Did exempt shares in one business trust count as exempt assets in another trust's 90% test?

Subject

Valuation

Plain-English summary

Qualifying exempt shares of another business trust remained exempt when held in the investing fund's portfolio. If the money-market fund itself met the 90% exempt-net-asset threshold, the value of its shares counted as an exempt asset when determining whether the investing fund also met that threshold.

The annual status depended on the prescribed valuation point: the close of business on the last business day of the prior calendar year, using the portfolio assets held on January 1. Investments held at other times during the prior year did not affect that January 1 determination.

What this means for you

Under the 2000 provisions applied, the exemption followed qualifying business-trust shares into another fund's portfolio. The ruling is historical and should not be read as a statement of current Florida intangible-tax law.

Common questions

Q: Did the underlying money-market fund have to qualify independently? Yes. It had to satisfy the 90% threshold on the applicable valuation date.

Q: Were all investments made during the prior year counted? No. The Department looked to the assets held at the prescribed year-end and January 1 valuation point.

Q: Did exempt federal and Florida obligations lose their status inside the portfolio? No. The Department said assets exempt under section 199.185 or other applicable statutes remained exempt in a business trust's portfolio.

Citations and references

• Fla. Stat. § 199.032 — annual intangible personal property tax
• Fla. Stat. § 199.103(2) — valuation date
• Fla. Stat. § 199.185(1)(j) — business-trust share exemption
• Fla. Admin. Code r. 12C-2.010(1)(j) — business-trust share exemption
• 31 U.S.C. § 3124(a) — federal-obligation tax exemption
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00C2-006

Original ruling text

SUMMARY

QUESTION: If Business Trust A owns shares of Business Trust
B and the shares of the Business Trust B are exempt from
intangible tax, will the shares of Business Trust B be
treated as exempt for the purpose of meeting the 90% exempt
net assets value to qualify the shares of Business Trust A
as exempt from intangible tax?

ANSWER - BASED ON FACTS BELOW: All assets of the Business
Trust that are exempt from intangible tax under the
provisions of section 199.185, F.S., or other applicable
statutes will remain exempt from tax when held in the
portfolio of investments of a business trust.

Aug 29, 2000

Re: Technical Assistance Advisement No. 00C2-006
Intangible Tax - Valuation
Sections 199.103(2) & 199.185(1)(j), F.S.
XXX (Fund)

Dear :

Your letter requesting a technical assistance advisement
has been referred to this office.

Facts as Presented by the Taxpayer

The Fund was created under the laws of the Commonwealth of
Massachusetts under an agreement and declaration of trust
commonly know as a "Massachusetts business trust." The Fund is
an open-end management investment company registered under the
Investment Company Act of 1940, as amended. The Fund's
objective is to provide shareholders a high level of tax exempt
income through investments in a portfolio of investment
securities, the interest and dividends of which are exempt from
federal income tax and Florida intangible tax. The Fund intends

to achieve its objective by investing in a portfolio of taxexempt municipal securities of Florida issuers, including the
State, counties, municipalities and political subdivisions,
agencies and instrumentalities of the State of Florida, as well
as obligations of the United States Government, its agencies,
instrumentalities, territories or possessions.

Requested Advisement

Based upon the statements and documents provided the
following ruling has been requested:

In determining whether the Fund satisfies the 90-percent
threshold required by s. 199.185(1)(j) of the Florida
Statutes, as of the applicable valuation date, 100 percent
of the value of the Money Market Fund shares that the Fund
owns will constitute an Exempt Asset; provided that the
Money Market Fund itself satisfies the 90-percent threshold
as of such date and notwithstanding that less than 100
percent of the net asset value of the Money Market Fund may
be invested in Exempt Assets.

Law, Analysis, and Determination

This question is answered in the positive. These types of
funds are governed by Federal and Florida law for purposes of
valuation. Obligations of the United States Government are
exempt from state property taxes under 31 U.S.C. s. 3124(a).
Under Florida law, shares or units of a business trust shall be
exempt from intangible tax if at least 90 percent of the net
asset value of the portfolio of assets are exempt from tax
imposed by s. 199.032, F.S. If the money market funds that the
Fund holds shares in meet the exemption afforded shares or units
of a business trust, those shares or units will remain exempt
when held as part of the Fund's portfolio. (See s.
199.185(1)(j), F.S., and rule 12C-2.010(1)(j), F.A.C.)

The date of valuation is prescribed as the close of
business on the last business day of the previous calendar year.
Only the assets held in the portfolios of the Fund and the money
market funds it is invested in on January 1 are to be valued.

Therefore, investments made by the Fund, or the money market
funds it has invested in at other times during the previous
calendar year have no effect on the exempt status of either
portfolio on January 1 of each year (see s. 199.103, F.S.).

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, your request
and related backup documents 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,

J.V. Parramore, Jr.
Tax Law Specialist
Technical Assistance and Dispute Resolution
Office Of General Counsel

JVP/mh