Were a qualifying Florida-focused investment fund and its common and preferred shares exempt from Florida's former intangible tax?

Subject

Valuation - Business Trust

Plain-English summary

The Department answered all three exemption questions yes. This second revision expanded the request to cover preferred as well as common shares of a newly organized closed-end fund structured as a Massachusetts business trust.

Shares of the fund were wholly exempt when the relevant portfolio consisted solely of exempt obligations of Florida and its political subdivisions or agencies, or of the United States and its agencies, instrumentalities, and territories. The ruling also approved full share exemption where the fund had held non-exempt securities during the year but held only exempt securities on the last business day, applying the cited January 1 annual-valuation rule.

The fund itself was exempt because it was organized under the Investment Company Act of 1940 and had no Florida location, employees, agents, or representatives; its principal business office and asset management were in Minnesota.

What this means for you

This ruling was tied to the former Florida intangible personal property tax, the fund's exact investment-company structure, the composition of its portfolio at the tested valuation point, and its lack of Florida operational presence. It is historical guidance, not a current blanket exemption for investment funds.

Common questions

Q: Did the ruling cover both common and preferred fund shares? Yes. That was the purpose of this second revision.

Q: Did holding non-exempt securities earlier in the year automatically defeat the share exemption? No. The Department answered the fund's second question affirmatively where only exempt securities were held on the last business day of the year.

Q: Was the investment fund itself exempt? Yes, on the specific organizational and out-of-state facts described.

Citations and references

• Fla. Stat. § 199.032 — former annual intangible personal property tax
• Fla. Stat. § 199.103(2) — January 1 valuation
• Fla. Stat. § 199.185(1)(d) — exempt government obligations
• Fla. Stat. § 199.185(1)(g) — investment-company asset exemption
• Fla. Stat. § 199.185(1)(i) — unit investment trust exemption
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93C2-004S

Original ruling text

Status: Supersedes TAA 93C2-004R, February 24, 1993 which
supersedes TAA 93C2-004, January 25, 1993

May 12, 1993

Re: Technical Assistance Advisement No. 93(C)2-004S (Second
Revision)
Intangible Tax - Valuation - Business Trust
ss. 199.103(2) and 199.185(1)(i), F.S.
XXX (the Fund)

Dear :

This is in response to your request for a revised technical
assistance advisement to include preferred shares of stock as
well as common shares of stock in the Fund. All other
information remains the same as the previous request for
advisement.

Facts

The Fund is a newly organized closed-end management company
that will be registered under the Investment Company Act of
1940, as amended. The Fund was created under the laws of the
Commonwealth of Massachusetts under a declaration of trust dated
December 29, 1992, as what is commonly known as a Massachusetts
business trust. The principal business office of the Fund, from
which the Fund's assets will be managed, is located in
Minneapolis, Minnesota.

The Fund intends to invest substantially all of its assets
in tax-exempt municipal obligations issued by the State of
Florida, its instrumentalities, and political subdivisions. For
defensive purposes, the Fund also reserves the right to invest
any percent of its total assets in other federally tax-exempt
securities or in U.S. government securities. The investment
objective of the Fund is to provide current income exempt from
regular federal income tax by investing in Florida municipal
obligations exempt from the Florida intangible personal property

tax.

Requested Advisement

1. Will shares of the Fund be wholly exempt from the tax
   on intangible personal property imposed by s. 199.032,
   F.S., if on January 1 of each year the portfolio of
   the Fund consists solely of obligations of the State
   of Florida, its political subdivisions and agencies,
   and the United States Government, its agencies,
   instrumentalities, and territories?
2. If the Fund holds non-exempt securities at any time
   during the calendar year, but on the last business day
   of such calendar year holds solely exempt securities,
   will shares of the Fund be wholly exempt from the
   intangible personal property tax?
3. Will the Fund be exempt from the tax on intangible
   personal property imposed by s. 199.032, F.S.?

Discussion and Law

1. In accordance with s. 199.185(1)(i), F.S., units of a
   unit investment trust organized under an agreement or
   declaration of trust and registered under the
   Investment Company Act of 1940, as amended, whose
   portfolio of assets consists solely of assets exempt
   under this section shall be exempt from the tax
   imposed under s. 199.032, F.S. Notes, bonds and other
   obligations issued by the State of Florida or its
   municipalities, counties, and other taxing districts,
   or by the United States Government and its agencies
   are exempt as provided in s. 199.185(1)(d), F.S.
2. Section 199.103, F.S., states that all intangible
   personal property shall be subject to the annual tax
   at its just valuation as of January 1 of each year,
   unless exempt under s. 199.185, F.S.
3. Section 199.185(1)(g), F.S., exempts the assets owned
   by a company organized under the Investment Company
   Act of 1940. The Fund will have no location,
   employees, agents or representatives in the State of
   Florida. Further, the principal business location of

the Fund is outside of Florida.

Conclusion

Based on the applicable statutory provisions, all three
questions are answered in the affirmative.

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,

Nadine C. Posey
Technical Assistant
Technical Assistance

NCP/mh