House Bill 1023

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    Florida House of Representatives - 1999                HB 1023

        By Representative Lacasa






  1                      A bill to be entitled

  2         An act relating to limited liability companies;

  3         amending s. 220.02, F.S.; declaring legislative

  4         intent that certain companies are exempt from

  5         the corporate income tax; revising legislative

  6         intent with respect to the amendment of s.

  7         220.02, F.S., by chapter 98-101, Laws of

  8         Florida; amending s. 220.03, F.S.; redefining

  9         the term "corporation" for purposes of the

10         corporate income tax; amending s. 220.13, F.S.;

11         redefining the term "taxable income" of limited

12         liability companies for purposes of determining

13         "adjusted federal income"; amending s. 608.471,

14         F.S.; exempting certain limited liability

15         companies from income taxation; amending s.

16         608.441, F.S.; revising conditions under which

17         a limited liability company will be dissolved;

18         amending s. 199.023, F.S.; redefining the term

19         "intangible personal property" for purposes of

20         the taxation thereof; amending s. 199.185,

21         F.S.; exempting interests in limited liability

22         companies from intangible personal property

23         taxation; providing an effective date.

24

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

26

27         Section 1.  Subsection (1) of section 220.02, Florida

28  Statutes, 1998 Supplement, is amended to read:

29         220.02  Legislative intent.--

30         (1)  It is the intent of the Legislature in enacting

31  this code to impose a tax upon all corporations,

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  1  organizations, associations, and other artificial entities

  2  that which derive from this state or from any other

  3  jurisdiction permanent and inherent attributes not inherent in

  4  or available to natural persons, such as perpetual life,

  5  transferable ownership represented by shares or certificates,

  6  and limited liability for all owners. It is intended that any

  7  limited liability company that is classified as a partnership

  8  for federal income tax purposes or is a single-member limited

  9  liability company that is disregarded as an entity separate

10  from its owner for federal income tax purposes and that is

11  formed under chapter 608 or qualified to do business in this

12  state as a foreign limited liability company not be subject to

13  the tax imposed by this code. It is the intent of the

14  Legislature to subject such corporations and other entities to

15  taxation hereunder for the privilege of conducting business,

16  deriving income, or existing within this state.  This code is

17  not intended to tax, and shall not be construed so as to tax,

18  any natural person who engages in a trade, business, or

19  profession in this state under his or her own or any

20  fictitious name, whether individually as a proprietorship or

21  in partnership with others, or as a member or a manager of a

22  limited liability company classified as a partnership for

23  federal income tax purposes; any estate of a decedent or

24  incompetent; or any testamentary trust.  However, a

25  corporation or other taxable entity that which is or that

26  which becomes partners with one or more natural persons shall

27  not, merely by reason of being a partner, exclude from its net

28  income subject to tax its respective share of partnership net

29  income.  This statement of intent shall be given preeminent

30  consideration in any construction or interpretation of this

31  code in order to avoid any conflict between this code and the

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  1  mandate in s. 5, Art. VII of the State Constitution that no

  2  income tax be levied upon natural persons who are residents

  3  and citizens of this state.

  4         Section 2.  Subsection (2) of section 7 of chapter

  5  98-101, Laws of Florida, is amended to read:

  6         Section 7.

  7         (2)  This section shall take effect upon this act

  8  becoming a law. The provisions of subsection 220.02(11)

  9  relating to qualified subchapter S subsidiaries this section

10  are intended to clarify the intent of the Legislature under

11  existing law and are effective with respect to tax years

12  beginning on or after January 1, 1997.

13         Section 3.  Paragraph (e) of subsection (1) of section

14  220.03, Florida Statutes, 1998 Supplement, is amended to read:

15         220.03  Definitions.--

16         (1)  SPECIFIC TERMS.--When used in this code, and when

17  not otherwise distinctly expressed or manifestly incompatible

18  with the intent thereof, the following terms shall have the

19  following meanings:

20         (e)  "Corporation" includes all domestic corporations;

21  foreign corporations qualified to do business in this state or

22  actually doing business in this state; joint-stock companies;

23  limited liability companies, under chapter 608; common-law

24  declarations of trust, under chapter 609; corporations not for

25  profit, under chapter 617; agricultural cooperative marketing

26  associations, under chapter 618; professional service

27  corporations, under chapter 621; foreign unincorporated

28  associations, under chapter 622; private school corporations,

29  under chapter 623; foreign corporations not for profit which

30  are carrying on their activities in this state; and all other

31  organizations, associations, legal entities, and artificial

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  1  persons which are created by or pursuant to the statutes of

  2  this state, the United States, or any other state, territory,

  3  possession, or jurisdiction. The term "corporation" does not

  4  include a proprietorship proprietorships, even if using a

  5  fictitious name; a partnership partnerships of any type, as

  6  such; a limited liability company companies that is are

  7  taxable as a partnership partnerships for federal income tax

  8  purposes or that has a single member and is disregarded as an

  9  entity separate from its owner for federal income tax

10  purposes; a state or public fair fairs or exposition

11  expositions, under chapter 616; an estate estates of a

12  decedent decedents or an incompetent incompetents; a

13  testamentary trust trusts; or a private trust trusts.

14         Section 4.  Subsection (2) of section 220.13, Florida

15  Statutes, 1998 Supplement, is amended to read:

16         220.13  "Adjusted federal income" defined.--

17         (2)  For purposes of this section, a taxpayer's taxable

18  income for the taxable year means taxable income as defined in

19  s. 63 of the Internal Revenue Code and properly reportable for

20  federal income tax purposes for the taxable year, but subject

21  to the limitations set forth in paragraph (1)(b) with respect

22  to the deductions provided by ss. 172 (relating to net

23  operating losses), 170(d)(2) (relating to excess charitable

24  contributions), 404(a)(1)(D) (relating to excess pension trust

25  contributions), 404(a)(3)(A) and (B) (to the extent relating

26  to excess stock bonus and profit-sharing trust contributions),

27  and 1212 (relating to capital losses) of the Internal Revenue

28  Code, except that, subject to the same limitations, the term:

29         (a)  "Taxable income," in the case of a life insurance

30  company subject to the tax imposed by s. 801 of the Internal

31  Revenue Code, means life insurance company taxable income;

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  1  however, for purposes of this code, the total of any amounts

  2  subject to tax under s. 815(a)(2) of the Internal Revenue Code

  3  pursuant to s. 801(c) of the Internal Revenue Code shall not

  4  exceed, cumulatively, the total of any amounts determined

  5  under s. 815(c)(2) of the Internal Revenue Code of 1954, as

  6  amended, from January 1, 1972, to December 31, 1983;

  7         (b)  "Taxable income," in the case of an insurance

  8  company subject to the tax imposed by s. 831(b) of the

  9  Internal Revenue Code, means taxable investment income;

10         (c)  "Taxable income," in the case of an insurance

11  company subject to the tax imposed by s. 831(a) of the

12  Internal Revenue Code, means insurance company taxable income;

13         (d)  "Taxable income," in the case of a regulated

14  investment company subject to the tax imposed by s. 852 of the

15  Internal Revenue Code, means investment company taxable

16  income;

17         (e)  "Taxable income," in the case of a real estate

18  investment trust subject to the tax imposed by s. 857 of the

19  Internal Revenue Code, means the income subject to tax,

20  computed as provided in s. 857 of the Internal Revenue Code;

21         (f)  "Taxable income," in the case of a corporation

22  which is a member of an affiliated group of corporations

23  filing a consolidated income tax return for the taxable year

24  for federal income tax purposes, means taxable income of such

25  corporation for federal income tax purposes as if such

26  corporation had filed a separate federal income tax return for

27  the taxable year and each preceding taxable year for which it

28  was a member of an affiliated group, unless a consolidated

29  return for the taxpayer and others is required or elected

30  under s. 220.131;

31

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  1         (g)  "Taxable income," in the case of a cooperative

  2  corporation or association, means the taxable income of such

  3  organization determined in accordance with the provisions of

  4  ss. 1381 through 1388 of the Internal Revenue Code;

  5         (h)  "Taxable income," in the case of an organization

  6  which is exempt from the federal income tax by reason of s.

  7  501(a) of the Internal Revenue Code, means its unrelated

  8  business taxable income as determined under s. 512 of the

  9  Internal Revenue Code;

10         (i)  "Taxable income," in the case of a corporation for

11  which there is in effect for the taxable year an election

12  under s. 1362(a) of the Internal Revenue Code, means the

13  amounts subject to tax under s. 1374 or s. 1375 of the

14  Internal Revenue Code for each taxable year;

15         (j)  "Taxable income," in the case of a limited

16  liability company, other than a limited liability company that

17  is classified as a partnership for federal income tax purposes

18  or that has a single member and is disregarded as an entity

19  separate from its owner for federal income tax purposes, as

20  defined in and organized pursuant to chapter 608 or qualified

21  to do business in this state as a foreign limited liability

22  company or other than a similar limited liability company

23  classified as a partnership for federal income tax purposes

24  and created as an artificial entity pursuant to the statutes

25  of the United States or any other state, territory,

26  possession, or jurisdiction, if such limited liability company

27  or similar entity is taxable as a corporation for federal

28  income tax purposes, means taxable income determined as if

29  such limited liability company were required to file or had

30  filed a federal corporate income tax return under the Internal

31  Revenue Code;

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  1         (k)  "Taxable income," in the case of a taxpayer liable

  2  for the alternative minimum tax as defined in s. 55 of the

  3  Internal Revenue Code, means the alternative minimum taxable

  4  income as defined in s. 55(b)(2) of the Internal Revenue Code,

  5  less the exemption amount computed under s. 55(d) of the

  6  Internal Revenue Code.  A taxpayer is not liable for the

  7  alternative minimum tax unless the taxpayer's federal tax

  8  return, or related federal consolidated tax return, if

  9  included in a consolidated return for federal tax purposes,

10  reflect a liability on the return filed for the alternative

11  minimum tax as defined in s. 55(b)(2) of the Internal Revenue

12  Code;

13         (l)  "Taxable income," in the case of a taxpayer whose

14  taxable income is not otherwise defined in this subsection,

15  means the sum of amounts to which a tax rate specified in s.

16  11 of the Internal Revenue Code plus the amount to which a tax

17  rate specified in s. 1201(a)(2) of the Internal Revenue Code

18  are applied for federal income tax purposes.

19         Section 5.  Section 608.471, Florida Statutes, 1998

20  Supplement, is amended to read:

21         608.471  Tax exemption on income of certain limited

22  liability companies.--

23         (1)  A limited liability company classified as a

24  partnership for federal income tax purposes, or a

25  single-member limited liability company that has a single

26  member and is disregarded as an entity separate from its owner

27  for federal income tax purposes, and organized pursuant to

28  this chapter or qualified to do business in this state as a

29  foreign limited liability company is not an "artificial

30  entity" within the purview of s. 220.02 and is not subject to

31  the tax imposed under chapter 220.

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    Florida House of Representatives - 1999                HB 1023

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  1         (2)  The income of a limited liability company that is

  2  classified as a partnership for federal income tax purposes,

  3  or that is a single-member limited liability company that has

  4  a single member and is disregarded as an entity separate from

  5  its owner for federal income tax purposes, and that is

  6  organized pursuant to this chapter or is qualified to do

  7  business in this state as a foreign limited liability company

  8  shall not be subject to the Florida Income Tax Code and the

  9  tax levied pursuant to chapter 220.

10         (3)  For purposes of taxation under chapter 220, a

11  limited liability company formed in this state or authorized

12  to transact business in this state as a foreign limited

13  liability company shall be classified as a partnership and any

14  limited liability company that has a single member shall be

15  disregarded as an entity separate from its owner for federal

16  income tax purposes, or, if applicable, unless classified

17  otherwise for federal income tax purposes, in which case the

18  limited liability company shall be classified identically to

19  its classification for federal income tax purposes.  For

20  purposes of taxation under chapter 220, a member or an

21  assignee of a member of a limited liability company formed in

22  this state or qualified to do business in this state as a

23  foreign limited liability company shall be treated as a

24  resident or nonresident partner unless classified otherwise

25  for federal income tax purposes, in which case the member or

26  assignee of a member shall have the same status as such member

27  or assignee of a member has for federal income tax purposes.

28         Section 6.  Paragraph (d) of subsection (1) of section

29  608.441, Florida Statutes, is amended to read:

30         608.441  Dissolution.--

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  1         (1)  A limited liability company organized under this

  2  chapter shall be dissolved upon the occurrence of any of the

  3  following events:

  4         (d)  When a limited liability company has no fewer than

  5  two members.

  6         Section 7.  Paragraph (a) of subsection (1) of section

  7  199.023, Florida Statutes, 1998 Supplement, is amended to

  8  read:

  9         199.023  Definitions.--As used in this chapter:

10         (1)  "Intangible personal property" means all personal

11  property which is not in itself intrinsically valuable, but

12  which derives its chief value from that which it represents,

13  including, but not limited to, the following:

14         (a)  All stocks or shares of incorporated or

15  unincorporated companies, business trusts, and mutual funds.

16  Any interest as a member in a limited liability company that

17  is classified as a partnership for federal income tax purposes

18  or that is a single-member limited liability company that is

19  disregarded as an entity separate from its owner for federal

20  income tax purposes.

21         Section 8.  Paragraph (c) of subsection (1) of section

22  199.185, Florida Statutes, 1998 Supplement, is amended to

23  read:

24         199.185  Property exempted from annual and nonrecurring

25  taxes.--

26         (1)  The following intangible personal property shall

27  be exempt from the annual and nonrecurring taxes imposed by

28  this chapter:

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

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

31  partner in a limited partnership registered with the

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  1  Securities and Exchange Commission pursuant to the Securities

  2  Act of 1933, as amended. Any interest as a member in a limited

  3  liability company that is classified as a partnership for

  4  federal income tax purposes or that is a single-member limited

  5  liability company that is disregarded as an entity separate

  6  from its owner for federal income tax purposes.

  7         Section 9.  This act shall take effect July 1, 1999.

  8

  9            *****************************************

10                          SENATE SUMMARY

11    Provides for exemption of single-member limited liability
      companies that are disregarded as entities separate from
12    their owners for federal income tax purposes from state
      corporate income taxation. Provides further that
13    ownership interests in such entities are not subject to
      intangible personal property taxes.
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