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