Senate Bill 0704
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Florida Senate - 1998 SB 704
By Senator Klein
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1 A bill to be entitled
2 An act relating to limited liability companies;
3 amending s. 220.02, F.S.; revising legislative
4 intent; providing application; amending s.
5 220.03, F.S.; revising a definition; amending
6 s. 220.13, F.S.; redefining the term "taxable
7 income" as applied to limited liability
8 companies to exclude income of certain limited
9 liability companies; amending s. 608.406, F.S.;
10 revising criteria for limited liability company
11 names; amending s. 608.471, F.S.; exempting
12 certain limited liability companies from the
13 corporate income tax; providing for classifying
14 certain limited liability companies or members
15 or assignees of a member of a limited liability
16 company for certain taxation purposes;
17 providing an effective date.
18
19 Be It Enacted by the Legislature of the State of Florida:
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21 Section 1. Subsection (1) of section 220.02, Florida
22 Statutes, is amended to read:
23 220.02 Legislative intent.--
24 (1) It is the intent of the Legislature in enacting
25 this code to impose a tax upon all corporations,
26 organizations, associations, and other artificial entities
27 which derive from this state or from any other jurisdiction
28 permanent and inherent attributes not inherent in or available
29 to natural persons, such as perpetual life, transferable
30 ownership represented by shares or certificates, and limited
31 liability for all owners. It is intended that any limited
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1 liability company that is classified as a partnership for
2 federal income tax purposes and formed under chapter 608 or
3 qualified to do business in this state as a foreign limited
4 liability company not companies be subject to the tax imposed
5 by this code. It is the intent of the Legislature to subject
6 such corporations and other entities to taxation hereunder for
7 the privilege of conducting business, deriving income, or
8 existing within this state. This code is not intended to tax,
9 and shall not be construed so as to tax, any natural person
10 who engages in a trade, business, or profession in this state
11 under his or her own or any fictitious name, whether
12 individually as a proprietorship or in partnership with
13 others, or as a member or a manager of a limited liability
14 company classified as a partnership for federal income tax
15 purposes; any estate of a decedent or incompetent; or any
16 testamentary trust. However, a corporation or other taxable
17 entity which is or which becomes partners with one or more
18 natural persons shall not, merely by reason of being a
19 partner, exclude from its net income subject to tax its
20 respective share of partnership net income. This statement of
21 intent shall be given preeminent consideration in any
22 construction or interpretation of this code in order to avoid
23 any conflict between this code and the mandate in s. 5, Art.
24 VII of the State Constitution that no income tax be levied
25 upon natural persons who are residents and citizens of this
26 state.
27 Section 2. Paragraph (e) of subsection (1) of section
28 220.03, Florida Statutes, is amended to read:
29 220.03 Definitions.--
30 (1) SPECIFIC TERMS.--When used in this code, and when
31 not otherwise distinctly expressed or manifestly incompatible
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1 with the intent thereof, the following terms shall have the
2 following meanings:
3 (e) "Corporation" includes all domestic corporations;
4 foreign corporations qualified to do business in this state or
5 actually doing business in this state; joint-stock companies;
6 limited liability companies, under chapter 608; common-law
7 declarations of trust, under chapter 609; corporations not for
8 profit, under chapter 617; agricultural cooperative marketing
9 associations, under chapter 618; professional service
10 corporations, under chapter 621; foreign unincorporated
11 associations, under chapter 622; private school corporations,
12 under chapter 623; foreign corporations not for profit which
13 are carrying on their activities in this state; and all other
14 organizations, associations, legal entities, and artificial
15 persons which are created by or pursuant to the statutes of
16 this state, the United States, or any other state, territory,
17 possession, or jurisdiction. The term "corporation" does not
18 include proprietorships, even if using a fictitious name;
19 partnerships of any type, as such; limited liability companies
20 that are taxable as partnerships for federal income tax
21 purposes; state or public fairs or expositions, under chapter
22 616; estates of decedents or incompetents; testamentary
23 trusts; or private trusts.
24 Section 3. Subsection (2) of section 220.13, Florida
25 Statutes, is amended to read:
26 220.13 "Adjusted federal income" defined.--
27 (2) For purposes of this section, a taxpayer's taxable
28 income for the taxable year means taxable income as defined in
29 s. 63 of the Internal Revenue Code and properly reportable for
30 federal income tax purposes for the taxable year, but subject
31 to the limitations set forth in paragraph (1)(b) with respect
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1 to the deductions provided by ss. 172 (relating to net
2 operating losses), 170(d)(2) (relating to excess charitable
3 contributions), 404(a)(1)(D) (relating to excess pension trust
4 contributions), 404(a)(3)(A) and (B) (to the extent relating
5 to excess stock bonus and profit-sharing trust contributions),
6 and 1212 (relating to capital losses) of the Internal Revenue
7 Code, except that, subject to the same limitations, the term:
8 (a) "Taxable income," in the case of a life insurance
9 company subject to the tax imposed by s. 801 of the Internal
10 Revenue Code, means life insurance company taxable income;
11 however, for purposes of this code, the total of any amounts
12 subject to tax under s. 815(a)(2) of the Internal Revenue Code
13 pursuant to s. 801(c) of the Internal Revenue Code shall not
14 exceed, cumulatively, the total of any amounts determined
15 under s. 815(c)(2) of the Internal Revenue Code of 1954, as
16 amended, from January 1, 1972, to December 31, 1983;
17 (b) "Taxable income," in the case of an insurance
18 company subject to the tax imposed by s. 831(b) of the
19 Internal Revenue Code, means taxable investment income;
20 (c) "Taxable income," in the case of an insurance
21 company subject to the tax imposed by s. 831(a) of the
22 Internal Revenue Code, means insurance company taxable income;
23 (d) "Taxable income," in the case of a regulated
24 investment company subject to the tax imposed by s. 852 of the
25 Internal Revenue Code, means investment company taxable
26 income;
27 (e) "Taxable income," in the case of a real estate
28 investment trust subject to the tax imposed by s. 857 of the
29 Internal Revenue Code, means the income subject to tax,
30 computed as provided in s. 857 of the Internal Revenue Code;
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1 (f) "Taxable income," in the case of a corporation
2 which is a member of an affiliated group of corporations
3 filing a consolidated income tax return for the taxable year
4 for federal income tax purposes, means taxable income of such
5 corporation for federal income tax purposes as if such
6 corporation had filed a separate federal income tax return for
7 the taxable year and each preceding taxable year for which it
8 was a member of an affiliated group, unless a consolidated
9 return for the taxpayer and others is required or elected
10 under s. 220.131;
11 (g) "Taxable income," in the case of a cooperative
12 corporation or association, means the taxable income of such
13 organization determined in accordance with the provisions of
14 ss. 1381 through 1388 of the Internal Revenue Code;
15 (h) "Taxable income," in the case of an organization
16 which is exempt from the federal income tax by reason of s.
17 501(a) of the Internal Revenue Code, means its unrelated
18 business taxable income as determined under s. 512 of the
19 Internal Revenue Code;
20 (i) "Taxable income," in the case of a corporation for
21 which there is in effect for the taxable year an election
22 under s. 1362(a) of the Internal Revenue Code, means the
23 amounts subject to tax under s. 1374 or s. 1375 of the
24 Internal Revenue Code for each taxable year;
25 (j) "Taxable income," in the case of a limited
26 liability company, other than a limited liability company
27 classified as a partnership for federal income tax purposes,
28 as defined in and organized pursuant to chapter 608 or
29 qualified to do business in this state as a foreign limited
30 liability company or other than a similar limited liability
31 company classified as a partnership for federal income tax
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1 purposes and created as an artificial entity pursuant to the
2 statutes of the United States or any other state, territory,
3 possession, or jurisdiction, if such limited liability company
4 or similar entity is taxable as a corporation for federal
5 income tax purposes absent a federal report and determination
6 of taxable income as a corporation under the Internal Revenue
7 Code, means taxable income determined as if such limited
8 liability company were required to file or had filed a federal
9 corporate income tax return under the Internal Revenue Code;
10 (k) "Taxable income," in the case of a taxpayer liable
11 for the alternative minimum tax as defined in s. 55 of the
12 Internal Revenue Code, means the alternative minimum taxable
13 income as defined in s. 55(b)(2) of the Internal Revenue Code,
14 less the exemption amount computed under s. 55(d) of the
15 Internal Revenue Code. A taxpayer is not liable for the
16 alternative minimum tax unless the taxpayer's federal tax
17 return, or related federal consolidated tax return, if
18 included in a consolidated return for federal tax purposes,
19 reflect a liability on the return filed for the alternative
20 minimum tax as defined in s. 55(b)(2) of the Internal Revenue
21 Code;
22 (l) "Taxable income," in the case of a taxpayer whose
23 taxable income is not otherwise defined in this subsection,
24 means the sum of amounts to which a tax rate specified in s.
25 11 of the Internal Revenue Code plus the amount to which a tax
26 rate specified in s. 1201(a)(2) of the Internal Revenue Code
27 are applied for federal income tax purposes.
28 Section 4. Section 608.406, Florida Statutes, is
29 amended to read:
30 608.406 Limited liability company name.--
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1 (1) The words "limited liability company" or "limited
2 company," or their abbreviation "L.L.C." or "L.C.," shall be
3 the last words of the name of every limited liability company
4 formed under the provisions of this chapter.
5 (2) The limited liability name may not contain
6 language stating or implying that the limited liability
7 company is organized for a purpose other than that permitted
8 in this act and its articles of organization.
9 (3) The limited liability name may not contain
10 language stating or implying that the limited liability
11 company is connected with a state or federal government agency
12 or a corporation chartered under the laws of the United
13 States.
14 (4) The limited liability name must be distinguishable
15 upon the records of the Division of Corporations of the
16 Department of State from all other entities or filings, except
17 fictitious name registrations pursuant to s. 865.09, organized
18 or registered under the laws of this state that are on file
19 with the division.
20 (5) Omission of the words "limited liability company"
21 or "limited company," or their abbreviation "L.L.C. or "L.C.,"
22 in the use of the name of the limited liability company shall
23 render any person who participates in the omission, or
24 knowingly acquiesces in it, liable for any indebtedness,
25 damage, or liability occasioned by the omission.
26 Section 5. Section 608.471, Florida Statutes, is
27 amended to read:
28 608.471 Tax exemption on income of certain limited
29 liability companies company.--
30 (1) A limited liability company classified as a
31 partnership for federal income tax purposes and organized
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1 pursuant to this chapter or qualified to do business in this
2 state as a foreign limited liability company is not an
3 "artificial entity" within the purview of s. 220.02 and is not
4 subject to the tax imposed under chapter 220.
5 (2) The income of a limited liability company that is
6 classified as a partnership for federal income tax purposes
7 and that is organized pursuant to this chapter or is qualified
8 to do business in this state as a foreign limited liability
9 company shall not be subject to the Florida Income Tax Code
10 and the tax levied pursuant to chapter 220.
11 (3) For purposes of taxation under chapter 220, a
12 limited liability company formed in this state or authorized
13 to transact business in this state as a foreign limited
14 liability company shall be classified as a partnership unless
15 classified otherwise for federal income tax purposes, in which
16 case the limited liability company shall be classified
17 identically to its classification for federal income tax
18 purposes. For purposes of taxation under chapter 220, a
19 member or an assignee of a member of a limited liability
20 company formed in this state or qualified to do business in
21 this state as a foreign limited liability company shall be
22 treated as a resident or nonresident partner unless classified
23 otherwise for federal income tax purposes, in which case the
24 member or assignee of a member shall have the same status as
25 such member or assignee of a member has for federal income tax
26 purposes. A distribution shall be deemed a "dividend" under s.
27 316 of the Internal Revenue Code as such code is defined in s.
28 220.03.
29 Section 6. This act shall take effect July 1, 1998.
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2 SENATE SUMMARY
3 Specifies that certain limited liability companies
classified as partnerships for federal income tax
4 purposes and organized under chapter 608, Florida
Statutes, or qualified to do business in this state as
5 foreign limited liability companies are not subject to
the corporate income tax imposed under the Florida Income
6 Tax Code. Modifies definitions and terms. Revises
criteria for limited liability company names.
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