Were shares of a Massachusetts business trust fund exempt from Florida's former intangible tax when its portfolio held exempt government assets?

Subject

Valuation - Business Trust

Plain-English summary

The fund shares were fully exempt when the entire portfolio consisted of assets exempt from Florida's intangible tax. The described exempt mix included Florida municipal bonds, United States government or agency securities, territorial obligations, and cash or cash equivalents.

If the fund held nonexempt securities at the close of the last business day of the previous calendar year, the shares were not fully exempt. The U.S.-government-debt portion remained exempt, while the portion containing nonexempt assets was taxable.

What this means for you

The historical exemption depended on the exact valuation-date portfolio. An all-exempt fund and a mixed fund received different share-level treatment.

Common questions

Q: Were shares fully exempt with only exempt assets? Yes.

Q: What happened with a mixed portfolio? The U.S.-government portion was exempt and the nonexempt portion was taxable.

Citations and references

• Fla. Stat. §§ 199.103(2) and 199.185(1)(i) — valuation and investment-fund exemption
• Fla. Admin. Code r. 12C-2.010(1)(j) — qualifying fund-share exemption
• 31 U.S.C. § 3124(a) — federal-obligation exemption, as cited in the ruling
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93C2-018

Original ruling text

Jun 16, 1993

Re: Technical Assistance Advisement No. 93(C)2-018
Intangible Tax - Valuation - Business Trust
Sections 199.103(2) & 199.185(1)(i), F.S.
Rule 12C-2.010(1)(j), F.A.C.
XXX (Trust)
XXX (Fund)

Dear :

Your letter requesting a technical assistance advisement
has been referred to this office.

Trust was created under the laws of the Commonwealth of
Massachusetts under an agreement and declaration of Trust
commonly know as a "Massachusetts business trust". The Trust is
divided into several portfolios one of which is the Fund. The
Fund's objectives are to provide shareholders a high level of
tax exempt income through investment in a portfolio of
investment securities, the interest and dividends of which are
exempt from federal income tax and Florida intangible tax. The
Fund intends to achieve it objectives by investing in a
portfolio of tax-exempt securities of the State of Florida, its
political subdivisions and authorities. The Fund may also invest
in obligations of the U.S. Government, its agencies, territories
and possessions.

Based upon the statements and documents received you have
submitted several questions for response. The questions and our
responses are as following:

i) Will the shares of the Fund be exempt from the
intangible tax if the portfolio of assets is invested
solely in Florida Municipal Bonds, U.S. Government or
its agency securities, territorial obligations and
cash or cash equivalents?

This question is answered in the positive. Shares in this

type of fund are exempt from tax under Florida law if the Fund's
portfolio of assets consists solely of assets which are exempt
from tax (see s. 199.185(1)(i), F.S. and Rule 12C2.010(1)(j),F.A.C.).

ii) If the Fund held securities at the close of business
on the last business day of previous calendar year
which were not exempt securities, as defined by s.
199.185, F.S., would the shares of the fund be exempt
from Florida's intangible personal property tax?

This question is answered in the negative. Only the
portion of the Fund's portfolio which is made up of U.S.
Government debt obligations will be exempt. The portion of the
Fund's portfolio which contains nonexempt assets will be subject
to tax (see Title 31 s. 3124a, USC, ss. 199.103 & 199.185(1)(i),
F.S. and Rule 12C-2.010(1)(j), F.A.C.).

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 confidential
information, we request you notify the undersigned in writing
within 15 days of any deletions you wish made to the request or
this response.

Sincerely,

J.V. Parramore, Jr.
Tax Law Specialist
Technical Assistance

JVP/mh