Were securities in an irrevocable trust subject to Florida intangible tax when an out-of-state trustee controlled the account?

Plain-English summary

The Florida Department of Revenue concluded that the irrevocable trust was not subject to Florida intangible tax while management and control of its securities remained with the out-of-state trustee. The securities account was maintained at the trustee's office outside Florida, although the trustee had a related entity in the state.

The taxpayer also had no taxable beneficial interest in the trust assets. The agreement did not allow the taxpayer to alter, amend, or revoke the trust or invade its corpus. The trust protector's powers were limited to directing the trustee to appoint property and removing the trustee.

The ruling tied trust situs to the trustee's domicile and the location of management or control. It described a taxable beneficial interest as a current right to income combined with a revocation right, a right to invade the corpus, or an unlimited power to appoint future beneficiaries.

What this means for you

Settlors transferring securities

The Department relied on the irrevocable structure and the settlor's lack of access to the trust corpus.

Out-of-state trustees

The ruling's no-tax conclusion depended on management and control of the account remaining outside Florida with the trustee.

Accountants and tax professionals

This was a 1996 determination under the cited intangible-tax provisions. Review trustee domicile, actual asset control, and every power retained by the settlor or trust protector.

Common questions

Q: Did a related Florida entity of the trustee create taxable situs?
A: Not under these facts. The securities account and management remained at the out-of-state trustee's office.

Q: Did the settlor retain a right to revoke the trust or invade its corpus?
A: No. The ruling expressly states that the taxpayer had neither right.

Q: Why did the Department find no taxable beneficial interest?
A: The taxpayer lacked the powers that the cited law combined with a current income right to define a taxable beneficial interest.

Q: Could the result change if control moved to Florida?
A: The ruling's conclusion was conditioned on management and control remaining with the out-of-state trustee.

Citations and references

• Fla. Stat. § 199.023(7) and Fla. Admin. Code r. 12C-2.002(1)(c) — taxable beneficial interests in trusts
• Fla. Stat. § 199.052(1) and (5) and Fla. Admin. Code r. 12C-2.006(3) — management, control, and trust taxation
• Fla. Stat. § 199.175(1) — taxable situs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-144

Original ruling text

Dec 26, 1996

Re: Technical Assistance Advisement No: 96(C)2-144
Intangible Tax - Trust
Sections 199.023(7), 199.052(5), and 199.175(1), F.S.
XXX - Taxpayer
XXX - Trust
XXX - Trust Protector
XXX - Trustee

Dear :

Your request for a Technical Assistance Advisement
concerning the taxability of intangible assets held in an
irrevocable trust has been reviewed and is addressed in the
following paragraphs.

Statement of the Facts

The Taxpayer established a Trust and transferred intangible
assets to the trust. A Trustee was appointed which resides
outside the State of Florida. Although the Trustee of the Trust
has a related entity in the State, the account in which these
securities will be maintained will be at the Trustee's office
outside the State of Florida. The Taxpayer will not have the
right to alter, amend or revoke the trust, nor will the Taxpayer
have the right to invade the corpus of the trust. The trust
agreement also provides for the Taxpayer to appoint a Trust
Protector. The power of the Trust Protector is limited to
directing the Trustee to appoint the property and to remove the
trustee.

Requested Advisement

You request an advisement confirming that:

1. The Trust will not be subject to Florida intangible
   tax.
2. The Taxpayer will not have a taxable beneficial

interest in the Trust.

Provisions of the Law

Section 199.052(5), F.S., and Rule 12C-2.006(3), F.A.C.,
tax a trust that has a taxable situs in Florida. A trust has
taxable situs if the Trustee is domiciled in this State.

Section 199.175(1), F.S., defines taxable situs as being
owned, managed, or controlled by a person or business domiciled
in this State on January 1 of the tax year. For purposes of the
intangible tax, s. 199.052(1), F.S., provides that "management
or control" does not include ministerial functions.

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

Conclusion

The Trust will not be subject to Florida intangible tax
provided management and control of the assets remains with the
out of state Trustee. The Taxpayer will not be subject to
intangible tax on assets held in the trust because the Taxpayer
has no beneficial interest in 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,

Celestine Grantham
Senior Tax Specialist
Tax Policy and Dispute Resolution
Office of General Counsel

CG/mh