Did a Florida-law trust owe intangible tax when its assets and records were managed by nonresident trustees outside Florida?

Subject

Trust

Plain-English summary

The trust was not subject to Florida intangible personal property tax, and neither the trustees nor the Florida resident taxpayer had to file a Florida intangible-tax return for it. Although Florida law governed the trust and three trustees lived in Florida, three nonresident trustees held management and control of the assets, books, and records outside Florida.

The taxpayer was entitled to the trust's net income, could receive principal in the trustees' discretion, and held a limited testamentary power of appointment. The Department described the statutory test for taxable beneficial interests but concluded, on the complete facts presented, that the trust and parties had no filing requirement.

What this means for you

Trust situs did not turn solely on governing law or the presence of some Florida trustees. The Department focused on where actual management and control of the trust assets and records rested.

Common questions

Did Florida governing law make the trust taxable? No, not on these facts.

Did having Florida resident trustees require a return? No. The cited rule said Florida trustees need not file when nonresident trustees hold management or control outside the state.

Did the Florida resident taxpayer have to file for the trust? No, according to the Department's conclusion for this trust.

Citations and references

• Fla. Stat. §§ 199.175(1) and 199.023(7)
• Fla. Admin. Code rr. 12C-2.006(3)(d) and 12C-2.002(1)(c)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94C2-024

Original ruling text

Dec 21, 1994

Re: Technical Assistance Advisement No. 94(C)2-024
Intangible Personal Property Tax - Trust
XXX (Trust)
XXX (Taxpayer)
XXX (Trustees)

Dear :

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

Facts

The Taxpayer, a Florida resident, intends to create the
Trust that will be controlled by Florida laws. However,
management and control of the Trust assets and the books and
records pertaining to the Trust will be located out-of-state.
Under the terms of the Trust, during the Taxpayer's lifetime,
she will be entitled to receive all Trust net income at least
quarterly, and all or any part of the Trust principal that the
Trustees in their discretion consider advisable. In addition,
the Taxpayer will have a limited power of appointment over the
assets of the Trust which may be exercised by her at death.

The Trustees will be given the discretion to terminate the
Trust at any time and distribute the Trust property to the
Taxpayer or for her benefit. At the time of the Taxpayer's
death, to the extent the Trust property is not otherwise
appointed by her, it will be distributed to or placed in further
trust for the benefit of her then living descendants.

The Trustees will be three individuals who are nonresidents
of the State of Florida and three individuals who are residents
of the State of Florida. Management and control of the Trust
assets and the books and records pertaining to the Trust will be
with the out-of-state Trustees. The Trust will be controlled by
Florida law.

Requested Advisement

Will the Taxpayer or the Trust be subject to the Florida
intangible personal property tax?

Discussion and Law

Section 199.175(1), F.S., provides that intangible personal
property shall have a taxable situs in this state when it is
owned, managed, or controlled by any person domiciled in this
state on January 1 of the tax year. As stated in the facts, the
Trust assets will be managed and controlled by the nonresident
Trustees. Rule 12C-2.006(3)(d), F.A.C., states that when
trustees are both residents and nonresidents, and management or
control is with the out of state trustees, then no return is
necessary by the Florida trustees.

A beneficial interest in a trust is defined in s.
199.023(7), F.S., and Rule 12C-2.002(1)(c), 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 the statutory provisions and the information
provided in your request, the Trust is not subject to the
intangible tax in Florida. Therefore, neither the Trustees nor
the Taxpayer is required to file a Florida intangible personal
property tax return for this 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