Who owed Florida's former intangible tax on interests and assets in a nonprofit hospital corporation's pooled-income fund?

Subject

Exemption - Persons

Plain-English summary

The donor's life interest and the nonprofit corporation's remainder interest were exempt, but the trustee was subject to Florida's former intangible tax while holding the fund corpus.

The donor received an income interest after an irrevocable transfer. The nonprofit corporation would receive the remaining units after the beneficiary's death, but it had no present interest in principal beyond the right to enforce the trust agreement. The statute therefore placed tax on the trust while a nonexempt trustee held the corpus.

What this means for you

The ruling separated the tax treatment of the donor, charitable remainder holder, and legal holder of the trust assets.

Common questions

Q: Was the donor's life interest taxable? No.

Q: Did the nonprofit corporation owe tax on its interest? No.

Q: Who owed the tax? The trustee, on the stated facts.

Citations and references

• Fla. Stat. §§ 199.183 and 199.185 — charitable and investment-trust exemptions
• Fla. Admin. Code r. 12C-2.010(1) — trust portfolio valuation
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93C2-017

Original ruling text

Jun 10, 1993

Re: Technical Assistance Advisement No. 93(C)2-017
Intangible Tax - Pooled-Income Fund
Sections 199.183, 199.185, F.S.
Rule 12C-2.010, F.A.C.
XXX (Hospital)
XXX (Corporation)
XXX (Fund)
XXX (Trustee)

Dear :

This is in response to your recent request for a technical
assistance advisement.

Facts

The Hospital was established in XXX, and has grown through
six major expansions. Today the Hospital operates as a full
service hospital, with new and modern surgical, emergency room,
radiological and intensive-care facilities. The Corporation is
the owner and operator of the Hospital. The Hospital is a
voluntary, non-profit, non-tax supported institution. Since its
founding, the Hospital has primarily relied upon financial
support of the area residents for its essential expansions.

In XXX the Corporation was established, and it received its
exemption from federal income tax as a 501(c)(3) organization in
XXX. The purpose of the Corporation is to administer funds
given to the Hospital and to provide funds which will enable the
Hospital to accomplish its objectives. The Corporation is
governed by a Board of Directors consisting of XXX members.
Outright gifts, bequests and trusts have been given to the
Corporation by persons who are committed to the support of the
Hospital. None of the gifts and contributions are used for the
operating costs of the Hospital, but they are, instead, used for
the improvement of facilities and equipment which enable the
Hospital to maintain state of the art technology.

As part of the Corporation's planned giving programs, the
Corporation maintains several alternative charitable gifting
arrangements. One such arrangement is a Fund which was
established under a Trust Agreement created by the Corporation
in XXX. The Fund is administered by the Trustee pursuant to the
Trust Agreement. Transfers to the Fund are irrevocable, and in
consideration for a transfer, the donor receives a right to
share in the net income of the Fund. Upon the death of the
income beneficiary, the remaining value of the units are paid by
the Trustee of the Fund to the Corporation.

Requested Advisement

The Corporation requests a ruling that the donor's interest
in the Fund is exempt from Florida intangible personal property
tax. Further, the Corporation requests a ruling that its
interests in the Fund are exempt from the intangible personal
property tax.

Discussion and Law

Section 199.185(1)(i), F.S., provides that investment
trusts 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
the Florida Statutes are exempt from the intangible personal
property taxes.

Rule 12C-2.010 (1), F.A.C., states that the portion of the
net asset value of the trust that is attributable to direct
obligations of the United States Government is exempt from
taxation.

If the remaining portion of the net asset value of the
trust, after removing the portion representing United States
Government obligations, represents assets which are themselves
exempt from Florida's intangible tax, then this portion of the
net asset value of the trust's portfolio is also exempt from
tax.

However, if the remaining portion of the net asset value of
the trust, after removing the portion attributable to United
States Government obligations, represents any asset which is
taxable under Florida law, then the remaining portion of the net
asset value of the trust is subject to tax.

Section 199.183, F.S., provides that intangible personal
property owned by nonprofit charitable institutions qualified as
charitable under s. 501(c)(3) of the United States Internal
Revenue Code of 1954 shall be exempt from taxation under this
chapter.

However, intangible personal property shall not be deemed
to be owned by such exempt institutions if it is held in a trust
of any kind under which the institution has no present interest
in the trust principal except the right to compel the
performance of the trust agreement. Such trusts are taxable
while trust corpus is held by a nonexempt trustee.

Conclusion

Based on the statutory provisions and the information
provided in your letter, the donors's life interest in the Fund
would be exempt from intangible personal property taxes.
Furthermore, the Corporation would have no intangible tax
liability for its interest in the Fund. However, the Trustee is
subject to the intangible tax in accordance with s. 199.183,
F.S.

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