Did Florida exempt an investment fund's entire value when at least 90% of its portfolio held intangible-tax-exempt assets?

Plain-English summary

Florida treated the funds' entire net asset value as exempt when the statutory 90-percent portfolio test was met. The shares had to be held in a trust registered under the Investment Company Act of 1940, and on January 1 at least 90 percent of the corresponding portfolio had to be invested in assets exempt from the intangible tax.

The 1999 amendment replaced the earlier all-or-nothing portfolio condition described in the ruling's history with the 90-percent threshold applied in this advisement.

What this means for you

The ruling addressed the law and measurement conditions in effect in 1999. It depended on the registered-trust structure, the composition of the portfolio, and the January 1 testing date stated in the determination.

Common questions

Q: Did only the exempt-asset percentage receive an exemption? No. Once the qualifying fund met the 90-percent test, the ruling exempted its entire net asset value.

Q: Was the test based only on holding tax-exempt bonds? The ruling referred more broadly to portfolio assets exempt from the intangible tax.

Q: What date controlled? The determination used January 1 of the taxable year.

Citations and references

• Fla. Stat. § 199.032 — intangible tax referenced in the ruling
• Fla. Stat. § 199.185(1)(i)-(j) — registered-trust portfolio exemption
• Chapter 99-274, Laws of Florida, § 2 — 1999 amendment
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99C2-007

Original ruling text

SUMMARY

QUESTION: Will the assets of the Fund be exempt from the
intangible tax if, on the last business day of the calendar
year, at least 90 percent of the net asset value of the
Funds' portfolio of assets is invested in assets that are
exempt from the intangible tax?

ANSWER - Based on Facts Below: If, on January 1 of the
taxable year, the Funds' shares are held in a trust
registered under the Investment Company Act of 1940, and 90
percent of the Funds' assets are invested in assets exempt
from the intangible tax, the entire net asset value of the
Funds is exempt from the intangible tax.

Oct 11, 1999

RE: Technical Assistance Advisement No. 99(C)2-007
Intangible Tax; Tax Exempt Bonds
Sections 199.032, 199.185(1)(i), and 199.185(1)(j), F.S.
XXX (collectively the Funds)

Dear :

This is in response to your recent request for a Technical
Assistance Advisement. Your letter requests a ruling as to
whether the entire portfolio of the Funds is exempt from the
Florida intangible tax.

FACTS PRESENTED BY THE TAXPAYER

On August 20, 1993, your firm submitted a request for a
technical assistance advisement concerning the intangible
personal property tax treatment of the Funds' shares. On
October 6, 1993, the Department of Revenue issued a technical
assistance advisement in which is advised that "if on the last
business day of the previous calendar year, the Funds' portfolio
assets consists solely of securities which are exempt from the

intangible personal property tax, the entire net asset value of
the Funds are exempt from Florida's annual intangible tax."

REQUESTED ADVISEMENT

The Funds request an advisement from the Department of
Revenue concerning the application of s. 199.185, F.S., as
amended.

Specifically, your letter asks if, on the last business day
of any calendar year, at least 90 percent of the net asset value
of the Funds' portfolio of assets is invested in assets that are
exempt from the intangible tax, then the Funds' shares will be
exempt in the next succeeding year from the intangible tax.

LAW AND ANALYSIS

Effective July 1, 1999, s. 199.185,(1)(i) F.S., was amended
by section 2, chapter 99-274, L.O.F. Under this amendment,
shares in a trust registered under the Investment Company Act of
1940 are exempt from the Intangible Tax "if at least 90 percent
of the net asset value of the portfolio of assets corresponding
to such shares... is invested in assets that are exempt from the
[intangible] tax...."

Section 199.185(1)(j), F.S., effective July 1, 1999,
states:

Units of a unit investment trust and shares or units of, or
other undivided interest in, a business trust organized
under an agreement, indenture, or declaration of trust and
registered under the Investment Company Act of 1940, as
amended, shall be exempt if at least 90 percent of the net
asset value of the portfolio of assets corresponding to
such shares, units, or undivided interests is in invested
in assets that are exempt from the tax imposed by s.
199.032.

DETERMINATION

Subsequent to July 1, 1999, the Fund's shares are held in a

trust registered under the Investment Company Act of 1940, and
on January 1 of the taxable year 90 percent of the Funds' assets
are invested in assets exempt from the intangible tax imposed
under s. 199.032, F.S., the entire net asset value of the Funds
is exempt from the 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. 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 from that
which is expressed in this response.

You are further advised that this response, your request
and related backup are public records under Chapter. 119, F.S.,
and are subject to disclosure to the public under the conditions
of s. 213.22, F.S. Confidential information must be deleted
before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance and Dispute Resolution
Office of the General Counsel

JBE/mh