Did an irrevocable foreign trust owe Florida intangible tax when its trustees could not be based in Florida and its beneficiary held only a limited appointment power?

Plain-English summary

The Florida Department of Revenue concluded that neither the trustee nor the beneficiary owed Florida intangible tax, and no trust return was required. The irrevocable trust's terms prevented its trustees from acquiring Florida taxable situs.

An individual trustee could not be a Florida resident, and a corporate trustee could neither qualify to do business nor conduct business in Florida. If a trustee became taxable in Florida, the trust required that trustee to stop serving.

The beneficiary had only a limited power of appointment. The beneficiary could not appoint trust assets or income to the grantor, the grantor's estate, or creditors of that estate, and could not revoke the trust or invade its principal. The Department therefore found no taxable beneficial interest.

What this means for you

Trustees of foreign trusts

For this 1996 ruling, the trust's mandatory restrictions on Florida-resident and Florida-business trustees prevented trustee-level Florida situs. The conclusion depended on those restrictions continuing to operate as written.

Trust beneficiaries

A limited appointment power was not treated as the general power required by the cited beneficial-interest test. The beneficiary also lacked revocation and principal-invasion rights.

Estate planners and tax professionals

The trust terms did more than express an intention to remain outside Florida: they disqualified a trustee who became taxable there. A Florida-resident individual trustee, a corporate trustee doing or qualified to do business in Florida, or broader beneficiary powers could change the analysis.

Common questions

Q: Did the trustee owe Florida intangible tax?
A: No. The trust barred trustees with the Florida residence or business connections described in the ruling.

Q: Did the beneficiary have a taxable beneficial interest?
A: No. The beneficiary's appointment power was limited and the beneficiary could not revoke the trust or invade its principal.

Q: Was a Florida trust return required?
A: No. The Department concluded that neither party was liable and no returns were required for the trust.

Q: What happened if a trustee became taxable in Florida?
A: The trust required that trustee to cease acting as trustee.

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 court interpretations may produce a different result.

Citations and references

• Fla. Stat. § 199.052(5) (Florida trustee responsibility)
• Fla. Stat. § 199.175 (Florida taxable situs)
• Fla. Stat. § 199.023(7) and Fla. Admin. Code r. 12C-2.002(1)(c) (taxable beneficial interest in a foreign trust)
• Fla. Stat. § 213.22 (technical assistance advisements)
• Fla. Stat. ch. 119 (public records)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-138

Original ruling text

Dec 17, 1996

Re: Technical Assistance Advisement No. 96(C)2-138
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
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 be 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