Did the out-of-state securitization entities acquire a Florida commercial domicile?

Subject

Commercial Domicile

Plain-English summary

The securitization corporations, trusts, and REMIC did not have a Florida commercial domicile for annual intangible-tax purposes. They were organized outside Florida, maintained principal offices and trustees outside Florida, had no Florida officers, and performed no executive or management functions or business-course decisions in Florida.

The finance company serviced receivables from Florida, but the trustees retained ownership and control, received reports, and administered the structures outside the state. The trusts' books and records were also kept outside Florida.

What this means for you

Florida servicing activity did not by itself establish the entities' commercial domicile. The ruling focused on where executive and management functions occurred, where the course of business was determined, and where trustees and records were located.

Common questions

Q: Did Florida loan servicing create commercial domicile? No, on these facts.

Q: Did Florida-resident directors change the result? No. The ruling emphasized that no officers, board meetings, or management decisions were in Florida.

Q: Was the REMIC subject to Florida intangible tax? No. It was neither legally nor commercially domiciled in Florida.

Citations and references

• Fla. Stat. § 199.175(1) — commercial domicile
• Fla. Stat. § 199.175(2)(b)2. — REMIC and investment-entity situs
• Fla. Admin. Code r. 12C-2.006(3) — trust situs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00C2-003

Original ruling text

SUMMARY

QUESTION: Will a securitization trust that purchases
accounts receivable from a finance company operating in
Florida, and selling shares of beneficial interest to the
general public, have a commercial domicile in Florida?

ANSWER - BASED ON FACTS BELOW: A securitization trust
organized under the laws of a state other than Florida,
having no officers in Florida and no determination of the
course of business operations made in Florida, does not
have a commercial domicile in Florida

Apr 19, 2000

Re: Technical Assistance Advisement No. 00C2-003
Intangible Tax - Commercial Domicile
Section 199.175(1), F.S.
XXX (Finance Company)
XXX (Securitization Corporation I)
XXX (Securitization Corporation II)
XXX (Securitization Corporation III)
XXX (Securitization Corporation IV)
XXX (Securitization Corporation V)
XXX (Holding Corporation)
XXX (Securitization Trust I - Trustee)
XXX (Securitization Trust II - Trustee II)
XXX (Securitization Trust III and IV - Trustee III and IV)
XXX (Securitization Trust V - Trustee V)

Dear :

This letter is in response to your request for technical
advice with respect to whether the trusts and securitization
corporations described below have commercial domicile in the
State of Florida for intangible tax purposes.

FACTS AS PRESENTED BY TAXPAYER

Finance Company is a financial services company offering
secured commercial and consumer financing to businesses and
individuals. Finance Company may or may not have corporate
domicile, for Florida intangible tax purposes, in the State of
Florida. Finance Company sells some of its loans and accounts
receivable ("Assets") to various entities in connection with
certain asset securitizations (i.e., the public offering of
beneficial interests in the Assets). In each case, Finance
Company (either directly or through third parties) provides
certain ministerial loan servicing functions in connection with
the securitizations pursuant to standard pooling and servicing
agreements (or similar agreements) acceptable to the public
securitization markets. The various securitization arrangements
are described in the following situations.

In Situation #1, Finance Company sells certain pools of
Assets to a wholly owned limited purpose corporation
("Securitization Corporation I") for ultimate securitization.
Securitization Corporation I issues beneficial interests in
these pools of Assets through a trust or series of trusts
established to own the pools of Assets that have been
transferred to Securitization Corporation I by Finance Company.
The trust is a real estate mortgage investment conduit ("REMIC")
that is organized under the laws of a state other than Florida,
and maintains its principal office outside of the State of
Florida. The trustee for the REMIC ("Trustee I") is a financial
institution that is organized under the laws of a state other
than Florida, and maintains its principal office outside of the
State of Florida. Trustee I, on behalf of the REMIC, has issued
and may in the future issue certificates in one or more series
representing beneficial interests in the pools of Assets that
have been transferred to the REMIC. Trustee I administers the
trusts from places of business located outside the State of
Florida, and maintains its records in a location outside the
State of Florida. All the documentation in connection with the
trust was executed and delivered outside the State of Florida.

Trustee I has engaged Finance Company as the servicer of
these pools of Assets, but has retained ownership and control
over the Assets pursuant to the securitization documents.

Trustee I receives from Finance Company a periodic asset report,
and performs an analysis of the information. Securitization
Corporation I is organized under the laws of, and maintains its
principal place of business in, a state other than Florida. No
officer of Securitization Corporation I resides in Florida, but
members of the Board of Directors may reside in Florida. No
meetings of the Board of Directors of Securitization Corporation
I will be held in Florida. All original legal documents with
respect to Securitization Corporation I will be executed,
administered and maintained outside of Florida, but books,
records and financial statements of Securitization Corporation I
may or may not be maintained and administered in Florida by
Securitization Corporation I or by an agent providing such
services.

In Situation #2, Finance Company has from time to time sold
to a wholly owned securitization conduit ("Securitization
Corporation II") certain of Finance Company's receivables.
These sales represent assets that are accumulated and warehoused
pending sale in a publicly offered securitization. These
receivables are then sold to institutional investors under an
agreement. The underlying pool of Assets related to the
receivables is managed by a financial institution acting as
agent ("Trustee II") for the institutional investors. Trustee
II is organized under the laws of a state other than Florida,
and maintains its principal office outside the State of Florida.

Trustee II has engaged Finance Company as the servicer of
these pools of Assets, but has retained ownership and control
over the Assets pursuant to the securitization documents.
Pursuant to the securitization documents, employees of Finance
Company prepare periodic reports (in computer generated format)
with regard to the Assets that are part of the securitization.
The reports are delivered periodically to Trustee II, who
reviews and balances the reporting and has the authority to
reject Finance Company's tabulations. Securitization
Corporation II is organized under the laws of, and maintains its
principal place of business in, a state other than Florida. No
officer of Securitization Corporation II resides in Florida, but
members of the Board of Directors may reside in Florida. No
meetings of the Board of Directors of Securitization Corporation

II will be held in Florida. All original legal documents with
respect to Securitization Corporation II will be executed,
administered and maintained outside Florida, but books, records
and financial statements of Securitization Corporation II may or
may not be maintained and administered in Florida by
Securitization Corporation II or by an agent providing such
services.

In Situation #3, Finance Company sells certain of Finance
Company's receivables to a wholly owned limited purpose
corporation that is a securitization conduit ("Securitization
Corporation III"). These receivables represent assets that are
accumulated and warehoused pending sale in a publicly offered
securitization. The underlying pool of assets related to the
receivables is sold to institutional investors under an
agreement. The Assets are managed by an agent for the
investors. The agent ("Trustee III") is a financial institution
that is organized under the laws of a state other than Florida,
and maintains its principal office outside of the State of
Florida.

Trustee III has engaged Finance Company as the servicer of
these pools of Assets, but has retained ownership and control
over the Assets pursuant to the securitization documents. Some
payments from customers whose loans are being serviced by
Finance Company (or by subservicers on behalf of the Finance
Company) are made to a lockbox in Florida, which lockbox is
controlled by a financial institution operating in Florida and
in other states. Payments made to the lockbox are deposited by
such financial institution in accounts in Florida maintained by
Finance Company (or a subservicer). Funds in these accounts are
transferred, on at least a weekly basis, to Trustee III for
later distribution pursuant to the securitization documents.

Securitization Corporation III is organized under the laws
of, and maintains its principal place of business in, a state
other than Florida. Pursuant to the securitization documents,
employees of Finance Company prepare periodic reports for
Trustee III. These reports are subject to the review and
approval of Trustee III. In addition, an independent auditor
reviews the reports and servicing records on a periodic basis,

and provides such review to the Trustee. No officer of
Securitization Corporation III resides in Florida, but members
of the Board of Directors may reside in Florida. No meetings of
the Board of Directors of Securitization Corporation III will be
held in Florida. All original legal documents with respect to
Securitization Corporation III will be executed, administered
and maintained outside of Florida, but books, records and
financial statements of Securitization Corporation III may or
may not be maintained and administered in Florida by
Securitization Corporation III or by an agent providing such
services.

In Situation #4, Finance Company sells certain pools of
Assets to a wholly owned limited purpose corporation
("Securitization Corporation IV") for ultimate securitization.
Securitization Corporation IV issues beneficial interests in
these pools of Assets through a trust or series of trusts
established to own the pools of Assets that have been
transferred to Securitization Corporation IV by Finance Company.
The trustee for these trusts ("Trustee IV") is a financial
institution that is organized under the laws of a state other
than Florida, and maintains its principal office outside of the
State of Florida. Trustee IV has issued and may in the future
issue certificates in one or more series representing beneficial
interests in the pools of Assets that have been transferred to
the trusts. Trustee IV administers the trusts from places of
business located outside the State of Florida, and maintains its
records in a location outside the State of Florida. All the
documentation in connection with the trust was executed and
delivered outside the State of Florida.

Trustee IV has engaged Finance Company as the servicer of
these pools of Assets, but has retained ownership and control
over the Assets pursuant to the securitization documents. From
time to time, payments may be made to a lockbox located in
Florida and ultimately forwarded to Trustee IV in the same
manner as in Situation #3, above. Securitization Corporation IV
is organized under the laws of, and maintains its principal
place of business in, a state other than Florida. No officer of
Securitization Corporation IV resides in Florida, but members of
the Board of Directors may reside in Florida. No meetings of

the Board of Directors of Securitization Corporation IV will be
held in Florida. All original legal documents with respect to
Securitization Corporation IV will be executed, administered and
maintained outside Florida, but books, records and financial
statements of Securitization Corporation IV may or may not be
maintained and administered in Florida by Securitization
Corporation IV or by an agent providing such services.

In Situation #5, Finance Company sells certain pools of
Assets to a wholly owned limited purpose corporation
("Securitization Corporation V") for ultimate securitization.
Securitization Corporation V issues beneficial interests in
these pools of Assets through a trust or series of trusts
established to own the pools of Assets that have been
transferred to Securitization Corporation V by Finance Company.
The trustee for these trusts ("Trustee V") is a financial
institution that is organized under the laws of a state other
than Florida, and maintains its principal office outside the
State of Florida. Trustee V has issued and may in the future
issue certificates in one or more series representing beneficial
interests in the pools of Assets that have been transferred to
the trusts. Trustee V administers the trusts from places of
business located outside the State of Florida, and maintains its
records in a location outside the State of Florida. All the
documentation in connection with the trust was executed and
delivered outside of the State of Florida.

Trustee V has engaged Finance Company as the servicer of
these pools of Assets, but has retained ownership and control
over the Assets pursuant to the securitization documents.
Securitization Corporation V is organized under the laws of, and
maintains its principal place of business in, a state other than
Florida. No officer of Securitization Corporation V resides in
Florida, but members of the Board of Directors may reside in
Florida. No meetings of the Board of Directors of
Securitization Corporation V will be held in Florida. All
original legal documents with respect to Securitization
Corporation V will be executed, administered and maintained
outside Florida, but books, records and financial statements of
Securitization Corporation V may or may not be maintained and
administered in Florida by Securitization Corporation V or by an

agent providing such services.

In Situation #6, Finance Company is the owner of 100% of a
limited purpose corporation ("Holding Corporation") that will be
the holder of certain certificates issued by the REMIC discussed
in Situation #1. The Holding Corporation is organized under the
laws of, and maintains its principal place of business in, a
state other than Florida, and the certificates will be held
outside Florida. No officer of Holding Corporation resides in
Florida, but members of the Board of Directors may reside in
Florida. No meetings of the Board of Directors of Holding
Corporation will be held in Florida. All original legal
documents with respect to Holding Corporation will be executed,
administered and maintained outside Florida, but books, records
and financial statements of Holding Corporation may or may not
be maintained and administered in Florida by Holding Corporation
or by an agent providing such services.

REQUESTED ADVISEMENT

Based upon the information above, you have requested an
opinion confirming that neither Securitization Corporation I,
Securitization Corporation II, Securitization Corporation III,
Securitization Corporation IV, Securitization Corporation V,
Holding Corporation nor any of the trusts administered by
Trustee I, Trustee II, Trustee III, Trustee IV, or Trustee V
have commercial domicile in the State of Florida for intangibles
tax purposes.

LAW AND ANALYSIS

For annual intangible tax purposes, taxable situs in
Florida exists when an intangible asset is owned, managed or
controlled by a corporation that has acquired commercial
domicile in Florida. Commercial domicile of a corporation is
acquired in Florida when the corporation maintains in Florida
its chief or principal office where executive or management
functions are performed or where the course of business
operations is determined (See s. 199.175(1), F.S.).

Rule 12C-2.006(3), F.A.C., provides that the taxable situs

of a trust is in Florida if the following two conditions are
met: (1) the Trustee's usual place of business is in Florida and
(2) the books and records pertaining to the trust are kept in
Florida. Other conditions govern situations where the Trustee
has no principal place of business, but these conditions are not
applicable in this case, since each of Trustee I, Trustee II,
Trustee III, Trustee IV, and Trustee V is a financial
institution with its principal place of business located outside
of Florida.

Section 199.175(2)(b)2., F.S., provides the following
regarding REMICs:

An intangible owned by a real estate mortgage investment
conduit, a real estate investment trust, or a regulated
investment company, as those terms are defined in the
United States Internal Revenue Code of 1986, as amended,
shall not be deemed to have a taxable situs in this state
unless such entity has its legal or commercial domicile in
this state.

CONCLUSIONS

Whether the facts in Situations #1, #2, #3, #4, #5 or #6
meet the commercial domicile test is a function of what
constitutes "executive or management functions" and "course of
business operations" within the meaning of the commercial
domicile test. The Securitization Corporations are organized
under the laws of a state other than Florida, have no officers
who are residents of Florida, and do no business in Florida; no
executive or management functions are performed in Florida, and
no determination of the course of business operations is made in
Florida. Therefore, based upon the statute and the information
provided, the commercial domicile test is not met.

The REMIC referred to in Situation #1 is not legally or
commercially domiciled in Florida. Since the REMIC is not
organized under the laws of Florida and the principal office of
the REMIC is not in Florida, the REMIC is not subject to
intangible tax.

None of the Trusts would be domiciled in Florida because
the trustees' usual places of business, and the books and
records, are outside of Florida.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response, your request
and related backup documents are public records under Chapter
119, F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

J.V. Parramore, Jr.
Tax Law Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel

JVP/mh