Was an interest-bearing cash account held with a broker subject to Florida intangible personal property tax?

Plain-English summary

Florida concluded that the interest-bearing cash account held with a broker was not subject to intangible personal property tax.

The Department verified that the account was simply interest-bearing cash rather than a mutual fund or money-market fund. It therefore treated the account like cash deposited with a bank.

The ruling distinguished actual funds. It said a mutual or money-market fund organized as a corporation would have been fully taxable as of January 1, while a fund organized as a business trust would have received an exemption for the portion of net asset value attributable to U.S. government debt obligations.

What this means for you

• The account's legal and investment structure mattered more than the fact that a broker held it.
• A cash balance was treated differently from an ownership interest in a mutual or money-market fund.
• The ruling's fund discussion shows that entity form and portfolio composition could change the result.

Common questions

Q: Was the brokerage cash account taxable? A: No.

Q: Why was it exempt?
A: It was an interest-bearing cash account, not a mutual or money-market fund, and the Department treated it like a bank cash deposit.

Q: Would every money-market fund have received the same result? A: No. The ruling said the treatment depended on whether the fund was organized as a corporation or a business trust.

Citations and references

• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-059

Original ruling text

May 22, 1996

Re: Technical Assistance Advisement No. 96(C)2-059 Intangible Tax/ Cash Account Held With Broker

Dear :

This is in response to your request for a Technical Assistance Advisement certifying that your Cash Account held with your broker is exempt from Intangible Tax.

Your correspondence of March 5, 1996, provided a copy of your XXX for the period January 1 through January 31, 1996. As of January 1, 1996, the opening Cash Balance in your account was
$XX.

Through verification with XXX in the XXX Office, I was informed that the XXX you hold is simply an interest bearing account which is not subject to Intangible Tax, like cash on deposit with a bank. The XXX is not organized as a Mutual or Money Market Fund. However, if such account were a Mutual or Money Market Fund, the tax consequences for Intangible Tax could change considerably depending on whether the fund was organized as a corporation or a business trust. If a Mutual or Money Market Fund is organized as a corporation, the entire fund as of January 1 of each year is subject to Intangible Tax. If the fund is organized as a Business Trust, the portion of its net asset value which is equal to the portion of the portfolio containing U.S. government debt obligations is exempt from Intangible 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,

Joy B. Eldred, C.P.A.
Tax Law Specialist
Tax Policy and Dispute
Resolution

JBE/mh