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

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