Did a bank's automatic-investment account qualify as an exempt money deposit under Florida's 2006 intangible-tax rules?

Plain-English summary

In this 2006 intangible-tax ruling, a bank offered an automatic-investment program for customers' idle cash. The account paid interest tied to a four-week Treasury-bill rate, issued no shares or dividends, and was not organized as a mutual money market fund.

Florida treated the account as a mere time deposit of money and therefore not taxable under the cited intangible-tax provisions.

The ruling distinguished securities held under a related investment-services agreement. Any taxable securities the bank held as agent for an investor remained taxable to that investor on January 1 of the tax year.

What this means for you

This is a historical ruling under Florida's 2006 intangible-tax provisions. Its distinction was between an exempt deposit of money and taxable securities held by a bank as the investor's agent; later legal changes may produce a different result.

Common questions

Why was the account exempt? Florida characterized it as a mere time deposit of money, and the cited law exempted instruments included in the definition of money.

Did the exemption cover securities in the investment-services account? No. Taxable securities held by the bank as agent were taxable to the investor.

When were those securities tested for taxability? The ruling specified January 1 of the tax year.

Citations and references

• Fla. Stat. § 199.023(2) (2006 definition of money)
• Fla. Stat. § 199.185(1)(a) (2006 intangible-tax exemption for money)
• Fla. Admin. Code r. 12C-2.003(1) (cited intangible-tax rule)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 06C2-002

Original ruling text

SUMMARY
QUESTION: Are Account deposits exempt from Intangible Tax
ANSWER - Based on Facts Below: Yes, the Accounts are mere time deposits of money and not subject to tax.

August 8, 2006

Re: Technical Assistance Advisement No. 06C2-002
Intangible Tax
Account Deposit
Sections 199.023 and 199.185, F.S.
Rule 12C-2.003(1), F.A.C.
XXX (hereinafter "Bank")
XXX (hereinafter "Account")
Dear:
Your letter requesting a Technical Assistance Advisement has been referred to this office for response. The
specific scenario for which advice has been requested is summarized below.
Facts as Presented by Petitioner
The Bank established the Account primarily for its trust department, but without some of the restrictions established
by the Depository Institute Deregulation Commissions Rule 1204.121. The Account requires no minimum balance, no
requirement for a seven day notice prior to withdrawal or transfer of funds, no limitations on the number of withdrawals
and transfers, and no restrictions on the number of additional deposits.
The Account has the following characteristics:

1. The Account is an automatic investment program for idle cash balances held in accounts by the customers;
2. The balances invested in the account will earn interest at a preferred rate equal to a 4-week U.S. Treasury Bill rate
   as quoted in "The Wall Street Journal";
3. The Account is available exclusively to customers participating in the automatic investment program;
4. The Account was not established or organized as a Mutual Money Market Fund;
5. The Account does not issue any shares or pay any dividends;

6. The rate of interest paid through the automatic investment program will be adjusted on a weekly basis to reflect any
increases or decreases in the T-Bill Rate;

7. The balances invested through the automatic investment program will be insured by the Federal Deposit Insurance
   Corporation up to the full amount permitted under applicable law;
8. Balances invested through the automatic investment program in excess of applicable Federal Deposit Insurance
   Corporation insurance limits will be secured by the Bank's pledge of marketable investments securities, held by an
   unaffiliated third-party for the purpose of guaranteeing repayment of all amounts invested through the automatic
   investment program.
   Request for Advisement
   Based on the facts described above, you request a Technical Assistance Advisement stating that the Account
   deposit product will be exempt from Florida Intangible Personal Property Tax.
   Provisions of Law and Discussion
   Section 199.023 (2), F.S., includes in the definition of "money", United States legal tender, certificates of deposit,
   and similar instruments that are held in by a taxpayer or deposited with or held in a bank.
   Section 199.185(1)(a), F.S., exempts instruments that are included in the definition of "money" from intangible tax.
   In addition to the "time" Account that is established for the benefit of the trust department, an Investment Services
   Account Agreement is established between the trust department and the investor. The agreement provides for the
   bank to act as agent for the investor in maintaining an investment services account for all cash, securities, and other
   property which the investor may deliver to the bank. According to the agreement, the cash is to be held in an interest
   bearing money market fund or short-term cash investment.
   Position of the Department
   Where the deposit is a mere time deposit of money, the Account will not be taxable for intangible tax purposes.
   However, any and all taxable securities held by the bank as agent for the investor under the Investment Services
   Account Agreement will be taxable to the investor on January 1 of the tax year.
   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,
Celestine Grantham Turner
Senior Tax Specialist
Technical Assistance and Dispute Resolution
CG/mh
Record ID: 18850