Did the trustee or beneficiary owe Florida intangible tax when the irrevocable trust barred Florida trustees and granted only a limited power of appointment?

Plain-English summary

Florida concluded that neither the trustee nor the beneficiary owed intangible tax and that no trust returns were required.

The irrevocable trust expressly prohibited any trustee from being a Florida resident. Because a trustee had to be a Florida resident or legally or commercially domiciled in Florida to have Florida taxable situs under the provisions cited by the Department, no trustee had taxable situs in the state.

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

What this means for you

Trustees and trust administrators

The ruling's situs conclusion depended on the trust's absolute bar against a Florida-resident trustee. A different trustee-residence or domicile provision was not addressed.

Florida beneficiaries

A beneficial interest was not taxable merely because the beneficiary held a limited appointment power. The Department looked for the combination described by statute and rule: a current income right plus revocation, corpus-invasion, or general appointment power.

Accountants and tax professionals

Review both trustee situs and beneficiary powers. Either branch can create a filing or payment issue under the provisions discussed in the advisement.

Common questions

Q: Did the trust have a Florida trustee?
A: No. Its governing document prohibited any trustee from being a Florida resident.

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 its corpus?
A: No.

Q: Did either person have to file a Florida intangible-tax return for the trust?
A: No. The Department said neither the trustee nor the beneficiary was liable and no returns were required.

Q: Can another trust rely on this TAA?
A: Not automatically. The advisement states that it binds the Department only under the facts and circumstances described in the request, and later legal changes or judicial interpretations may produce a different result.

Citations and references

• Fla. Stat. § 199.052(5) — Florida trustee's primary 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) — taxable beneficial interest
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-128

Original ruling text

Dec 03, 1996

Re: Technical Assistance Advisement No. 96(C)2-128
Intangible Tax;

XXX Trust
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

no trustee may be a resident of Florida.

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 no trustee may be a resident of 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