Did a Florida beneficiary or Wisconsin trustee have to file Florida intangible-tax returns for an irrevocable trust?

Plain-English summary

The Florida Department of Revenue concluded that neither the Florida beneficiary nor the Wisconsin trustee had to file a Florida intangible-tax return for the irrevocable trust's assets.

The beneficiary was a Florida domiciliary and the trust's current income beneficiary, but retained only a limited power to appoint successor beneficiaries. The beneficiary could not appoint the beneficiary, the beneficiary's estate, or creditors of that estate as successors and did not have an unlimited appointment power, revocation right, or power to invade trust principal. The Department therefore found no taxable beneficial interest.

The Wisconsin trustee held the trust's management and control powers. Nothing submitted suggested that the trust was located anywhere other than with that trustee, so neither the trust nor trustee had Florida taxable situs.

What this means for you

Florida trust beneficiaries

Florida residence alone did not create the filing duty at issue. The Department also examined whether the beneficiary held the statutory combination of income and broad control rights.

Out-of-state trustees

The trust followed the trustee's location under these facts because management and control rested with the Wisconsin trustee and no contrary Florida connection was shown.

Accountants and tax professionals

Separate the beneficiary-interest analysis from the trust-situs analysis. The ruling found independently that the beneficiary lacked a taxable interest and the trustee lacked Florida situs.

Common questions

Q: Was the beneficiary a Florida resident? A: Yes. The ruling described the beneficiary as a Florida domiciliary.

Q: Why was the beneficiary's interest not taxable? A: The beneficiary had only a limited power to name successors and lacked an unlimited appointment power, revocation right, or power to invade principal.

Q: Who managed and controlled the trust? A: The Wisconsin trustee.

Q: Did either party have to file a Florida intangible-tax return for the trust? A: No. The ruling required no return from either the beneficiary or trustee under these facts.

Citations and references

• Fla. Stat. § 199.023(7) — taxable beneficial interest
• Fla. Stat. § 199.052(1), (5), and (6) — annual returns and trust filing responsibilities
• Fla. Stat. § 199.175(1) — taxable situs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-150

Original ruling text

Dec 26, 1996

Re: Technical Assistance Advisement TAA 96(C)2-150 Intangible Tax - Taxation of Trust and Beneficiary ss. 199.023 & 199.052, F.S. XXX Irrevocable Trust of 1976 (Trust) XXX (Beneficiary) XXX (Trustee)

Dear :

Your request for a technical assistance advisement concerning Trust has been referred to this office for response.

Facts

Below is a summary of the information submitted upon which this technical advice is based:

Beneficiary, a Florida domiciliary, created Trust by execution of a trust agreement on XXX. On XXX, Trust was restated, renamed and made irrevocable. A resident of another state was named Trustee in the restated trust agreement. The trust agreement grants the powers of management and control to Trustee. Trustee also is granted the power to appoint all or part of the trust principal to or in trust for the benefit of Beneficiary without any reservation. Beneficiary has reserved only a limited power of appointment over the asset of Trust. The distribution of the trust principal, by Trustee, is to be made upon the first of the following events to occur: 1) Upon the day occurring four (4) months after the date of the receipt of each asset contributed to Trust; or 2) Upon the death of Beneficiary, Trustee will distribute any trust principal that has not been appointed by Beneficiary.

Requested Ruling

Based upon the information supplied with the request for

Technical Assistance Advisement and summarized above, you have asked how the intangible personal property tax applies to Trust, Trustee and Beneficiary.

Provisions of Law

Section 199.052(1), F.S., states that "(a)n annual intangible tax return must be filed with the department by every corporation authorized to do business in this state or doing business in this state and 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. For purposes of this chapter, control' ormanage' does not include any ministerial function or any processing activity. The return shall be due on June 30 of each year. It shall list separately the character, description, and just valuation of all such property."

Section 199.052(5), F.S., states that "(t)he trustee of a Florida-situs trust is primarily responsible for returning the trust's intangible personal property and paying the annual tax on it. The trust's beneficiaries, however, may individually return their equitable shares of the trust's intangible personal property and pay the tax on such shares, in which case the trustee need not return such property or pay such tax, although the department may require the trustee to file an informational return."

Section 199.052(6), F.S., provides that "(e)ach Florida resident with a beneficial interest, as defined in s. 199.023(7), in a foreign-situs trust, that is, a trust with situs outside of this state, is primarily responsible for returning the resident's equitable share of the trust's intangible personal property and paying the annual tax on it. The trustee of a foreign trust may return and pay the tax on the equitable shares of all Florida residents having beneficial interests, in which case the residents need not return such property or pay such tax."

Section 199.175(1), F.S. states that "(i)ntangible personal property shall have 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. Such intangibles shall be subject to annual taxation under this chapter, unless the person who owns, manages, or controls them is specifically exempt or unless the property is specifically exempt. This provision shall apply regardless of where the evidence of the intangible property is kept; where the intangible is created, approved, or paid; or where business may be conducted from which the intangible arises. The fact that a Florida corporation owns the stock of an out-of-state corporation and manages and controls such corporation from a location in this state shall not operate to give a taxable situs in this state to the intangibles owned by the out-of-state corporation, which intangibles arise out of business transacted outside this state."

Discussion of Law

Based upon the provisions of the trust agreement, Beneficiary is granted a limited power to appoint successor beneficiaries. To have a taxable beneficial interest in Trust, Beneficiary must not only be the current income beneficiary, but must also have an unlimited power of appointment or the right to revoke the trust or the power to invade the trust principal. The rights granted to Beneficiary under the trust to appoint successor beneficiaries limits Beneficiary by excluding Beneficiary, Beneficiary's estate or the creditors of Beneficiary's estate as successor beneficiaries. Therefore, Beneficiary does not have a taxable beneficial interest in Trust.

Under the provision of Ch. 199, F.S., a trustee of a Florida situs trust must file an intangible tax return. Trustee is a resident of Wisconsin. The situs of a trust is usually at the location of the trustee. In the case at hand nothing has been presented that would suggest that Trust is located anywhere other than with Trustee. Therefore, neither Trust nor Trustee would have a taxable situs in Florida.

Conclusion

Based upon the provisions of the statutes and the trust

agreement, Beneficiary is not required to file an intangible tax return for the assets of Trust. Likewise, Trustee has no taxable situs is Florida. Therefore, Trustee is not required to file an intangible tax return for 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
Tax Policy and Dispute Resolution
Office of General Counsel

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