Did a rabbi trust acquire Florida intangible-tax situs because one of its three or more trustees was a Florida trust company?

Plain-English summary

Florida found no intangible-personal-property-tax situs for a rabbi trust whose nonresident trustees held majority management and control.

The Florida requester was a trust company serving as one co-trustee. The master trust required at least three trustees, at least two of whom had to be nonresidents, and decisions were made by a majority. The grantor alone retained power to alter, amend, or revoke the trust.

Under the Department's rule for mixed resident and nonresident trustees, a trust did not have Florida situs when a nonresident majority held equal management and control. Because the Florida co-trustee could not manage or control the assets by itself, it did not have to file an intangible-tax return for the trust.

The Department concluded that neither the Florida trust company nor the trust was subject to Florida intangible personal property tax.

What this means for you

Trust companies and trustees

A Florida co-trustee did not create situs on these facts because the governing document placed control with a majority and required that majority to be nonresident.

Employers using rabbi trusts

The ruling concerned a grantor trust funding nonqualified deferred compensation. Its result depended on the trustee composition and control terms stated in the master trust.

Accountants and tax professionals

Review who actually holds management and control on January 1, not merely whether one trustee is based in Florida. Document trustee residency, voting rules, and each trustee's authority.

Common questions

Q: Did the Florida trust-company co-trustee create Florida situs?
A: No. It lacked authority to manage or control the trust property without the nonresident majority.

Q: Who controlled the trust?
A: A majority of at least three trustees, with at least two required to be nonresidents of Florida.

Q: Was a Florida intangible-tax return required for the trust?
A: No.

Q: Did the ruling address the companies using the trust?
A: It states that those companies would be organized and domiciled outside Florida, but the requested holding addressed the Florida co-trustee and the trust.

Q: Can another trust rely on this TAA?
A: Not automatically. The advisement says it binds the Department only for the specific trustee-residency, voting, control, and trust-document facts described.

Citations and references

• Fla. Stat. § 199.175(1) — Florida taxable situs for intangible personal property
• Fla. Admin. Code r. 12C-2.006(3)(f) — trusts with resident and nonresident trustees
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-0111

Original ruling text

Oct 15, 1996

Re: Technical Assistance Advisement No. 96(C)2-0111
Intangible Tax; Taxable Situs - Trust
Section 199.175(1), F.S., and Rule 12C-2.006(3)(f), F.A.C.
XXX (the Taxpayer)

Dear :

Your letter of August 21, 1996, requesting a Technical
Assistance Advisement regarding the taxable situs of a certain
Master Trust Agreement to be utilized by the above referenced
bank, has been received and examined by this office. The
scenario presented for consideration is summarized below:

FACTS

A "Rabbi Trust" is a grantor trust to be created by the Taxpayer
to provide a fund for non-qualified deferred compensation plans
in accordance with Federal income tax laws. The companies
utilizing the Trust will be domiciled and legally organized
under the laws of states other than the State of Florida. The
Trust requires that at least three trustees be appointed, two of
whom must be nonresidents of the State of Florida, and the
remaining trustee is the Taxpayer. The latter is a trust company
legally domiciled in Florida and organized under Florida law.

Article 4 of the Trust provides that only the grantor may alter,
amend or revoke the Master Trust. Article 5, K. provides that
the control and management of the Trust is to be exercised only
by a majority of the trustees.

Master Trust Agreement ("Trust") to be utilized by the Taxpayer,
as a Co-Trustee of the "Rabbi Trust" was furnished for review.

REQUESTED ADVISEMENT

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

LAW & ARGUMENT

Section 199.175(1), F.S., provides that intangible personal
property acquires a Florida tax situs when it is owned, managed,
or controlled by any person domiciled in this state on January 1
of the tax year.

Rule 12C-2.006(3)(f), F.A.C., further provides that when
there are three or more trustees and they are residents and
nonresidents with equal management and control, if the majority
of the trustees are nonresidents the trust does not have taxable
situs in this state and no return is required to be filed.

As stated in the facts, the Trust assets will be managed
and controlled by a majority of the trustees, who in this case
are nonresidents. Rule 12C-2.006(3)(f), F.A.C., states that
when trustees are both residents and nonresidents, and
management or control is with a majority of out of state
trustees, then no return is necessary by the Trust. The
Taxpayer, though a Florida trustee, would not be required to
file an intangible tax return for the Trust because it does not
have the authority to manage or control the trust property.

CONCLUSION

Based upon the statutory provisions and the information
contained in your letter, neither the Taxpayer nor the Trust is
subject to Florida intangible personal property tax.

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,

Moses O. Daramola
Senior Tax Specialist
Tax Policy & Dispute Resolution
Office of the General Counsel

MOD/md