Did a foreign irrevocable trust or its beneficiary owe Florida intangible tax when trustee and beneficiary powers were restricted?

Plain-English summary

The Florida Department of Revenue concluded that neither the trustee nor the beneficiary of the 1995 irrevocable trust was liable for Florida intangible tax. The trust did not have to file Florida intangible-tax returns under the stated arrangement.

No individual trustee could be a Florida resident, and no corporate trustee could qualify to do or conduct business in Florida. A trustee who became taxable in Florida had to cease acting. On those terms, the Department found that no trustee had Florida taxable situs.

The beneficiary had a limited power of appointment over trust assets but could not benefit the grantor, the grantor's estate, or creditors of that estate. The beneficiary also could not revoke the trust or invade its corpus. Those restrictions kept the interest outside the cited definition of a taxable beneficial interest.

What this means for you

Foreign-trust trustees

The ruling treated trustee residence and legal or commercial domicile as the basis for Florida situs. The trust required replacement of any trustee who became taxable in Florida.

Beneficiaries and grantors

The Department examined whether the beneficiary could revoke the trust, reach principal, or exercise a general rather than limited appointment power.

Accountants and tax professionals

The no-tax and no-return conclusions applied to the specific 1996 trust terms. Confirm that current law and the actual trust instrument support the same analysis before drawing a present-day conclusion.

Common questions

Q: What Florida connections were trustees prohibited from having?
A: An individual trustee could not reside in Florida, and a corporate trustee could not qualify to do or actually do business there.

Q: Could the beneficiary appoint assets to the grantor?
A: No. The trust also barred appointments to the grantor's estate or its creditors.

Q: Could the beneficiary revoke the trust or invade principal?
A: No. The ruling relied on the absence of both powers.

Q: Was a Florida return required for the trust?
A: No. The Department stated that no returns were required.

Citations and references

• Fla. Stat. § 199.052(5) — responsibility of a Florida trustee for intangible tax
• Fla. Stat. § 199.175 — 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

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-147

Original ruling text

Dec 26, 1996

Re: Technical Assistance Advisement No. 96(C)2-147
Intangible Tax; Trust
ss. 199.023(7), and 199.052(5), F.S.
XXX Irrevocable Trust of 1995

Dear :

This office has received your request for a Technical
Assistance Advisement for the trust listed above. This office
has examined the provisions of the trust document that contains
provisions governing duties of trustees and rights of the
beneficiary.

Discussion of Trust Provisions

Under the provisions of the 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 and Discussion of Law

Section 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. Based upon this statute and the provisions of the
trust, 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.

Section 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. 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,

J.V. Parramore, Jr.

Tax Law Specialist
Technical Assistance

JVP/mh