Did a sole income beneficiary or non-Florida trustees owe Florida intangible tax on a trust?

Subject

Trusts

Plain-English summary

Neither the sole income beneficiary nor the trustees owed Florida intangible personal property tax, and no return was required for the trust. The beneficiary's appointment power was limited: it could not benefit the grantor, the grantor's estate, or estate creditors, and the beneficiary could neither revoke the trust nor invade its principal.

The trust also required all individual trustees to remain nonresidents and the corporate trustee not to do or be qualified to do business in Florida. A trustee who became taxable in Florida had to be removed. The Department therefore found no Florida taxable situs for the trustees.

What this means for you

The beneficiary test combined a current income right with additional control over trust property or future beneficiaries. A limited appointment power without revocation or principal-invasion rights did not meet that test here, while the trustee provisions kept management outside Florida's taxing situs.

Common questions

Was the income beneficiary's interest taxable? No. The beneficiary lacked revocation, principal-invasion, and unlimited appointment rights.

Did the trustees create Florida situs? No. They could not reside in Florida, and the corporate trustee could not do or qualify to do business there.

Was a Florida return required? No, under the Department's conclusion for this trust.

Citations and references

• Fla. Stat. §§ 199.023(7), 199.052(5), 199.175, and 213.22
• Fla. Admin. Code r. 12C-2.002(1)(c)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94C2-022

Original ruling text

Dec 07, 1994

Re: Technical Assistance Advisement No. 94(C)2-022 Intangible Personal Property Tax - Trusts XXX (Trust) XXX (Beneficiary) XXX (Trustees)

Dear :

Your recent request for a technical assistance advisement has been received in this office.

Requested Advisement

Is the Trust or the sole income beneficiary subject to the Florida intangible personal property tax?

Discussion of Trust Provisions

Under the provisions of the Trust the Beneficiary is granted a limited power of appointment over the assets of the trust. This limitation states that the beneficiary/grantor may not appoint to or for the benefit of the grantor, or the grantor's estate, or the creditors of the grantor's estate, any asset or income of the trust. The Trust further provides that the trustees may not be residents of Florida and that the corporate trustee may not be qualified to do or be doing business in Florida. If anyone of the trustees becomes taxable in Florida the Trust requires that the trustee be removed.

Provisions of Law

Section 199.023(7), F.S., and Rule 12C-2.002(1)(c), F.A.C., state that a taxable beneficial interest in trust is the current right to income coupled with either a right to revoke the trust, or the right to invade the corpus of the trust or an unlimited power of appointment of future beneficiaries.

Section 199.052(5), F.S., places primary responsibility for payment of the intangible tax on the Florida trustee. To have a taxable situs in Florida the provisions of s. 199.175, F.S., must be met. The trustee must be a Florida resident or be legally commercially domiciled in Florida to have a taxable situs in Florida.

Discussion of Law

Based upon the provisions of the Trust, the Beneficiary has a limited power of appointment over the assets of the Trust, but does not have the power to invade the corpus of the Trust, nor the power to revoke the Trust. Therefore, the Beneficiary does not have a taxable beneficial interest in the Trust.

The Trustees may not be residents of Florida and the corporate trustee may not be doing business, or be qualified to do business, in Florida. Therefore, the Trustees have no taxable situs in Florida.

In summary, neither the Beneficiary nor the Trustees is liable for the intangible personal property tax in Florida and no return is required to be filed for the Trust.

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