When were shares of a municipal-securities fund exempt from Florida's annual intangible tax?

Subject

Valuation

Plain-English summary

The fund shares were fully exempt if every portfolio asset was exempt. In a mixed portfolio, the portion attributable to direct U.S. government and territorial obligations remained exempt.

After removing those federal and territorial obligations, the remaining fund value was exempt only if all remaining assets were exempt under Florida law. If any taxable asset remained, that whole remaining portion was taxable.

What this means for you

The ruling did not use a simple asset-by-asset exemption for the nonfederal remainder. One taxable asset could make that remaining portion taxable.

Common questions

Were shares backed only by Florida exempt obligations exempt? Yes.

Were direct U.S. and territorial obligations exempt in a mixed fund? Yes.

What happened if the rest contained any taxable asset? The entire remaining portion was taxable.

Citations and references

• Fla. Stat. §§ 199.103(2), 199.185(1)(i), and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94C2-009

Original ruling text

Apr 19, 1994

Re: Technical Assistance Advisement No. 94(C)2-009
Intangible Tax - Valuation
Sections 199.103(2) & 199.185(1)(i), F.S.
XXX (Trust)
XXX (Fund)

Dear :

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

The Fund 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 Fund is
registered under the Investment Company Act of 1940, as amended.
The Fund's objective is 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 its objective by investing in a
portfolio of tax-exempt municipal securities of Florida issuers
including the State of Florida, its counties, municipalities,
political subdivisions, agencies and instrumentalities, as well
as the United State Government, its agencies, political
subdivisions 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 Fund owns, on January 1 of the
year, a portfolio of investments that consist of
obligations of the State of Florida, its counties,
municipalities and political subdivisions, and
agencies and instrumentalities of the State of
Florida?

This question is answered in the positive. Under
Florida law shares of a trust whose portfolio of
assets is solely invested in assets that are exempt
from tax are themselves exempt from tax [see s.
199.185(1)(i)].

ii) If the Fund holds securities, at the close of business
on the last day of a calendar year, that are not
exempt securities described in s. 199.185, F.S., with
securities that are exempt, what portion of a Fund
share held by a Florida resident on January 1 will be
exempt from the intangible tax?

Applying the Federal and Florida Statutes to the Fund
requires that the following guidelines be used to
determine what portion, if any, of the net asset value
of the Fund will be exempt from taxation:

The portion of the net asset value of the Fund that is
attributed to direct obligations of the United States
Government is exempt from taxation.

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

If the remaining portion of the net asset value of the
Fund, after removing the portion attributable to
United States Government and territorial obligations,
represents any asset that is taxable under Florida
law, then the remaining portion of the net asset value
of the Fund is subject to tax.

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