How were shares of tax-exempt investment funds valued for Florida's annual intangible tax?

Subject

Valuation - Business Trust

Plain-English summary

The annual tax result depended solely on the fund's portfolio at the statutory valuation point, not on investments held at other times during the year. The Department confirmed the three requested statements.

Direct obligations of the United States and the listed territories and possessions were exempt. Fund shares received a proportional exemption for those holdings. If the rest of the valuation-date portfolio also consisted entirely of assets exempt under Florida law, the shares were fully exempt.

What this means for you

The ruling required a valuation-date snapshot and then separated direct government obligations from the remaining portfolio to determine proportional or complete exemption.

Common questions

Q: Did investments held earlier in the year affect the annual result? No.

Q: Were direct federal and listed territorial obligations exempt? Yes.

Q: When were the fund shares fully exempt? When the entire valuation-date portfolio consisted of exempt assets.

Citations and references

• Fla. Stat. § 199.103(2) — fund-share valuation date
• Fla. Stat. § 199.185(1)(d) — government-obligation exemption
• Fla. Admin. Code r. 12C-2.010(1)(j) — trust portfolio valuation
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93C2-023

Original ruling text

Sep 13, 1993

Re: Technical Assistance Advisement No. 93(C)2-023
Intangible Personal Property Tax; Valuation - Business
Trust
Sections 199.103(2) and 199.185(1)(d), F.S.
Rule 12C-2.010(1)(j), F.A.C.
XXX (Company)
XXX (Fund 1)
XXX (Fund 2)

Dear:

This is in response to your recent request for a technical
assistance advisement regarding the Florida intangible personal
property tax on certain Funds.

Facts

The Company is organized as a Massachusetts business trust
and registered under the Investment Company Act of 1940 as an
open-end management investment company. The Company will have
at least two series of Funds and it may add additional series in
the future. Each Fund's portfolio of investments will be
separately managed. The investment objective of each Fund is to
seek a high level of current interest income, exempt from
federal income tax. Each Fund's shares are also intended to be
exempt from intangible tax.

Advisements Requested

1. The annual intangible tax is based solely upon
   intangible investments owned on January 1 of each year
   and intangible investments owned at any time other
   than January 1 of each year are not taken into account
   for purposes of the annual intangible tax.
2. Notes, bonds and other obligations issued by the
   following are exempt from the intangible tax: (i) the
   U.S. Government or its agencies and instrumentalities;

(ii) the Government of Puerto Rico or by its
authority; (iii) the Government of the Virgin Islands
or any municipality thereof; (iv) the Government of
Guam or by its authority; (v) the Government of
American Samoa; and (vi) the Government of the
Northern Mariana Islands or by its authority.

3. Shares of a Fund will be exempt from the intangible
   tax for a year, on a proportionate basis, to the
   extent that the Fund's portfolio of investments
   consists of investments described in request number 2
   on January 1 of that year. If the remaining portion
   of the Fund's portfolio of investments on January 1 of
   a year, after removing any investments described in
   request number 2, consists of investments exempt from
   the intangible tax, then the shares of the Fund will
   be wholly exempt from the intangible tax for that
   year.

Discussion and Law

1. Section 199.103(2), F.S., provides that shares or
   units of companies registered under the Investment
   Company Act of 1940, where such shares or units are
   not exempt under s. 199.185, F.S., shall be valued at
   the net asset value of such shares or units on the
   last business day of the previous calendar year.
2. Notes, bonds, and other obligations issued by the
   United States Government and its agencies are exempt
   from the intangible tax as provided in s.
   199.185(1)(d), F.S.
3. Rule 12C-2.010(1)(j), F.A.C., states that funds which
   are organized under an agreement or indenture of trust
   shall be valued based upon the following guidelines to
   determine what portion, if any, of the net asset value
   of the trust will be exempt from taxation: (i) 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; (ii) 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.

Conclusion

Based upon statutory provisions and the information
presented in your letter, the three scenarios listed under
Advisements Requested are confirmed as stated.

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