust seems to be subject in categories 17 this assumes the!