Under Florida's 1996 intangible tax, did a trust or its income beneficiary owe tax when no Florida-situs person could serve as trustee?

Plain-English summary

Florida found no intangible-tax or filing liability for the trust or its income beneficiary.

The beneficiary transferred taxable publicly traded securities to a management trust, received all annual income, and could receive principal only in the trustee's discretion. The beneficiary waived the power to revoke, amend, alter, remove or replace the trustee, or appoint trust property.

No person or entity with Florida tax situs could serve as trustee. A trust protector could be a Florida resident and could remove the trustee or appoint a successor, but that did not change the ruling's result. Because there was no Florida trustee and the beneficiary lacked the combination of rights required for a taxable beneficial interest, neither had to file.

What this means for you

• Income rights alone did not create the cited taxable beneficial interest.
• The beneficiary lacked revocation, corpus-control, and appointment powers.
• Trustee situs remained outside Florida by the trust's terms.

Common questions

Q: Was the trust taxable in Florida? A: No.

Q: Was the income beneficiary taxable on the trust interest? A: No.

Q: Could the trust protector live in Florida? A: Yes, on the stated facts.

Citations and references

• Fla. Admin. Code r. 12C-2.002(1)(c) — taxable beneficial interest
• Fla. Admin. Code r. 12C-2.002(1)(ee) — filing responsibility without a Florida trustee
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-010

Original ruling text

Feb 05, 1996

Re: Technical Assistance Advisement No. 96(C)2-010 Intangible Personal Property Tax; Trust XXX (Taxpayer) XXX (Trust) XXX (Trustee)

Dear :

This is in response to your request for a technical assistance advisement regarding the taxability of a trust agreement.

Facts

The Taxpayer has established the Trust and plans to transfer to it publicly traded securities which are not exempt from the Florida intangible personal property tax. Those securities will be held in a brokerage account at a national brokerage company, which may or may not have offices in Florida.

The primary purpose of the Trust is to provide a means for the management of Taxpayer's intangible assets.

Taxpayer waives any right to alter, amend or revoke the Trust, and to remove or replace the Trustee.

The terms of the Trust provide that Taxpayer will receive all of the income from the Trust annually, and may receive principal from the Trust in the Trustee's discretion for Taxpayer's health and maintenance in reasonable comfort.

Trustee may also appoint the Trust principal to Taxpayer and must appoint the Trust principal as directed by the trust protector. Taxpayer has no power of appointment over any part of the Trust.

As of Taxpayer's death, the remaining Trust property is to

be distributed by the Trustee to Taxpayer's revocable trust, as it is then in existence, otherwise to Taxpayer's estate.

The trust protector, who may be a resident of Florida, shall appoint a successor trustee in the event Trustee ceases to be Trustee.

No person or entity with Florida tax situs may serve as trustee. The trust protector may remove the Trustee. Trustee may use the services of an advisor, who might be the Taxpayer.

Requested Rulings

1. The Trust will not be subject to Florida intangible
   personal property tax on any property not otherwise exempt from Florida intangible tax owned by the Trust on January 1 of each year, and the Trust will not be subject to the reporting and return requirements under Chapter 199 or applicable administrative code provisions; and
2. Taxpayer will not have a beneficial interest in the
   Trust which would be subject to Florida intangible personal property tax with respect to any property not otherwise exempt from Florida intangible tax owned by the Trust on January 1 of each year, and Taxpayer will not be subject to the reporting and return requirements under Chapter 199 or applicable administrative code provisions.

Discussion and Law

Rule 12C-2.002(1)(c), F.A.C., defines "Beneficial Interest in a Trust" 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.

A trust having a taxable situs in Florida is primarily taxable to the trustee. A beneficiary, having a taxable beneficial interest, where there is no Florida trustee, is

responsible for filing a return for the taxable trust assets. (See Rule 12C-2.002(1)(ee), F.A.C.)

The taxable situs of a trust shall be in Florida if the trustee's usual place of business where the books and records pertaining to the trust are kept is in Florida; or, if the trustee has no principal place of business, then taxable situs shall be determined as follows: (a) If a Florida resident is sole trustee of a foreign trust, the trust is deemed to have a taxable situs in Florida and the corpus is subject to tax. (b) If there is more than one trustee, and all are Florida residents, only one return is to be filed. (c) When trustees are both residents and nonresidents and management and control of the trust is with the Florida trustee, then a return for the trust is to be filed by the Florida trustee. (d) When trustees are both residents and nonresidents, and management and control of the trust is with an out of state trustee, then no return is necessary by the Florida trustee. (e) When there are two trustees, one is a resident and one a nonresident and they share equally in management and control of the trust, the assessment of property shall be apportioned between them. (f) When there are three or more trustees and they are residents and nonresidents and they share equally in management and control, the trust has a taxable situs in this state if the majority of the trustees are residents of this state. In such a case, only one return is to be filed for the trust. If the majority of the trustees are nonresidents the trust does not have a taxable situs in this state and no return is to be filed.

Conclusion

Based upon the statutory provisions and the information provided, the requested rulings are answered in the affirmative.

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
Senior Tax Specialist
Tax Policy and Dispute
Resolution
Office of General Counsel

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