How did an insurer apply Florida's intangible-tax exemption when its annuity reserves were bookkeeping entries rather than designated assets?

Plain-English summary

The insurer could apply the annuity-reserve exemption as a general reduction in the taxable value of its intangible property.

Insurance companies maintained the statutory reserves as bookkeeping entries and were not required to designate particular assets as reserve property. The Department therefore said the company should first determine the taxable value of its intangible property, then reduce that value by the amount of assets held as the Florida statutory reserve for annuity products.

The cited statute made the exemption conditional on the tax savings being credited to the annuity holders.

What this means for you

The exemption did not require tracing the reserve to named securities or other specific intangible assets under the accounting practice described in the ruling.

Common questions

Q: Did the insurer have to identify specific reserve assets?
A: No. The reserves were maintained as account entries rather than tied to particular assets.

Q: How was the exemption calculated?
A: The company reduced the taxable value of its intangible property by the value of the assets held as its Florida statutory annuity reserve.

Q: Was there a condition on the tax savings?
A: Yes. Section 624.509(8), as quoted in the ruling, required the savings to be credited to annuity holders.

Citations and references

• Fla. Stat. § 624.509(8) — annuity-reserve exemption from intangible tax
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95C2-025

Original ruling text

Aug 07, 1995

Re: Technical Assistance Advisement 95(C)2-025
Intangible Tax; Exemptions - Insurance Annuity Reserves
Section 624.509(8), F.S.
XXX (Company)

Dear :

Your letter requesting a Technical Assistance Advisement on
the application of the intangible tax to the statutory reserves
of an insurance company offering annuity products to Florida
customers has been received and examined by this office.

Section 624.509(8), F.S., states that "... the intangible
tax imposed by chapter 199 shall not be imposed on assets equal
to the statutory legal reserves of annuity products maintained
by insurance companies on behalf of their holders if the tax
savings derived are credited to the annuity holders." Based
upon this statutory provision you have specifically asked how to
apply this exemption to the intangible tax liability of Company.

The Florida Statutes require only that an insurance company
set aside a percentage of assets on the books of the company as
a reserve for its policy holders. Discussions with the
Department of Insurance confirm that insurance companies only
maintain the reserves as an account entry and are not required
to specify which assets are held in reserve. Therefore, since
no specific assets are designated as reserve assets the
exemption must be applied generally. That is, the exemption is
taken against the intangible tax liability of Company. Company
should determine the amount of taxable value of its intangible
property and reduce that value by an amount equal to the value
of the assets held as the Florida statutory reserve for annuity
products.

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