Were Canadian Registered Retirement Savings Plans exempt from Florida's annual intangible personal property tax?

Plain-English summary

The Canadian Registered Retirement Savings Plans were not exempt from Florida's annual intangible personal property tax. Florida's exemption covered property held in retirement arrangements qualified under specified Internal Revenue Code provisions. The Department found that the Canadian RRSPs, despite their similarity to U.S. IRAs, did not qualify under section 408(a).

The taxpayers had treated the RRSP investments as nonexempt on their January 1, 2001 and January 1, 2002 returns. The Department said those returns were properly filed and did not need amendment.

What this means for you

Economic similarity to a U.S. retirement account was not enough. The Florida exemption incorporated specific federal qualification provisions, and the foreign plan did not meet them.

Common questions

Q: Did the Department exempt RRSPs because Canada and the United States recognize tax deferral? No.

Q: Why did the exemption fail? The plans did not qualify as IRAs under Internal Revenue Code section 408(a).

Q: Did these taxpayers need to amend the returns on which they paid intangible tax? No.

Citations and references

• Fla. Stat. §§ 199.032 and 199.185(1)(e) — annual intangible tax and qualified-plan exemption
• I.R.C. § 408(a) — individual retirement account qualification
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02C2-006

Original ruling text

SUMMARY

QUESTION: Are Canadian Registered Retirement Savings Plans
exempt from intangible tax?

ANSWER - Based on Facts Below: No. Canadian Registered
Retirement Savings Plans, although very similar to U.S.
Individual Retirement Accounts, do not meet the
requirements for exemption under section 408(a) of the
Internal Revenue Code. Therefore, they are not exempt from
intangible tax.

Jun 26, 2002

Re: Technical Assistance Advisement No. 02C2-006
Intangible Tax
Exemption from Florida Intangible Tax for Canadian Citizens
Registered Retirement Savings Plan
Sections 199.032 and 199.185(1)(e), F.S.
XXX ("Taxpayers")

Dear :

This is in response to your request for a Technical
Assistance Advisement in which you ask if your investments in
Canadian Registered Retirement Savings Plans ("RRSP's") are
exempt from Florida intangible tax. The specific facts for
which advice has been requested are presented below.

Facts Presented by Petitioner

Taxpayers are Canadian citizens that relocated permanently
to Florida in September 2000. Prior to their immigration to the
United States in 2000, they made investments in Canadian
Registered Retirement Savings Plans ("RRSP's") that they still
hold today.

An RRSP is the Canadian equivalent of the U.S. Individual

Retirement Account ("IRA"), a government sanctioned tax deferral
mechanism. The RRSP allows Canadian individual taxpayers to
deduct, from the income subject to tax, specified amounts
contributed to the Plan (up to 18% of a taxpayers prior year's
earned income, to a maximum of $13,100 Canadian dollars or
approximately US $9,000 annually). These amounts are invested
primarily in securities, earning interest, dividends or capital
gains depending on the Plan chosen by the taxpayer. These
earnings accumulate in the Plan free of current tax, enabling
the savings to grow more rapidly. As with the U.S. IRA, the
RRSP merely provides a deferral of tax. When the funds are
eventually withdrawn, the full amount of the withdrawal is
subject to income tax. The U.S. Internal Revenue Service,
through its treaty with Canada, recognizes the Canadian RRSP as
a tax deferral mechanism; and earnings within the taxpayer's
RRSP are not subject to U.S. current tax.

Requested Ruling by the Petitioner

Since the Canadian RRSP mirrors the U.S. IRA, and the IRA
is exempt for purposes of the intangible tax, you feel that RRSP
is also exempt. At the time of preparing the intangible tax
returns for years January 1, 2001, and January 1, 2002, you
chose to treat your Canadian RRSP investments as non-exempt
(thereby paying intangible tax on these investments), since you
did not have an official and binding answer to their treatment
for tax purposes.

You seek the Department's confirmation that Canadian RRSP's
are exempt for purposes of the intangible tax, and you would
appreciate guidance on how you should proceed in amending the
2001 and 2002 tax returns that you have already filed with the
Department of Revenue.

Law and Discussion

Section 199.032, F.S., imposes the annual intangible tax on
the just valuation of all intangible property that has a taxable
situs in this state subject only to the exemptions and credits
allowed by law. Section 199.185(1)(e), F.S., provides that
intangible personal property held in trust pursuant to any stock

bonus, pension, or profit sharing plan or any individual
retirement account which is qualified under s. 530, s. 401, s.
408, or s. 408A of the United States Internal Revenue Code, 26
U.S.C. ss. 530, 401, 408, and 408A, as amended, is exempt from
intangible tax.

Conclusion

Although Canadian registered retirement savings plans are
similar to individual retirement accounts (IRA's), they do not
meet the requirements for qualification as IRA's under section
408(a) of the Internal Revenue Code. As a result, the earnings
of such a plan are currently includable in the gross income of
the beneficiary of the plan for United States income tax
purposes. The beneficiary of such a plan may elect to defer
United States federal income tax on certain current-year
earnings of the plan that are not distributed to the
beneficiary.

Canadian RRSP's, as stated above, although very similar to
U.S. IRA's, do not meet the requirements for exemption under
section 408(a) of the Internal Revenue Code. Therefore, your
tax returns are properly filed, and there is no need to amend
these returns.

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 interpretation of the
statutes or rules upon which this advise 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
199, 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,

Baldan E. Sulker
Senior Tax Specialist
Technical Assistance & Dispute Resolution
Office of General Counsel

BES/mh