Under Florida's 1996 intangible tax, did an irrevocable trust create liability for its out-of-state trustees, grantor, or Florida custodians?

Plain-English summary

Florida found no 1996 intangible-tax liability for the trust's out-of-state trustees, its grantor, or the nondiscretionary Florida service providers.

The irrevocable trust designated multiple out-of-state residents as trustees. They could make discretionary distributions of income or principal for the grantor's benefit, while the grantor and trustees held only limited powers of appointment. Florida investment counsel, custodians, and brokers could be hired but could not receive discretionary control or management over the trust's intangible property.

The Department said the trustees' out-of-state domicile prevented Florida trust situs on the stated facts. The grantor lacked the rights required for a taxable beneficial interest, and the Florida providers' nondiscretionary roles did not amount to management or control.

What this means for you

• The ruling tied trust situs to the trustees' domicile.
• Discretionary distributions did not give the grantor the cited taxable combination of rights.
• Florida custodial or investment activity did not create liability without discretionary authority.

Common questions

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

Q: Was the grantor liable?
A: No, because the ruling found no taxable beneficial interest.

Q: Were Florida custodians or brokers liable? A: No, because they had no 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 96C2-035

Original ruling text

Apr 01, 1996

Re: Technical Assistance Advisement No. 96(C)2-035 Florida Intangible Tax - Trust XXX Grantor XXX (the "Trustees") 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

On XXX, the Grantor established an irrevocable trust designating out-of-state residents as Trustees. The Trustees will pay or apply for the benefit of the Grantor, part or all of the Trust income or principal which the Trustees considers advisable. The Grantor and Trustees possess limited powers of appointment. The Trust may never have Trustees with Florida domicile, although the Trustees 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 the Trust's custody.

Requested Advisement

You request that we affirm the following:

1. Based on the fact that as of January 1, the out-ofstate Trustees will have responsibility for management
   and control of the Trust, the Trustees 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, they will not be required to return the property and 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 Trustees, 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