Senate Bill 1450c1

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    Florida Senate - 1998                           CS for SB 1450

    By the Committee on Ways and Means and Senators Bankhead, Lee,
    Clary, Hargrett, Sullivan, McKay, Crist and Cowin




    301-1913-98

  1                      A bill to be entitled

  2         An act relating to intangible personal property

  3         taxes; amending s. 199.023, F.S.; defining the

  4         terms "ministerial function" and "processing

  5         activity" for purposes of ch. 199, F.S.;

  6         amending s. 199.052, F.S.; increasing the

  7         minimum amount of annual intangible personal

  8         property tax which a person may be required to

  9         pay; repealing s. 199.052(11), F.S., relating

10         to returns filed by banking organizations, to

11         conform; amending s. 199.175, F.S., relating to

12         taxable situs; conforming provisions; amending

13         s. 199.185, F.S.; revising the exemption from

14         intangible personal property taxes for certain

15         property held in trust; revising the exemption

16         for real estate mortgage investment conduits;

17         partially exempting accounts receivable arising

18         out of a trade or business from intangible

19         personal property taxes; providing legislative

20         intent to fully exempt such assets in

21         subsequent years; providing a full, rather than

22         partial, exemption from the annual tax for

23         banks and savings associations and providing

24         for application of the exemption to

25         organizations defined by s. 220.62(1), (2),

26         (3), and (4), F.S.; exempting insurers from the

27         annual tax; repealing s. 199.104, F.S., which

28         provides a credit against the annual tax for

29         banks and savings associations; repealing s.

30         220.68, F.S., which provides a credit against

31         the franchise tax imposed on banks and savings

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  1         associations based on intangible tax paid;

  2         amending s. 199.282, F.S.; revising the penalty

  3         for late filing of an annual intangible tax

  4         return; providing a limitation on combined

  5         delinquency and late filing penalties; revising

  6         the penalty for omitting or undervaluing

  7         property on an annual return; amending s.

  8         199.292, F.S.; revising the distribution of

  9         intangible tax revenues; amending s. 220.02,

10         F.S., relating to order of credits against the

11         corporate income tax or franchise tax, and s.

12         624.509, F.S., relating to the insurance

13         premium tax; conforming provisions; providing

14         application; providing effective dates.

15

16  Be It Enacted by the Legislature of the State of Florida:

17

18         Section 1.  Subsections (13) and (14) are added to

19  section 199.023, Florida Statutes, to read:

20         199.023  Definitions.--As used in this chapter:

21         (13)  "Ministerial function" means an act the

22  performance of which does not involve the use of discretion or

23  judgment.

24         (14)  "Processing activity" means an activity

25  undertaken to administer or service intangible personal

26  property in accordance with such terms, guidelines, criteria,

27  or directions as are provided solely by the owner of the

28  property. Methods, systems, or techniques chosen by the

29  processor to implement such terms, guidelines, criteria, or

30  directions are not considered the exercise of management or

31  control.

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  1         Section 2.  Subsection (2) of section 199.052, Florida

  2  Statutes, is amended to read:

  3         199.052  Annual tax returns; payment of annual tax.--

  4         (2)  No person shall be required to pay the annual tax

  5  in any year when the aggregate annual tax upon the person's

  6  intangible personal property, after exemptions, would be less

  7  than $60 $5.  In such case, an annual return is not required

  8  unless the taxpayer is a corporation, a banking organization

  9  claiming the exemption provided in s. 199.185(1)(i), or an

10  agent or fiduciary of whom the department requires an

11  informational return. Agents and fiduciaries shall report for

12  each person for whom they hold intangible personal property if

13  the aggregate annual tax on such person is $60 or more than

14  $5.

15         Section 3.  Effective July 1, 2000, subsection (11) of

16  section 199.052, Florida Statutes, is repealed, and subsection

17  (2) of that section, as amended by this act, is amended to

18  read:

19         199.052  Annual tax returns; payment of annual tax.--

20         (2)  No person shall be required to pay the annual tax

21  in any year when the aggregate annual tax upon the person's

22  intangible personal property, after exemptions, would be less

23  than $60.  In such case, an annual return is not required

24  unless the taxpayer is a corporation, a banking organization

25  claiming the exemption provided in s. 199.185(1)(i), or an

26  agent or fiduciary of whom the department requires an

27  informational return. Agents and fiduciaries shall report for

28  each person for whom they hold intangible personal property if

29  the aggregate annual tax on such person is $60 or more.

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  1         Section 4.  Effective July 1, 2000, paragraph (a) of

  2  subsection (1) and paragraph (b) of subsection (2) of section

  3  199.175, Florida Statutes, are amended to read:

  4         199.175  Taxable situs.--For purposes of the annual tax

  5  imposed under this chapter:

  6         (1)  Intangible personal property shall have a taxable

  7  situs in this state when it is owned, managed, or controlled

  8  by any person domiciled in this state on January 1 of the tax

  9  year.  Such intangibles shall be subject to annual taxation

10  under this chapter, unless the person who owns, manages, or

11  controls them is specifically exempt or unless the property is

12  specifically exempt. This provision shall apply regardless of

13  where the evidence of the intangible property is kept; where

14  the intangible is created, approved, or paid; or where

15  business may be conducted from which the intangible arises.

16  The fact that a Florida corporation owns the stock of an

17  out-of-state corporation and manages and controls such

18  corporation from a location in this state shall not operate to

19  give a taxable situs in this state to the intangibles owned by

20  the out-of-state corporation, which intangibles arise out of

21  business transacted outside this state.

22         (a)  For the purposes of this chapter, "any person

23  domiciled in this state" means:

24         1.  Any natural person who is a legal resident of this

25  state;

26         2.  Any bank or financial institution, business,

27  business trust as described in chapter 609, company,

28  corporation, insurance company, partnership, or other

29  artificial entity organized or created under the law of this

30  state, except a trust; or

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  1         3.  Any person, including a trust, who has established

  2  a commercial domicile in this state.

  3         (2)  Intangible personal property shall have a taxable

  4  situs in this state when it is deemed to have a business situs

  5  in this state and it is owned, managed, or controlled by a

  6  person transacting business in this state, even though the

  7  owner may claim a domicile elsewhere.  This provision shall

  8  apply regardless of where the evidence of the intangible is

  9  kept or where the intangible is created, approved, or paid.

10         (b)  Notwithstanding the provisions of this subsection:

11         1.a.  Intangibles that are credit card or charge card

12  receivables or related lines of credit or loans shall be

13  deemed to have business situs in this state only when the debt

14  represented by such intangibles is owed by a customer who is

15  domiciled in this state.

16         b.  The performance of ministerial functions relating

17  to, or the processing of, credit card or charge card

18  receivables in this state for the owner of such receivables is

19  not sufficient to support a finding that the owner is

20  transacting business in this state.

21         c.  The term "credit card or charge card receivables"

22  does not include trade or service receivables as defined in s.

23  864 of the Internal Revenue Code of 1986, as amended.

24         2.  An intangible owned by a real estate mortgage

25  investment conduit, a real estate investment trust, or a

26  regulated investment company, as those terms are defined in

27  the United States Internal Revenue Code of 1986, as amended,

28  shall not be deemed to have a taxable situs in this state

29  unless such entity has its legal or commercial domicile in

30  this state.

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  1         3.  The ownership of any interest in a participation or

  2  syndication loan or pool of loans, notes, or receivables shall

  3  not be sufficient to support a finding that the owner of such

  4  interest is transacting business in this state.  For the

  5  purposes of this subparagraph, a participation or syndication

  6  loan is a loan in which more than one lender is a creditor to

  7  a common borrower, and a participation or syndication interest

  8  in a pool of loans, notes, or receivables is an interest

  9  acquired from the originator or initial creditor with respect

10  to the loans, notes, or receivables constituting the pool.

11         4.  Assets owned by a foreign insurance company, as

12  defined in s. 624.06, shall not be deemed to have a business

13  situs in this state if they are managed and controlled outside

14  this state.

15         Section 5.  Subsections (1) and (5) of section 199.185,

16  Florida Statutes, are amended, and subsection (8) is added to

17  that section, to read:

18         199.185  Property exempted from annual and nonrecurring

19  taxes.--

20         (1)  The following intangible personal property shall

21  be exempt from the annual and nonrecurring taxes imposed by

22  this chapter:

23         (a)  Money.

24         (b)  Franchises.

25         (c)  Any interest as a partner in a partnership, either

26  general or limited, other than any interest as a limited

27  partner in a limited partnership registered with the

28  Securities and Exchange Commission pursuant to the Securities

29  Act of 1933, as amended.

30         (d)  Notes, bonds, and other obligations issued by the

31  State of Florida or its municipalities, counties, and other

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  1  taxing districts, or by the United States Government and its

  2  agencies.

  3         (e)  Intangible personal property held in trust

  4  pursuant to any stock bonus, pension, or profit-sharing plan

  5  or any individual retirement account which is qualified under

  6  s. 530, s. 401, or s. 408, or s. 408A of the United States

  7  Internal Revenue Code, 26 U.S.C. ss. 530, 401, and 408, and

  8  408A, as amended.

  9         (f)  Intangible personal property held under a

10  retirement plan of a Florida-based corporation exempt from

11  federal income tax under s. 501(c)(6) of the United States

12  Internal Revenue Code, 26 U.S.C., if the primary purpose of

13  the corporation is to support the promotion of professional

14  sports and the retirement plan is either a qualified plan

15  under s. 457 of the United States Internal Revenue Code or the

16  contributions to the plan, pursuant to a ruling by the United

17  States Internal Revenue Service, are not taxable to plan

18  participants until actual receipt or withdrawal by the

19  participant.

20         (g)  Notes and other obligations, except bonds, to the

21  extent that such notes and obligations are secured by

22  mortgage, deed of trust, or other lien upon real property

23  situated outside the state.

24         (h)  The assets of a corporation registered under the

25  Investment Company Act of 1940, 15 U.S.C. s. 80a-1-52, as

26  amended.

27         (i)  All intangible personal property issued in or

28  arising out of any international banking transaction and owned

29  by a banking organization.

30         (j)  Units of a unit investment trust organized under

31  an agreement or declaration of trust and registered under the

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  1  Investment Company Act of 1940, as amended, whose portfolio of

  2  assets consists solely of assets exempt under this section.

  3         (k)  Interests in real estate securitizations,

  4  including, but not limited to, real estate mortgage investment

  5  conduits (REMIC) and financial asset securitization trusts

  6  (FASITS), which that are directly or indirectly secured by or

  7  payable from notes and obligations that are in turn secured

  8  solely by a mortgage, deed of trust, or other lien upon real

  9  property situated in or outside of the state, including, but

10  not limited to, mortgage pools, participations, and

11  derivatives and are held as investments by banks or savings

12  associations in compliance with regulatory agency guidelines.

13         (l)  One-third of the accounts receivable arising or

14  acquired in the ordinary course of a trade or business which

15  are owned, controlled, or managed by a taxpayer on January 1,

16  1999, and thereafter. It is the intent of the Legislature

17  that, pursuant to future legislative action, the portion of

18  such accounts receivable exempt from taxation be increased to

19  two-thirds for taxes levied on January 1, 2000, and further

20  increased to all such accounts receivable on January 1, 2001,

21  and thereafter. This exemption does not apply to accounts

22  receivable which arise outside the taxpayer's ordinary course

23  of trade or business. For the purposes of this chapter, the

24  term "accounts receivable" means a business debt that is owed

25  by another to the taxpayer or the taxpayer's assignor in the

26  ordinary course of trade or business and is not supported by

27  negotiable instruments. Accounts receivable include, but are

28  not limited to, credit card receivables, charge card

29  receivables, credit receivables, margin receivables, inventory

30  or other floor plan financing, lease payments past due,

31  conditional sales contracts, retail installment sales

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  1  agreements, financing lease contracts, and a claim against a

  2  debtor usually arising from sales or services rendered and

  3  which is not necessarily due or past due. The examples

  4  specified in this paragraph shall be deemed not to be

  5  supported by negotiable instruments. The term "negotiable

  6  instrument" means a written document that is legally capable

  7  of being transferred by indorsement or delivery. The term

  8  "indorsement" means the act of a payee or holder in writing

  9  his or her name on the back of an instrument without further

10  qualifying words other than "pay to the order of" or "pay to"

11  whereby the property is assigned and transferred to another.

12         (5)  Those organizations Every bank and savings

13  association, as defined in s. 220.62(1), (2), (3), or (4) are,

14  is exempt from .5 mill of the tax imposed by s. 199.032.

15         (8)  Every insurer, as defined in s. 624.03, whether

16  the insurer is authorized or unauthorized as defined in s.

17  624.09, is exempt from the tax imposed by s. 199.032.

18         Section 6.  The amendment to subsection (5) and the

19  creation of subsection (8) of section 199.185, Florida

20  Statutes, by this section shall apply to taxes due on or after

21  July 1, 1999.

22         Section 7.  Effective July 1, 2000, paragraph (k) of

23  subsection (1) of section 199.185, Florida Statutes, as

24  amended by this act is amended to read:

25         199.185  Property exempted from annual and nonrecurring

26  taxes.--

27         (1)  The following intangible personal property shall

28  be exempt from the annual and nonrecurring taxes imposed by

29  this chapter:

30         (k)  Interests in real estate securitizations,

31  including, but not limited to real estate mortgage investment

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  1  conduits (REMIC) and financial asset securitization trusts

  2  (FASITS), which are directly or indirectly secured by or

  3  payable from notes and obligations that are in turn secured

  4  solely by a mortgage, deed of trust, or other lien upon real

  5  property situated outside the state, including, but not

  6  limited to, mortgage pools, participations, and derivatives

  7  and are held as investments by banks or savings associations

  8  in compliance with regulatory agency guidelines.

  9         Section 8.  Effective for tax years beginning after

10  December 31, 1999, sections 199.104 and 220.68, Florida

11  Statutes, are repealed.

12         Section 9.  Subsections (3) and (4) of section 199.282,

13  Florida Statutes, are amended to read:

14         199.282  Penalties for violation of this chapter.--

15         (3)(a)  If any annual or nonrecurring tax is not paid

16  by the due date, a delinquency penalty shall be charged.  The

17  delinquency penalty shall be 10 percent of the delinquent tax

18  for each calendar month or portion thereof from the due date

19  until paid, up to a limit of 50 percent of the total tax not

20  timely paid.

21         (b)  If any annual tax return required by this chapter

22  is not filed by the due date, a penalty of 10 30 percent of

23  the tax due with the return shall be charged for each calendar

24  month or portion thereof during which the return remains

25  unfiled, up to a limit of 50 percent of the total tax due for

26  each year or portion of the year during which the return

27  remains unfiled.

28

29  For any penalty assessed under this subsection, the combined

30  total for all penalties assessed under paragraphs (a) and (b)

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  1  shall not exceed 10 percent per calendar month, up to a limit

  2  of 50 percent of the total tax due.

  3         (4)  If an annual tax return is filed and property is

  4  either omitted from it or undervalued, then a specific penalty

  5  shall be charged.  The specific penalty shall be 10 30 percent

  6  of the tax attributable to each omitted item or to each

  7  undervaluation. No delinquency or late filing penalty shall be

  8  charged with respect to any undervaluation.

  9         Section 10.  Subsection (3) of section 199.292, Florida

10  Statutes, is amended to read:

11         199.292  Disposition of intangible personal property

12  taxes.--All intangible personal property taxes collected

13  pursuant to this chapter shall be placed in a special fund

14  designated as the "Intangible Tax Trust Fund." The fund shall

15  be disbursed as follows:

16         (3)  An amount equal to 33.5 percent Of the remaining

17  intangible personal property taxes collected, an amount equal

18  to 35.3 percent in state fiscal year 1998-1999 and an amount

19  equal to 37.7 percent in each year thereafter, shall be

20  transferred to the Revenue Sharing Trust Fund for Counties. An

21  amount equal to 66.5 percent Of the remaining taxes collected,

22  an amount equal to 64.7 percent in state fiscal year 1998-1999

23  and an amount equal to 62.3 percent in each year thereafter,

24  shall be transferred to the General Revenue Fund of the state.

25         Section 11.  Effective July 1, 2000, subsection (10) of

26  section 220.02, Florida Statutes, is amended to read:

27         220.02  Legislative intent.--

28         (10)  It is the intent of the Legislature that credits

29  against either the corporate income tax or the franchise tax

30  be applied in the following order: those enumerated in s.

31  220.68, those enumerated in s. 631.719(1), those enumerated in

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  1  s. 631.705, those enumerated in s. 220.18, those enumerated in

  2  s. 631.828, those enumerated in s. 220.181, those enumerated

  3  in s. 220.183, those enumerated in s. 220.182, those

  4  enumerated in s. 220.1895, those enumerated in s. 221.02,

  5  those enumerated in s. 220.184, those enumerated in s.

  6  220.186, and those enumerated in s. 220.188.

  7         Section 12.  Effective July 1, 2000, subsections (4),

  8  (7), and (8) of section 624.509, Florida Statutes, are amended

  9  to read:

10         624.509  Premium tax; rate and computation.--

11         (4)  The intangible tax imposed under chapter 199, The

12  income tax imposed under chapter 220, and the emergency excise

13  tax imposed under chapter 221 which are paid by any insurer

14  shall be credited against, and to the extent thereof shall

15  discharge, the liability for tax imposed by this section for

16  the annual period in which such tax payments are made.  As to

17  any insurer issuing policies insuring against loss or damage

18  from the risks of fire, tornado, and certain casualty lines,

19  the tax imposed by this section, as intended and contemplated

20  by this subsection, shall be construed to mean the net amount

21  of such tax remaining after there has been credited thereon

22  such gross premium receipts tax as may be payable by such

23  insurer in pursuance of the imposition of such tax by any

24  incorporated cities or towns in the state for firefighters'

25  relief and pension funds and police officers' retirement funds

26  maintained in such cities or towns, as provided in and by

27  relevant provisions of the Florida Statutes.  For purposes of

28  this subsection, payments of estimated income tax under

29  chapter 220 and of estimated emergency excise tax under

30  chapter 221 shall be deemed paid either at the time the

31  insurer actually files its annual returns under chapter 220 or

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  1  at the time such returns are required to be filed, whichever

  2  first occurs, and not at such earlier time as such payments of

  3  estimated tax are actually made.

  4         (7)  Credits and deductions against the tax imposed by

  5  this section shall be taken in the following order: deductions

  6  for assessments made pursuant to s. 440.51; credits for taxes

  7  paid under ss. 175.101 and 185.08; credits for income taxes

  8  paid under chapter 220, the emergency excise tax paid under

  9  chapter 221 and the credit allowed under subsection (5), as

10  these credits are limited by subsection (6); credits for

11  intangible taxes paid under chapter 199; all other available

12  credits and deductions.

13         (8)  From and after July 1, 1980, the premium tax

14  authorized by this section shall not be imposed upon receipts

15  of annuity premiums or considerations paid by holders in this

16  state and from and after July 1, 1991, the intangible tax

17  imposed by chapter 199 shall not be imposed on assets equal to

18  the statutory legal reserves of annuity products maintained by

19  insurance companies on behalf of their holders if the tax

20  savings derived are credited to the annuity holders.  Upon

21  request by the Department of Revenue, any insurer availing

22  itself of this provision shall submit to the department

23  evidence which establishes that the tax savings derived have

24  been credited to annuity holders.  As used in this subsection,

25  the term "holders" shall be deemed to include employers

26  contributing to an employee's pension, annuity, or

27  profit-sharing plan.

28         Section 13.  For tax years beginning after December 31,

29  1999, no credit under section 624.509(4), Florida Statutes,

30  for intangible tax imposed under chapter 199, Florida

31  Statutes, shall be available.

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  1         Section 14.  Except as otherwise expressly provided in

  2  this act, this act shall take effect July 1, 1998.

  3

  4          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
  5                             SB 1450

  6

  7  The committee substitute for SB 1450 exempts one-third of
    accounts receivable from intangibles tax in 1999, and
  8  expresses legislative intent to exempt two-thirds of accounts
    receivable in 2000 and totally exempt them in 2001. It will
  9  require affirmative action of the Legislature to effect those
    changes, however. The original bill provided for the phased
10  repeal and did not require future legislative action.

11  The committee substitute delays the tax exemption for banks
    and insurance companies for a year, applying to taxes due on
12  or after July 1, 1999. The credits for intangibles taxes paid
    that can be taken against corporate income tax and insurance
13  premium tax are preserved until tax years beginning after
    December 31, 1999.
14
    Unlike SB 1450, the committee substitute does not excuse banks
15  from having to pay intangibles tax on trusts and does not
    excuse investment advisers from having to pay tax on accounts
16  over which they have discretionary authority.

17  The committee substitute amends the fraction of revenues from
    the intangibles tax which are distributed to counties so that
18  they will be held harmless from reductions in total tax
    collections.
19
    The committee substitute amends the current exemption for real
20  estate mortgage investment conduits (REMICs) held by banks and
    savings associations. It exempts from intangibles tax
21  interests in real estate securitizations, which include, but
    are not limited to, real estate mortgage investment conduits
22  (REMICs) and financial asset securitization trust (FASITs).
    Such instruments must be secured solely by mortgages, deeds or
23  trust, or other liens upon real property.

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