Did Florida resident grantors and beneficiaries or an out-of-state discretionary trustee owe intangible tax on trust assets?

Subject

Trusts

Plain-English summary

Neither the out-of-state trustee nor the Florida resident grantors and beneficiaries had to file a Florida intangible personal property tax return for the trusts. The trustee lived outside Florida, maintained no Florida office, and held full discretion over distributions of both income and principal.

The Department explained that a beneficiary becomes responsible when a trust has Florida situs, no Florida trustee files, and the beneficiary has a taxable beneficial interest. On the facts supplied, the trusts were not subject to Florida intangible tax and neither group had a filing obligation.

What this means for you

Florida residence of a grantor or beneficiary did not alone make the trust taxable. The location of the trustee and assets, plus whether beneficiaries held current income and additional control rights, drove the analysis.

Common questions

Did the nonresident trustee owe Florida tax? No, because the trustee had no Florida residence or office and the trust assets lacked Florida situs.

Did the Florida beneficiaries owe tax? No, under the trust terms and facts presented.

Was a Florida return required? No.

Citations and references

• Fla. Stat. §§ 199.023 and 213.22
• Fla. Admin. Code r. 12C-2.002(1), including paragraph (1)(ee)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94C2-021

Original ruling text

Dec 01, 1994

Re: Technical Assistance Advisement No. 94(C)2-021 Intangible Personal Property Tax - Trusts XXX (Trusts) XXX (Grantors/Beneficiaries) XXX (Trustee)

Dear :

This response is to your recent request for a technical assistance advisement.

Facts

The Grantors/Beneficiaries of the Trusts, are residents of the State of Florida. The Trustee of the Trusts is an out-ofstate resident with no office in Florida. Full discretion for distributions of income and principal of the Trusts has been granted to the Trustee.

Requested Advisement

1. The Trustee of the Trusts will have no liability for
   the Florida intangible tax if the Trustee is not a Florida resident and the Trusts' assets do not have a Florida situs; and
2. The Grantors/Beneficiaries of the Trusts will have no
   liability for the Florida intangible tax with respect to intangible assets owned by the Trusts.

Discussion and Law

Rule 12C-2.002(1)(ee), F.A.C., provides that a trust having a taxable situs in Florida is primarily taxable to the trustee.

A beneficiary, having taxable beneficial interest, where there is no Florida trustee, is responsible for filing an intangible tax return for the taxable trust assets.

A beneficial interest in a trust is defined in s. 199.023, F.S., and Rule 12C-2.002(1), F.A.C., as one or more valuable property rights in a trust. A taxable beneficial interest in a trust is the current right to income coupled with: the right to invade the corpus of the trust; or the right to revoke the trust; or the right to appoint successor beneficiaries without limitation.

Conclusion

Based upon statutory provisions and the information furnished in your letter, these Trusts would not be subject to the intangible tax in Florida. Therefore, neither the Trustee nor the Grantors/Beneficiaries is required to file a Florida intangible personal property tax return for these Trusts.

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,

Nadine C. Posey

Tax Audit Specialist III
Technical Assistance

NCP/mh