Was a federal-base ground lease under the Military Housing Privatization Initiative subject to Florida's governmental leasehold intangible tax?

Plain-English summary

The Florida Department of Revenue concluded that a private developer's ground lease of federal military-base land under the Military Housing Privatization Initiative was not subject to Florida's governmental leasehold intangible personal property tax.

The project involved privatized housing for service members and their families. Although the long-term lease otherwise appeared to meet Florida's criteria for a taxable governmental leasehold, federal law did not provide congressional consent for state taxation of an MHPI lease.

The Department distinguished ordinary military-property leases covered by 10 U.S.C. § 2667(f), which permits state or local taxation. The MHPI statute specifically made that section inapplicable, leaving the federal-jurisdiction rule in International Business Machines Corp. v. Vaughn controlling.

The conclusion addressed only the leasehold interest in the underlying land, not housing improvements or other property.

What this means for you

Military-housing project companies

Confirm the federal statutory authority for the particular lease. The result turned on the MHPI's exclusion from the federal consent-to-tax provision.

Property and tax professionals

Do not extend this conclusion to improvements or other property. The Department expressly limited the advisement to the underlying ground lease.

Common questions

Q: Was the MHPI ground lease subject to Florida's governmental leasehold intangible tax?
A: No.

Q: Did the ruling decide the tax treatment of improvements?
A: No.

Citations and references

• Fla. Stat. §§ 196.199(2)(b), 199.023(1)(d), 199.032, and 213.22
• 10 U.S.C. §§ 2667(f) and 2878(e)
• International Business Machines Corp. v. Vaughn, 98 So. 2d 747 (Fla. 1957)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 13C2-004

Original ruling text

Executive Director
Marshall Stranburg

QUESTION: IS THE LEASE OF LAND UNDER THE MILITARY HOUSING PRIVATIZATION
INITIATIVE SUBJECT TO THE GOVERNMENT LEASEHOLD INTANGIBLE PERSONAL
PROPERTY TAX?
ANSWER: SINCE CONGRESS HAS NOT PROVIDED CONSENT TO FLORIDA TO IMPOSE
TAXES ON LEASES UNDER THE MILITARY HOUSING PRIVATIZATION INITIATIVE, THE
INTERNATIONAL BUSINESS MACHINES CORPORATION V. VAUGHN CASE CONTROLS AND
TAXPAYER’S LEASE OF LAND FROM THE GOVERNMENT WITHIN BASE IS NOT BE
SUBJECT TO GOVERNMENTAL LEASEHOLD INTANGIBLE PERSONAL PROPERTY TAX.
October 07, 2013
Re:

Technical Assistance Advisement No. 13C2-004
Intangible Tax - Governmental Leasehold Interest
XXX (“Taxpayer”)
Section 196.199, F.S.

Dear XXX:
This is in response to your letter dated XXX, requesting a determination regarding the imposition
of governmental leasehold intangible personal property tax on a ground lease entered into by a private
lessee for land located within a military base. This response constitutes a Technical Assistance
Advisement under Chapter 12-11, Florida Administrative Code (F.A.C.), and is issued to you under the
authority of section 213.22, Florida Statutes (F.S.).
FACTS PROVIDED BY TAXPAYER
Pursuant to the Military Housing Privatization Initiative (“MHPI”), the United States XXX
(“Government”) solicited proposals from qualified entities desiring to enter into a business arrangement
with the Government in connection with the Government’s XXX (the “Project”), resulting in the Project
being awarded to the Taxpayer.
The Project involves privatization of housing to Uniformed Service members and their families in
order to accelerate housing improvements and alleviate shortages where they exist, thereby reducing
waiting times for adequate housing and improving morale of Government personnel. Pursuant to the
Project, the Government will convey existing housing units and certain associated improvements located
on XXX bases to the Taxpayer at transaction closing. The Taxpayer will obtain financing; provide
required equity; and, plan, design, develop, renovate, demolish, construct, own, operate, maintain, and
manage a rental housing development for a minimum of XXX military families for XXX years at the
referenced facilities.
Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – James McAdams, Director  Information Services – Damu Kuttikrishnan, Director

www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement 13C2-004
Page 2

Various entities will be formed by the Taxpayer that will be responsible for certain aspects of the
Project. One of these entities (the “Lessee”) will enter into a XXX-year ground lease with the Government
for land located within XXX (“Base”). XXX rent will be paid by the Lessee to the Government for the
ground lease, and the Lessee or a related entity will own the existing housing units and associated
improvements located on the leased land and will also construct additional housing units on the leased
land. The housing units will be rented by the Lessee or related entity to service members and their
families.
REQUESTED ADVISEMENT
The Taxpayer requests that the Department determine that the Lessee’s lease of land from the
Government within Base should be treated as intangible personal property rather than real property, for
tax purposes, but will not be subject to governmental leasehold intangible personal property tax imposed
under s. 196.199(2)(b), F.S., due to a Florida Supreme Court ruling in the case of International Business
Machines Corporation v. Vaughn, 98 So.2d 747 (Fla. 1957).
LAW AND DISCUSSION
Under current law, the county property appraisers, and not the Department of Revenue, have the
authority and responsibility to determine whether real property is entitled to an exemption from ad
valorem property tax. The primary jurisdiction for making these factual determinations rests with the
county property appraiser, upon a proper application for exemption made consistent with s. 196.011,
Florida Statutes. Therefore, the remaining discussion will only address the government leasehold
intangible personal property tax.
Section 196.199(2)(b), F.S., treats certain leasehold interests in governmentally-owned property as
intangible personal property rather than as real property. The governmental leasehold intangible personal
property tax is imposed on those leasehold interests defined under s. 199.023(1)(d), F.S. (2005), at the rate
of $.50 per $1,000 provided in section 199.032, F.S., based on the value of the leasehold estate on January
1 of each tax year.
In this case, the lease is for a term of XXX years for real estate located at Base, which is owned by
the federal government. Rental payments are due from the Lessee to Base pursuant to the lease agreement
creating the leasehold estate, and the leased property will be used by the Lessee for residential and/or
commercial purposes. Consequently, the lease seems to meet the required criteria for imposition of the
governmental leasehold intangible personal property tax.
However, as noted by the Taxpayer, International Business Machines Corporation v. Vaughn,
supra, addressed the issue whether equipment owned by IBM XXX was subject to taxation by Okaloosa
County. The appellant asked the court to declare that the Tax Assessor and Tax Collector be restrained
from assessing and collecting taxes on the property. Although the Florida Supreme Court held that a
cession of exclusive jurisdiction to the United States proscribed the state or local governments from taxing
property located on a military base, Attorney General Opinion 75-198 determined this case is not
controlling, since there was no federal statute permitting the taxation of the interest sought to be taxed.
The Florida Supreme Court recognized that the consent of Congress to the tax would have altered the
conclusion. Id. at 750

Technical Assistance Advisement 13C2-004
Page 3

10 U.S.C. Sec. 2667(f) addresses the treatment of a lessee’s interest in property of military bases
and specifically provides that the interest of a lessee of property leased under this section may be taxed by
State or local governments. Thus, a lease covered by 10 U.S.C. Sec. 2667(f) could be taxed by Florida
because the federal government has provided consent to Florida to impose taxes. However, the MHPI,
unlike most other leases of military property, is not governed by 10 U.S.C. Sec. 2667(f). 10 U.S.C. Sec.
2878(e) specifically addresses the MHPI and clearly provides that Sec. 2667 is not applicable to the
MHPI. Since there is no other provision consenting to state taxation, Congress has not consented to state
taxation of a lease under the MHPI.
CONCLUSION
Since Congress has not provided consent to Florida to impose taxes on leases under the MHPI,
the International Business Machines Corporation v. Vaughn case controls and Taxpayer’s lease of land
from the Government within Base is not subject to governmental leasehold intangible personal property
tax. Please note that this advisement addresses only the leasehold interest in the underlying land, and not
improvements or any other property.
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 Turner
Tax Law Specialist
Technical Assistance and Dispute Resolution

Record ID: 147972