Did the Florida grantor, out-of-state corporate trustee, or nonresident trust advisor owe intangible tax on the described irrevocable trust?

Plain-English summary

Florida concluded that the grantor, trustee, and trust advisor were not liable for intangible tax on the irrevocable trust.

The sole corporate trustee was outside Florida, kept no Florida office, and was required to hold and exclusively manage the assets outside the state. The grantor could not amend, revoke, terminate, or manage the trust, and the trustee alone decided whether income or principal should be distributed for the grantor's welfare.

The grantor therefore lacked a taxable beneficial interest. The Department found no current income right, no power of appointment, no right to change beneficiaries, no revocation right, and no right to invade corpus. The trust also required annual assets above a redacted threshold to revert by operation of law, but the Department's final conclusion still found no liability under the submitted provisions.

The grantor's son served as trust advisor and could remove the trustee and appoint another corporate trustee that also had to keep the assets outside Florida. The son lived outside Florida, and his expressly limited fiduciary rights had no Florida intangible-tax effect.

What this means for you

Grantors and beneficiaries

The ruling depended on the absence of enforceable income, revocation, principal, appointment, and management rights. A discretionary benefit from the trustee was not treated as a current right.

Corporate trustees

The no-situs conclusion relied on a sole nonresident trustee exclusively holding and managing assets outside Florida, with no Florida office or business location.

Trust advisors and tax professionals

An advisor's removal power did not create Florida tax here because the advisor was a nonresident, acted under limited fiduciary authority, and could appoint only another corporate trustee required to keep the assets outside Florida.

Common questions

Q: Did the trust have Florida taxable situs?
A: No. Its sole trustee held and managed the assets outside Florida and had no Florida office.

Q: Did the Florida grantor have a current right to trust income?
A: No. Distributions were within the trustee's discretion.

Q: Could the grantor revoke the trust or reach principal?
A: No.

Q: Did the annual reversion of excess assets make the grantor taxable?
A: The ruling disclosed that provision but still concluded the grantor had no taxable beneficial interest under the full submitted terms.

Q: Did the nonresident son's trust-advisor role create tax?
A: No.

Q: Who was liable for Florida intangible tax?
A: None of the trustee, grantor, or trust advisor.

Q: Can another trust rely on this TAA?
A: Not automatically. The advisement states that it binds the Department only on the management, distribution, reversion, advisor, trustee, and redacted trust terms described.

Citations and references

• Fla. Stat. § 199.032 — annual intangible personal property tax
• Fla. Stat. § 199.175(1), (1)(a)3. — trust domicile and Florida taxable situs
• Fla. Stat. §§ 199.052(6) and 199.023(7) — foreign-trust return and taxable beneficial interest
• Fla. Admin. Code rr. 12C-2.006(3) and 12C-2.002 — trust situs and beneficial interests
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-122

Original ruling text

Nov 13, 1996

Re: Technical Assistance Advisement No. 96(C)2-122
Florida Intangible Tax; Trust
Section 199.032, F.S.
XXX (Grantor/Taxpayer)
XXX (Trust)
XXX (Trustee)
XXX (Grantor's Son/Trust Advisor)

Dear :

Your letter dated September 27, 1996, requests a Technical
Assistance Advisement regarding the applicability of Florida
intangible tax pursuant to s. 199.032, F.S., under the facts and
documents set forth herein. This request is made pursuant to
Chapter 12-11, F.A.C., and is issued to you under the authority
of s. 213.22, F.S.

Statement of Facts

The Taxpayer is a domiciliary of Florida and maintains his
permanent residence in XXX. The taxpayer is subject to and must
file the applicable return with FDOR for the Florida intangible
tax with respect to the value of such taxable property which he
owns, controls or manages, either directly or indirectly through
an agent or other third party, in the State of Florida as of
January 1 of each year.

The Taxpayer, as the Grantor, intends to establish a Trust
with the Trustee, in accordance with the specific terms and
conditions set forth in the Trust documents. The Trust, which
is to be governed by the laws of the State of XXX, is
irrevocable and no person, including the Trustee, has the power
to terminate the Trust at any time.

The Grantor may not alter, amend, revoke or terminate any
provision of the Trust. The assets of the Trust will be held
and exclusively managed by the Trustee in XXX. The Grantor is

precluded from managing any of the assets held by the Trustee
during the term of the Trust. The assets of the Trust may never
be managed by the Trustee within the State of Florida and the
Trustee does not maintain any office or place of business within
the State of Florida. The Trustee, in its discretion, may make
distributions of income and principal to the Grantor as it may
deem necessary for the benefit and general welfare of the
Grantor.

On XXX of each calendar year all assets held in trust in
excess of $XX will revert back to the Grantor by operation of
law and be transferred to the Grantor by the Trustee in
accordance with such instructions as are provided in writing by
the Grantor. Where no written instruction is given, the
required distribution arising by virtue of the reversionary
interest held by the Grantor (or his estate in the event of his
death) shall be made to the Trustee of the Grantor/Taxpayer
Amended and Restated (revocable) Trust Agreement dated XXX.

The Trust Advisor has the power to remove the Trustee at
any time and appoint a successor corporate trustee which is
prohibited from holding and managing the assets of the Trust
within the State of Florida.

The Grantor's son is designated in the Trust instrument to
serve as the "Trust Advisor". The Trust Advisor's rights with
respect to the management of the Trust's assets are specifically
limited by the Trust and the exercise of such rights is subject
to applicable rules governing fiduciaries. The Grantor's son is
domiciled in the State of XXX and has no residence within the
State of Florida.

The Taxpayer intends to make additional contributions of
cash or other property from time to time to the Trust, which
Trust will, at all times, maintain a minimum balance of $XX in
cash or value of other property.

Requested Ruling

You request that we answer the following:

1. Is the Taxpayer subject to Florida intangible tax with
respect to any and all property held by the Trust;
which property would otherwise be taxable property for
intangible tax purposes?

2. Is the Trustee subject to Florida intangible tax with
   respect to any and all property comprising the trust
   estate, including property which would otherwise be
   taxable property for intangible tax purposes, under
   its management and control?
3. Is the Taxpayer's son, as Trust Advisor, subject to
   Florida intangible tax with respect to any and all
   property in the Trust?

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.

Intangible personal property shall have a taxable situs in
this state when it is managed or controlled by any person
domiciled in this state on January 1 of the tax year. (see s.
199.175(1), F.S.). A trust is deemed to be domiciled in this
state if the trustee is domiciled in the state. (see s.
199.175(1)(a) 3., F.S.) The taxable situs of a trust shall be in
Florida if the trustee's usual place of business where the books
and records pertaining to the trust are kept is in Florida. If
the trustee has no principal place of business, then situs is
determined by whether management and control exists in Florida,
or by the residence of the trustee. (see Rule 12C-2.006(3),
F.A.C.)

When there is no taxable situs in Florida, a beneficiary of
a trust having a taxable beneficial interest in the trust may be
responsible for filing a return for taxable trust assets. (see
s. 199.052(6), F.S., and Rule 12C-2.002(1)(ee), F.A.C.) A
resident has a taxable beneficial interest in a foreign trust if
the resident has a vested interest in the trust, even if subject
to divestment, which includes at least a current right to income
and either a power to revoke the trust, or a general power of

appointment. (see s. 199.023(7), F.S.).

By rule, taxable beneficial interest in a trust is the
current right to income coupled with the right to invade the
corpus of the trust, or the right to revoke the trust or the
right to appoint successor beneficiaries without limitation. A
beneficial interest in a trust is taxable only to the extent the
trust corpus consists of property subject to the annual tax.
(see Rule 12C-2.002, F.A.C.).

Conclusion

The Taxpayer has no current right to income of the Trust.
The out-of-state Trustee has the full discretion for
distribution of income of the Trust. The Taxpayer retains no
power of appointment over any portion of the Trust, has no right
to revoke the Trust, has no right to change the beneficiaries of
the Trust or appoint successor beneficiaries, or any right to
invade the corpus of the Trust. Therefore, pursuant to the
statutory and administrative provisions, the Taxpayer has no
taxable beneficial interest in the Trust.

When there is a sole Trustee who is not a resident of the
State of Florida who manages and holds the Trust's assets at all
times outside of the State of Florida as required by the Trust,
then the Trust has no Florida situs and the Trustee is not
required to file a return or pay the annual intangible tax on
the assets of the trust.

The Taxpayer's son, who is designated by the Trust to serve
as an Advisor to the Trustee, is domiciled outside of Florida.
The Taxpayer's son is not a resident of the State of Florida.
The exercise of all rights set forth under the Trust as Trust
Advisor does not have any impact for Florida intangible tax
purposes.

Therefore, based on the provisions of the statutes and the
provisions of the Trust, neither the Trustee, the Grantor, nor
the Trust Advisor are liable for the Florida intangible 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,

Baldan E. Sulker
Senior Tax Specialist
Tax Policy and Dispute Resolution
Office of General Counsel

BES/mh