Were shares of a money-market fund holding Student Loan Marketing Association obligations exempt from Florida intangible tax?

Subject

Valuation - Business Trust

Plain-English summary

Florida residents' shares of the money-market fund were exempt from intangible tax as long as the fund's January 1 portfolio consisted only of exempt assets. The fund held cash, United States government securities, and obligations of the Student Loan Marketing Association.

The ruling applied federal law deeming the association's obligations United States government obligations for purposes of the state-tax immunity in 31 U.S.C. § 3124.

What this means for you

The federal treatment of the association's obligations supplied their exempt status, but the share exemption still depended on the entire portfolio meeting Florida's all-exempt test at the valuation date.

Common questions

Q: Were Student Loan Marketing Association obligations treated as federal obligations? Yes, for the property-tax rule cited in the ruling.

Q: Did owning one exempt federal obligation make all fund shares exempt? No. The entire January 1 portfolio had to consist only of exempt assets.

Q: Which investors did the ruling discuss? Florida residents owning shares of the fund.

Citations and references

• Fla. Stat. § 199.185(1)(i) — fund-share exemption
• 20 U.S.C. § 1087-2 and 31 U.S.C. § 3124 — federal status and tax immunity
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93C2-003

Original ruling text

Jan 19, 1993

Re: Technical Assistance Advisement 93(C)2-003
Intangible Tax - Valuation - Business Trust
XXX (Trust)
XXX (Fund)

Dear :

Your letter requesting a Technical Assistance Advisement
has been received by this office. Your specific request asks if
the shares of a Massachusetts type business trust which holds
only obligations issued by the Student Loan Marketing
Association is subject to Florida's intangible tax.

The Trust is a Massachusetts business trust, an investment
company registered with the SEC, which offers redeemable
securities in respect to 13 series or sub-trusts on a continuous
basis. The offerings are registered with the SEC and the
states, including Florida. One of the sub-trusts is a moneymarket mutual fund (the "Fund"). The Fund holds all its assets
in either cash or United States Government securities. A
portion of Fund's holdings include obligations of the Student
Loan Marketing Association.

Section 199.185(1)(i), F.S., provides an exemption from tax
for shares of a fund whose portfolio of assets consists solely
of assets which are exempt from Florida's intangible tax. Based
upon this statutory provision Florida residents owning shares of
such a fund would have no tax liability with regard to the
shares.

Title 20, Section 1087-2, USC provides that the obligations
of the Association shall be deemed to be obligations of the
United States Government for the purposes of section 3124 of
Title 31, USC. This provision causes the obligations of the
Student Loan Marketing Association to be exempt from state and
local taxation on taxes based upon property value.

Applying this statutory provision to the Fund, the shares
of this fund will be exempt from Florida's intangible tax so
long as the portfolio of assets, on January 1 of each year,
consists only of assets which are exempt from Florida's
intangible tax.

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 and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

J.V. Parramore, Jr.
Technical Assistant
Technical Assistance

JVP/mh