Under Florida's 1996 intangible tax, were an out-of-state trustee, the grantor, or Florida custodians liable for an irrevocable trust's assets?

Plain-English summary

Florida found no 1996 intangible-tax liability for the trust's out-of-state trustee, its grantor, or the nondiscretionary investment professionals described.

The irrevocable trust required an out-of-state trustee, who could make discretionary distributions of income or principal for the grantor's benefit. The grantor and trustee had only limited powers of appointment. Florida investment counsel, custodians, or brokers could be hired, but they could not receive discretionary control or management over the trust's intangible property.

The Department said the trustee was outside Florida, the grantor did not have the rights required for a taxable beneficial interest, and the Florida service providers performed no discretionary management or control. None had to report the trust property or pay the intangible tax on these facts.

What this means for you

• Trustee domicile determined the trust-situs analysis stated in the ruling.
• A possible discretionary distribution did not give the grantor the cited taxable combination of rights.
• Florida custody or investment services did not create liability without discretionary authority.

Common questions

Q: Was the out-of-state trustee liable for Florida intangible tax? A: No.

Q: Did the grantor have a taxable beneficial interest? A: No, under the trust terms described.

Q: Did using Florida custodians or brokers create tax liability? A: No, because they lacked discretionary management or control.

Citations and references

• Fla. Stat. § 199.032 — annual intangible tax
• Fla. Stat. § 199.023(7) — taxable beneficial interest
• Fla. Stat. § 199.052(1), (5) — management, control, and trust situs
• Fla. Stat. § 199.175 — taxable situs
• Fla. Admin. Code r. 12A-2.002(1)(c) — beneficial-interest definition
• Fla. Admin. Code r. 12C-2.006(3) — trust situs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-033

Original ruling text

Apr 01, 1996

Re: Technical Assistance Advisement No. 96(C)2-033 Florida Intangible Tax - Trust XXX Grantor XXX (the "Trustee") XXX Trust

Dear :

Your letter requesting a Technical Assistance Advisement has been referred to this office for response. The specific scenario for which advice has been requested is summarized below.

Statement of Fact

In X, the Grantor established an irrevocable trust designating an out-of-state resident as sole Trustee. The Trustee will pay or apply for the benefit of the Grantor, part or all of the Trust income or principal which the Trustee considers advisable. The Grantor and Trustee possess limited powers of appointment. The Trust may never have a Trustee with Florida domicile, although the Trustee of the Trust may employ investment counsel, custodians and brokers in Florida and grant such persons any type of authority over the account. However, the counsel, custodians, and brokers may not have a discretionary control or management over any intangible personal property in its custody.

Requested Advisement

You request that we affirm the following:

1. Based on the fact that as of January 1, the out-ofstate Trustee has responsibility for management and
   control of the Trust, the Trustee will not be liable for intangible tax.

2. Since the Grantor will not possess a taxable beneficial interest in the Trust on January 1, the Grantor will also not be liable for the tax.

3. Since the investment counsel, custodian, or brokers
   will not possess discretionary authority to manage or control the property on January 1 of each year, it will not be required to return the property or pay tax.

Provision of the Law

Section 199.032, F.S., imposes an annual tax of 2 mills on all intangible property that is owned, managed or controlled by a person domiciled or having a taxable situs in Florida. (See ss. 199.052 and 199.175, F.S.)

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

Section 199.052(1), F.S., also provides that management or control does not include any ministerial function or processing activity. A trust will have a taxable situs in Florida if the Trustee is domiciled in this State. (See s. 199.052(5), F.S., and Rule 12C-2.006(3), F.A.C.)

Conclusion

Based on the provisions of the statutes and the provisions of the Trust, neither the Trustee, Grantor nor custodian are liable for the 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,

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

CG/mh