Were certificates representing interests in church mortgage loans, federal obligations, certificates of deposit, and cash subject to Florida intangible tax?

Plain-English summary

The certificates of participation were exempt from Florida intangible tax.

Holders participated only in mortgage-secured church loans, U.S. government obligations, cash, and certificates of deposit. The ruling identified those underlying assets as exempt. Although the fund held equity securities separately, certificate holders had no right to participate in them.

What this means for you

The result depended on the holder's actual beneficial rights in the underlying asset pool, not every asset owned elsewhere by the fund.

Common questions

Q: Did holders participate in the fund's equity securities? A: No.

Q: What assets supported the certificates? A: Exempt mortgage notes, federal obligations, cash, and certificates of deposit.

Q: Were the certificates taxable?
A: No.

Citations and references

• Fla. Stat. ch. 199 and § 199.185 — annual intangible tax and exemptions
• I.R.C. § 501(c)(3) — fund qualification stated in the ruling
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95C2-016

Original ruling text

Apr 07, 1995

Re: Technical Assistance Advisement No. 95(C)2-016 Intangible Tax; Certificates of Participation XXX (FUND)

Dear :

Your letter requesting a Technical Assistance Advisement has been received by this office. The specific request for advice deals with the taxation of a certificate of participation issued by Fund. The following information was presented for consideration:

The Fund was organized as a Florida not for profit corporation, for the purpose of procuring and managing funds to assist churches in the construction and major improvements of churches, parsonages, church school and other church operated facilities. The Fund has been determined by the Internal Revenue Service Code of 1986, As Amended to be an organization qualified to be charitable under s. 501(c)3, IRC.

The Fund is authorized to issue up to $30,000,000 in certificates. Certificates are issued to Florida residents for cash at their face value in minimum amounts of $100. The certificates entitle investors to a beneficial interest in certain assets held by the Fund in the form of mortgage loans made by the Fund to churches, United States government obligations, and cash. The notes evidencing the church loans are fully secured by mortgages on Florida real property. The Fund also holds certain equity securities. The securities are held in a Board restricted fund. A holder of a certificate does not have a right to participate in the securities; rather the certificate holder has a right to participate only in cash, certificates of deposit, and notes that are fully secured by mortgages on Florida real estate.

Based upon this information technical advice on the taxation of the certificates of participation is requested.

Chapter 199, F.S., levies a tax on all intangible property having a taxable situs in the State. Section 199.185, F.S., provides exemptions from the annual intangible tax for certain property such as notes secured by real property in Florida or outside Florida, obligations of the United States Government, or money.

Examining the rights granted the certificate holder reveals that the holder of the certificate participates in the ownership of the underlying assets held by the Fund. The assets that the certificate holder owns are those that are expressly exempt from the intangible tax under s. 199.185, F.S. Therefore, the certificates are exempt from 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 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