Did a foreign trust with a Florida grantor-beneficiary and an out-of-state trustee have Florida intangible-tax situs or a filing requirement?

Plain-English summary

The Florida Department of Revenue concluded that the described foreign trust had no Florida intangible-tax liability or return requirement. Its trustee lived outside Florida, maintained no Florida office, and the trust assets did not have Florida situs.

The Florida grantor was also a trust beneficiary, but did not have a taxable beneficial interest under the cited law. He had no current right to income, could not revoke the trust or invade its principal, and lacked a general or unlimited power to appoint future beneficiaries. Distributions of income and principal were left to the trustee's full discretion.

Accordingly, neither the beneficiary nor the nonresident trustee was liable for Florida intangible tax, and no return was required for the trust. The Department warned that the trust would become taxable if it employed agents domiciled in Florida under the identified trust provision.

What this means for you

Trustees of out-of-state trusts

For this 1996 advisement, the trustee's residence, office location, and control of the trust assets were central to situs. A nonresident trustee with no Florida office supported the conclusion that the trust assets lacked Florida taxable situs.

Florida trust beneficiaries

Florida residence alone did not create a taxable beneficial interest. The cited test required a current right to income together with specified control rights, and this beneficiary did not have those rights.

Estate planners and tax professionals

The conclusion was highly fact-dependent. A current income right, revocation right, power to invade principal, unlimited appointment power, Florida trustee or office, or Florida-domiciled agents could change the analysis described in the ruling.

Common questions

Q: Did the Florida beneficiary owe intangible tax on the trust assets? A: No. The Department found that he lacked the combination of income and control rights required for a taxable beneficial interest.

Q: Did the out-of-state trustee owe Florida intangible tax? A: No. The trustee was not a Florida resident, had no Florida office, and the trust assets lacked Florida taxable situs.

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

Q: What Florida connection could have changed the result? A: The Department specifically stated that the trust would be taxable if it employed agents domiciled in Florida under Article III.C.7. of the trust.

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. § 199.023(7) and Fla. Admin. Code r. 12C-2.002(1)(c) (taxable beneficial interest in a foreign-situs trust)
• Fla. Stat. § 199.052(5) (trustee responsibility for a Florida-situs trust)
• Fla. Stat. § 199.175(1) (Florida taxable situs)
• Fla. Stat. § 199.152(1) (annual intangible tax return requirement)
• Fla. Stat. § 213.22 (technical assistance advisements)
• Fla. Stat. ch. 119 (public records)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-140

Original ruling text

Dec 20, 1996

Re: Technical Assistance Advisement No. 96(C)2-140 Intangible Tax; Taxable Situs - Foreign Trust Sections 199.023(7), 199.052(7), 199.175(1), F.S. XXX (hereinafter referred to as "Grantor") XXX (hereinafter referred to as "Grantor") XXX (hereinafter referred to as the "Trust") XXX (hereinafter referred to as the "Trustee")

Dear :

This office has received your request for a Technical Assistance Advisement for the trust listed above.

Discussion of Trust Provisions

Under the provisions of the Trust, the Grantor, a Florida resident and beneficiary of the Trust, will assign all of his rights, title and interest in and to certain intangibles to the Trust. The Trustee is a resident of the State of XXX, and the situs for the Trust is in the State of XXX. The Trustee does not have an office in Florida. The beneficiary of the Trust does not have a current right to income; and the Trustee has been granted full discretion for distributions of income and principal. The beneficiary does not have the right to revoke his Trust nor does he have a general power of appointment. If the beneficiary dies prior to the end of the Term of the Trust, the assets shall be payable to the beneficiary's revocable trust, if any, and if none, to the beneficiary's estate.

Provisions of Law

Section 199.023(7), F.S., and Rule 12C-2.002(1)(c), F.A.C., provide that a taxable beneficial interest in a foreign-situs trust is the current right to income coupled with either a right to revoke the trust, or the right to invade the corpus of the trust, or an unlimited power of appointment of future beneficiaries.

Section 199.052(5), F.S., places primary responsibility for payment of the intangible tax on the trustee of a Florida situs trust. To have a taxable situs in Florida the trust must meet the provisions of s. 199.175(1), F.S., which states that intangible personal property has a taxable situs in this state when it is owned, managed, or controlled by any person domiciled in this state on January 1 of the tax year. Section 199.152(1), F.S., requires an annual intangible tax return to be filed with the Department by every person, regardless of domicile, who on January 1 owns, controls, or manages intangible personal property which has a taxable situs in this state.

Discussion of Law

Based on the trust provisions, the beneficiary does not have a taxable beneficial interest in the Trust since he does not have the current right to income coupled with either a right to revoke the trust, or the right to invade the corpus of the trust, or an unlimited power of appointment of future beneficiaries.

Under Article III.C.7., the trust would be rendered taxable if employed agents were domiciled in Florida.

The Trustee is not a resident of Florida. The Trust assets do not have a Florida situs, and therefore no taxable situs under s. 199.175(1), F.S. In summary neither the beneficiary nor the Trustee 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,

Joy B. Eldred, C.P.A.
Tax Law Specialist
Tax Policy and Dispute Resolution
Office of General Counsel

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