Article By Shaun Blogg, Partner-in-Charge, West Palm Beach Office, "Tax Benefits of Florida for Hedge Funds and Private Equity," Featured in HFMWeek

Excerpt:

When doing business in Florida, it’s not about the taxes you pay; it’s about the taxes you don’t pay!

This being the case, Florida has long been a centre for new and expanding business, especially in the ‑ financial and service sectors, and has recently become the focal point for the relocation of hedge funds and private equity. Not only has Florida become a attractive to the fund managers but also to prime brokers, administrators, a attorneys and other service providers to the industry for reasons that include being where the hedge fund activity is and the state tax benefits.

As federal tax rates continue to climb – with the new additional 5% personal income tax on high income earners, the 3.8% Medicare tax on investment income, the 0.9% additional Medicare tax on business income, the 5% increase in capital gains tax, and the possibility of a change in the tax on carried interest – Florida’s appeal as a business-friendly tax jurisdiction will only continue to grow. As there is not much that can be done about the federal side, much can be done on the state side.

Florida currently has a corporate income tax rate of 5.5% on corporations that pay tax in their own right, more commonly known as “C Corporations”. It also has a sales and use tax of 6% and a number of other taxes and fees that are similar to those in most other states, including a county surtax, ad valorem property tax, documentary stamp tax, transfer tax and unemployment compensation tax, to name a few.

• No corporate income tax on S corporations
• No corporate income tax on limited partnerships
• No corporate income taxes on flow-through limited liability corporations
• No corporate franchise tax on capital stock
• No property tax on business inventories
• No state-level property tax
• No intangible personal property tax

• No personal income tax
• No estate tax
• No generation-skipping transfer tax
• No income tax on trusts
• No intangible personal property tax
• No withholding tax on non-resident shareholder income

• Capital investment credit
• Community contribution tax credit
• Enterprise zone jobs and property credits
• New markets tax credit

The benefits of living and working in Florida can be best illustrated by comparing state and city taxes in Florida with the range of taxes levied in Connecticut, Pennsylvania, Massachusetts and New York (all in the Northeastern United States) on $1m in income and an estate value of $10m.

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