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

Plain-English summary

Florida concluded that neither the trustee nor the beneficiary owed intangible tax and that no return was required for the trust.

The irrevocable trust required every individual trustee to remain a non-Florida resident. A corporate trustee could not be qualified to do business or actually do business in Florida, and any trustee that became taxable in Florida had to cease serving. The Department therefore found no trustee with Florida taxable situs.

The income beneficiary held only a limited power of appointment. It could not be exercised for the beneficiary, the beneficiary's estate, or the estate's creditors. The beneficiary also lacked the power to revoke the trust or invade its corpus, so the Department found no taxable beneficial interest.

What this means for you

Trustees and trust administrators

The situs result depended on continuing trustee restrictions, including the mandatory removal of a trustee that became taxable in Florida. Trustee residence and corporate business status should be monitored over time.

Florida income beneficiaries

A current income interest did not create liability by itself. The Department also examined whether the beneficiary could revoke the trust, reach principal, or exercise a general power of appointment.

Accountants and tax professionals

Review the governing document's exact appointment, corpus, revocation, and trustee-qualification provisions. This ruling approved only the restricted powers described in the trust.

Common questions

Q: Could an individual trustee live in Florida? A: No.

Q: Could a corporate trustee qualify or do business in Florida? A: No.

Q: What happened if a trustee became taxable in Florida? A: The trust required that trustee to stop serving.

Q: Did the beneficiary have a general power of appointment? A: No. The power was limited and could not benefit the beneficiary, the beneficiary's estate, or the estate's creditors.

Q: Could the beneficiary revoke the trust or invade principal? A: No.

Q: Were Florida intangible-tax returns required? A: No under the trust terms described in the advisement.

Q: Can another trust rely on this TAA? A: Not automatically. The advisement states that it binds the Department only under the facts and trust provisions described, and different trustee, beneficiary-power, or later legal facts may change the result.

Citations and references

• Fla. Stat. § 199.052(5) — Florida trustee's filing and payment responsibility
• Fla. Stat. § 199.175 — Florida taxable situs
• Fla. Stat. § 199.023(7) — taxable beneficial interest in a foreign trust
• Fla. Admin. Code r. 12C-2.002(1)(c) — beneficiary rights that create a taxable interest
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-113

Original ruling text

Oct 31, 1996

Re: Technical Assistance Advisement No. 96(C)2-113 Intangible Tax; XXX Trust dated 10/16/96

Dear :

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

Discussion of Trust Provisions

Under the provisions of the irrevocable 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 the trustee cease to act as trustee.

Provisions of Law

Subsection 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.

Subsection 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 trust provides 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 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,

Mary Ella Ingram
Tax Specialist
Tax Policy and Dispute Resolution