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

JVP/mh