Were shares of a Massachusetts investment trust exempt from Florida's former intangible tax when its portfolio held government obligations and cash?

Subject

Valuation - Business Trust

Plain-English summary

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

If the trust held nonexempt securities at the close of the last business day of the prior calendar year, the shares were not fully exempt. The exempt portfolio portion remained exempt, while the portion attributable to taxable assets was subject to the historical tax.

What this means for you

The exemption followed the exact asset mix on the valuation date. A single mixed portfolio required separating the exempt and taxable portions rather than treating all shares alike.

Common questions

Q: Were the shares fully exempt with an all-exempt portfolio? Yes.

Q: Did one nonexempt holding make every portion taxable? No. This ruling allocated the exemption between exempt and nonexempt portfolio portions.

Q: Which date controlled? The close of business on the last business day of the previous calendar year.

Citations and references

• Fla. Stat. §§ 199.103(2) and 199.185(1)(i) — valuation and investment-trust exemption
• Fla. Admin. Code r. 12C-2.010(1)(j) — qualifying trust-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 93C2-020

Original ruling text

Jul 14, 1993

Re: Technical Assistance Advisement No. 93(C)2-020
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)

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
registered under the Investment Company Act of 1940, as amended.
The Trust'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
Trust 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 Trust 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 Trust 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 trust are exempt from tax under Florida law if the

trust's portfolio of assets consists solely of assets which are
exempt from tax (see s. 199.185(1)(i), F.S., 12C-2.010(1)(j),
F.A.C.).

ii) If the Trust 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 Trust be exempt
from Florida's intangible personal property tax?

This question is answered in the negative. The shares of
the Trust would be subject to tax based on the portion of the
portfolio of assets which is subject to the intangible tax. The
portion of the portfolio of assets which consists of exempt
assets is exempt from tax. (see Title 31 s. 3124a, USC, ss.
199.103 & 199.185(1)(i), F.S., 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 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.

Tax Law Specialist
Technical Assistance

JVP/mh