Did a trust owe Florida intangible tax when its trustees had to remain outside Florida and its beneficiary held only a limited appointment power?

Plain-English summary

Neither the trustee nor the beneficiary owed Florida intangible tax, and no trust return was required under the revised ruling.

The trust prohibited an individual trustee from being a Florida resident and prohibited a corporate trustee from qualifying or doing business in Florida. A trustee becoming taxable in Florida had to stop serving. The Department therefore found no Florida taxable situs at the trustee level.

The beneficiary held only a limited power of appointment that could not benefit the grantor, the grantor's estate, or the grantor's estate creditors. The beneficiary could not revoke the trust or invade its corpus. Those limited rights did not constitute a taxable beneficial interest.

What this means for you

The ruling separated trustee situs from beneficiary rights. Avoiding trustee-level Florida situs required the stated residency and business restrictions, while avoiding a taxable beneficial interest depended on the precise limits on income, revocation, corpus, and appointment rights.

Common questions

Q: Did any trustee have Florida taxable situs?
A: No. The trust terms barred the Florida residence or business activity described in the ruling.

Q: Did the beneficiary's appointment power create tax?
A: No. It was limited and could not benefit the grantor, the grantor's estate, or estate creditors.

Q: Could the beneficiary revoke the trust or invade its corpus?
A: No under the express trust provisions reviewed by the Department.

Q: Was a Florida trust return required?
A: No. The ruling concluded that neither the trustee nor beneficiary was liable and no return was required.

Citations and references

• Fla. Stat. § 199.023(7) — taxable beneficial interests in foreign trusts
• Fla. Stat. § 199.052(5) — Florida trustee filing responsibility
• Fla. Stat. § 199.175 — Florida taxable situs
• Fla. Admin. Code r. 12C-2.002(1)(c) — foreign-trust beneficial interests
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-103R

Original ruling text

Status: Replaces TAA 96C2-103 issued Septermber 20, 1996

            Oct 14, 1996

Re: Technical Assistance Advisement No. 96(C)2-103 Revised
Intangible Tax; Trust
XXX Beneficiary
XXX Beneficiary
XXX Trust

Dear :

This office has received your request for a Technical
Assistance Advisement for the trust listed above. This office
has examined the provisions of the trust document that contains
provisions governing duties of trustees and rights of the
beneficiary.

       Discussion of Trust Provisions

Under the provisions of the trust, the beneficiary is
granted a limited power of appointment over the assets of the
trust. This limitation states that the beneficiary/grantor may
not appoint to or for the benefit of the grantor, or the
grantor's estate, or the creditors of the grantor's estate, any
asset or income of the trust. The trust further provides that
the individual trustee may not be a resident of Florida and that
a corporate trustee may neither be qualified to do nor do
business in Florida. If any trustee becomes taxable in Florida,
the trust requires that trustee to cease to act as trustee.

           Provisions of Law

Section 199.052(5), F.S., places primary responsibility for
payment of intangible tax on a Florida trustee. Section
199.175, F.S., describes persons and assets with taxable situs
in Florida. A trustee must be a Florida resident or legally or
commercially domiciled in Florida to have a taxable situs in
Florida.

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Section 199.023(7), F.S., and Rule 12C-2.002(1)(c), F.A.C.,
state that a taxable beneficial interest in a foreign trust
includes at least a current right to income coupled with either
a right to revoke the trust, or a right to invade the corpus of
the trust, or a general power of appointment.

            Discussion of Law

The individual trustee may not be a resident of Florida,
and no corporate trustee may do or be qualified to do business
in Florida. Therefore, no trustee has a taxable situs in
Florida.

Based on the express provisions of the trust, that the
income beneficiary has a limited power of appointment over the
assets of the trust, does not have a power to invade the corpus
of the trust, and does not have power to revoke the trust, the
beneficiary does not have a taxable beneficial interest in the
trust.

In summary, neither the trustee nor the beneficiary is
liable for the intangible tax in Florida and no returns are
required to be filed for the 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

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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,


                J.V. Parramore, Jr.
                Tax Law Specialist
                Tax Policy and Dispute Resolution
                Office of General Counsel

JVP/mh