Will the 1934 Rockefeller family trusts become subject to New York State or New York City income tax if their corporate trustee is replaced with a Delaware trust company and the two New York-domiciled members of the trusts' controlling Committee are replaced by people not domiciled in New York?

Plain-English summary

John D. Rockefeller, Jr. created five irrevocable trusts in 1934 (the 1934 Trusts) for the benefit of his children, naming The Chase National Bank of the City of New York - now JPMorgan Chase Bank - as trustee. The trust agreements also created a five-member Committee with sweeping power to direct the trustee: the trustee cannot act on most matters unless the Committee instructs or approves it. JPMorgan Chase Bank, as trustee, asked whether the Trusts would become exempt from New York State and New York City personal income tax if (a) the Committee replaced the trustee with J.P. Morgan Trust Company of Delaware, and (b) the two Committee members currently domiciled in New York resigned and were replaced by non-New York domiciliaries.

Because the Trusts' grantor was domiciled in New York when the Trusts were created and became irrevocable, the Trusts are "resident trusts" under Tax Law § 605(b)(3)(C) regardless of what happens to the trustee or the Committee. But New York provides a statutory escape hatch: under Tax Law § 605(b)(3)(D) and 20 NYCRR 105.23(c), a resident trust owes no New York tax if (1) all trustees are domiciled outside New York, (2) the entire corpus - including real and tangible property - sits outside New York, and (3) all income and gains are non-New York source, as if the trust were a nonresident.

The Department found that condition turns on a wrinkle: because the Committee has controlling power over the trustee, its members are themselves treated as co-trustees under New York trust law (following Matter of Rubin). That means the domicile of every Committee member - not just the corporate trustee - counts toward the "all trustees domiciled outside New York" test. It also left open whether any investment advisors or former Committee members later retained by the Committee might likewise qualify as co-trustees, since that depends on the actual powers they're given.

On the corporate trustee's domicile, the Department rejected the simple "state of incorporation" rule from Sease v. Central Greyhound Lines and instead held that a corporate trustee's domicile - like an individual's - is the state from which its business is actually directed or managed (its principal place of business), consistent with Mercantile-Safe Deposit and Trust Co. v. State Tax Commission. Whether the proposed Delaware trustee's principal place of business is actually Delaware, and whether every Committee member and any advisor-turned-co-trustee is domiciled outside New York, are factual determinations the Advisory Opinion could not resolve on the facts presented.

What this means for you

Trustees and fiduciaries restructuring a New York-connected trust

Moving a trust's corporate trustee out of New York does not, by itself, exempt a resident trust from New York tax. You must also confirm the trustee's domicile under the "principal place of business" test (board meetings, executive presence, day-to-day management), and separately confirm that every person or committee with controlling power over the trustee - who counts as a co-trustee - is also domiciled outside New York.

Advisors and committee members with veto or directive powers

If a trust instrument gives an advisor or committee the power to direct or veto the trustee's actions, New York trust law (Matter of Rubin) treats that advisor or committee member as a co-trustee. That status carries tax consequences: their individual domicile is tested the same way an individual trustee's domicile would be, using the ordinary "permanent home" definition in 20 NYCRR 105.20(d)(1).

New York City tax exposure

New York City personal income tax under Article 30 of the Tax Law tracks the state rule. For any taxable year the trust fails the three-part exemption test, the Trusts also owe New York City tax if any trustee (including a co-trustee Committee member) is domiciled in New York City for that year.

Common questions

Q: Are the 1934 Trusts New York resident trusts?
A: Yes. The grantor, John D. Rockefeller, Jr., was domiciled in New York when the property was transferred to the Trusts and when they became irrevocable, so they are resident trusts under Tax Law § 605(b)(3)(C) - independent of where the trustee or Committee is later located.

Q: Does replacing the corporate trustee with a Delaware trust company automatically end New York tax?
A: No. It only helps if the Delaware entity's principal place of business - where its board and management actually direct its business - is genuinely outside New York, and only if the other two conditions (corpus and income outside New York) and the domicile of every co-trustee are also satisfied.

Q: Why do the Committee members' domiciles matter if they aren't called "trustees"?
A: Because the Committee can direct the trustee to take or withhold virtually any action, New York courts (Matter of Rubin) treat an advisor or committee with that kind of controlling power as a co-trustee. The Department applied that rule here, so the Committee members' domiciles count toward the "all trustees domiciled outside New York" requirement.

Q: Could New York City tax apply even if New York State tax does not?
A: The two run together under this opinion - the Department states that for any year the trust fails the three-condition state exemption, New York City tax under Article 30 also applies if a trustee (including a co-trustee) is then domiciled in New York City.

Q: Did the Department decide whether the Trusts will actually qualify for the exemption?
A: No. It set out the legal framework but expressly left the factual determinations - the Delaware trustee's true principal place of business, and the domicile of each Committee member and any advisor found to be a co-trustee - undecided, since an Advisory Opinion only applies the law to the facts as given, not to facts still in flux.

Citations and references

• Tax Law § 605(b)(3) - defines a resident estate or trust, including a trust funded by a New York domiciliary
• Tax Law § 605(b)(3)(D) - exempts a resident trust from tax if all trustees, the corpus, and all income are outside New York
• Tax Law § 605(b)(4) - defines a nonresident estate or trust
• 20 NYCRR 105.20(d)(1) - defines an individual's domicile as the place intended as a permanent home
• 20 NYCRR 105.23(c) - sets out the three conditions exempting a resident trust from New York personal income tax
• Tax Law Article 30 - imposes New York City personal income tax, applied here consistent with the state trust-residency rules
• Tax Law § 171(24) and 20 NYCRR 2376.1(a) - limit an Advisory Opinion to the specified facts presented
• Sease v. Central Greyhound Lines, Inc., 306 NY 284 - corporate domicile as state of incorporation (rejected here for trustee-domicile purposes)
• Mercantile-Safe Deposit and Trust Co. v. State Tax Commission - basis for testing a corporate trustee's domicile by its principal place of business
• Matter of Rubin, 143 Misc 2d 303, affd 172 AD2d 841 - an advisor or committee with controlling power over a trustee is treated as a co-trustee

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_2004.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a04_7i.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-04(7)I
Income Tax
November 12, 2004

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I031015B

On October 15, 2003, a Petition for Advisory Opinion was received from JPMorgan
Chase Bank, as Trustee of the 1934 Trusts, c/o John Powers, 345 Park Avenue, New York, NY
10154.
The issue raised by Petitioner, JPMorgan Chase Bank, as Trustee of the 1934 Trusts, is
whether the trusts, described below, will be subject to New York State or New York City income
tax if (a) the Committee, described below, replaces the trustee with a trustee not domiciled in
New York State, and (b) the two Committee members who are currently domiciled in New York
State are replaced by individuals who are not domiciled in New York State.
Petitioner submits the following facts as the basis for this Advisory Opinion.
John D. Rockefeller, Jr., as grantor (the Grantor), and The Chase National Bank of the
City of New York (now JPMorgan Chase Bank), as trustee (the Trustee), created five irrevocable
trusts by written instruments (the Agreements of Trust), dated December 18, 1934, for the
benefit of Abby Rockefeller Milton, John D. Rockefeller 3rd, Nelson A. Rockefeller, Laurance S.
Rockefeller, and David Rockefeller, respectively (collectively, the Trusts). The Grantor was a
domiciliary of New York, New York when the Trusts were created.
Under the terms of the Agreements of Trust, the Trustee is given broad powers over the
Trusts’ assets. The Agreements of Trust appoint a committee which is empowered to instruct the
Trustee in the exercise of the Trustee’s powers under the Agreements of Trust (the Committee).
Specifically, the Agreements of Trust provide that the payment of income and principal to any
beneficiary should be made in accordance with the Committee’s instructions. Moreover, the
Agreements of Trust provide that the Committee may direct the Trustee, and the Trustee must
obey such direction, to take or refrain from taking any action which the Committee deems it
advisable for the Trustee to take or refrain from taking.
Subject to the directions of the Committee, the Trustee is given certain powers and
authority over the Trusts’ assets pursuant to Section II of the Agreements of Trust. Specifically,
the Trustee has the power to: (1) retain any stocks, bonds, securities or other property, real or
personal, which at any time form part of any Trust; (2) consent to the reorganization,
consolidation, or merger of any corporation or the sale or lease to any corporation or person of
the property of any corporation, any of the stocks, bonds, notes or other securities which are held
by the Trustee under the Agreements of Trust and do any act with respect to such stocks, bonds,
notes or other securities; (3) exercise any option contained in any stocks, bonds, notes or other
securities held by it for the conversion of the same to other securities and make any payments in

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connection therewith and decide whether to make such payment from principal or income; (4)
make advances for the protection or preservation of any of the securities held by it or for the
foreclosure of any mortgage or otherwise and decide whether to make such payment from
principal or income; (5) borrow money for any purposes connected with the protection or
preservation of the principal of any Trust and mortgage or pledge any real estate or personal
property forming a part of any Trust; (6) accept deeds of real property in satisfaction of bonds
and mortgages and pay consideration in connection therewith; (7) pay and discharge any taxes,
assessments or other charges levied or made upon any Trust; (8) determine whether or not to
maintain a sinking fund; (9) incur and pay out of the income or principal any and all expenses in
connection with the discharge of the Trustee’s duties; (10) vote any shares of stock held in trust;
and (11) in the case of a minor entitled to receive any property hereunder, to pay over the same
to the parent of the minor.
Pursuant to Section III of the Agreements of Trust, the Trustee has full power and
authority to: (1) sell, exchange or otherwise dispose of any Trust’s assets; (2) invest and reinvest
any Trust’s funds in any stocks, bonds, securities, personal property or real estate as the Trustee
deems advisable; (3) establish a trust fund and make distributions to any person entitled to any or
all of the principal of any Trust fund in any securities or other property held by it; and (4) in
making distributions in kind among two or more persons, to distribute the same or different
property to such persons and to conclusively determine the value of the property distributed.
However, the Agreements of Trust provide that the Trustee shall not take any action under and
pursuant to Section III of the Agreements of Trust unless directed by the Committee or until it
shall have notified the Committee in writing of the action it contemplates taking and shall have
requested the Committee’s approval thereof and it shall have received permission from the
Committee to take such action. In the event that the Committee does not respond to the request
from the Trustee for permission to take such action within ten days of the Trustee’s mailing of
such request, or if the Committee states that the Trustee may exercise its own discretion over
such action, the Trustee has discretion over whether or not to take such action.
The Trustee is a corporation, incorporated under the laws of New York State. Pursuant to
Section X of the Agreements of Trust, the Committee may, by unanimous vote of all of its
members, remove the Trustee and appoint a bank or trust company organized under the laws of
any state in the United States to act as trustee. The Committee proposes to remove the Trustee
and appoint a successor trustee incorporated under the laws of Delaware (hereinafter sometimes
referred to as the Successor Trustee). It expects to appoint J.P. Morgan Trust Company of
Delaware, a Delaware limited purpose trust company (hereinafter sometimes referred to as the
Proposed Successor Trustee). Both the Trustee and the Proposed Successor Trustee are
indirectly wholly owned subsidiaries of J.P. Morgan Chase & Co., a Delaware corporation.
Once the Proposed Successor Trustee has been appointed, it will take title to, and be the
custodian of, all the Trusts’ assets, which assets will be recorded on and become part of the
Proposed Successor Trustee’s books and records and fiduciary assets. As it does for all trusts for

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which the Proposed Successor Trustee acts as a trustee, it will purchase certain administrative
services in connection with the administration of the Trusts from its affiliate, Petitioner, a
New York State banking corporation, pursuant to the terms of an existing agency agreement.
These services will include tax preparation services for fiduciary income tax returns, client
relationship support services and certain other processing and ministerial services. The Proposed
Successor Trustee will be responsible for the monitoring and oversight of its agent in providing
these services and will conduct a full review of the Trusts quarterly.
The Proposed Successor Trustee is a corporation of substantial significance. It has an
annual revenue of $2.4 million, assets under management of $1.4 billion and capitalization of
$30 million. Delaware law governs the Proposed Successor Trustee’s capitalization, and the
Proposed Successor Trustee is regulated and supervised by the Office of the State Bank
Commissioner. The State of Delaware conducts annual examinations of the Proposed Successor
Trustee’s policies and procedures, accounts under administration, financial records and
statements and the daily administration of the trust company. In addition, the Proposed
Successor Trustee maintains over 900 fiduciary accounts from its Delaware headquarters, which
is located at 500 Stanton Christiana Road, Newark, Delaware 19713.
Four of the Proposed Successor Trustee’s seven directors are Delaware residents. Of the
Proposed Successor Trustee’s eighteen officers, fourteen, including the President and Chief
Executive Officer, live and/or work in Delaware. Meetings of the Board of Directors are held in
Delaware. The Board of Directors must approve the activities of the Proposed Successor
Trustee’s Trust and Investment Committee at its quarterly meetings. In addition to the fourteen
fiduciary professionals who work out of offices in Delaware, an administrative staff maintains
the Proposed Successor Trustee’s records, including Board minutes, the corporate charter and
license, the Trust and Investment Committee minutes, files for trust accounts and original
agreements, in Delaware. The Board of Directors, therefore, makes major policy decisions from
the Delaware headquarters, and the administrative staff carries out day-to-day operations in
Delaware.
The Proposed Successor Trustee acts as Trustee of and administers trusts in many states,
not just in Delaware. In that connection, it retains from time to time non-Delaware service
providers such as accountants, investment managers, legal counsel, administrative support and
others (including its corporate affiliates) in connection with managing trusts of which it is
Trustee. However, it has no exclusive relationship with such service providers. Rather, the
Proposed Successor Trustee uses in-state providers when convenient and is free to use various
out-of-state service providers depending upon the differing needs of its clients.
The Committee directs the Trustee on all decisions regarding the investment of the
Trusts’ assets. For more than a decade, the Committee has retained advisors to make
recommendations regarding the allocation of the Trusts’ assets among various asset classes, such

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as large cap equities and small cap equities, both domestic and international, bonds and
alternative investments, such as venture capital and other private funds. Before the merger of
Morgan Guaranty Trust Company of New York with and into The Chase Manhattan Bank, the
Committee retained Morgan Guaranty Trust Company of New York to manage the investments
of a portion of the equity portfolio and its affiliate, J.P. Morgan Investment Management, Inc., to
provide asset allocation advice. The Committee also retained Cambridge Associates to provide
related advice regarding the Trusts’ investments. After the merger of Morgan Guaranty Trust
Company of New York with and into The Chase Manhattan Bank, which resulted in the
formation of Petitioner, the Committee continued to retain Petitioner for investment management
services and its affiliate, J.P. Morgan Investment Management, Inc., for asset allocation advice
and plans to continue to do so, subject to the Committee’s right to replace any of the advisors it
retains at any time.
The Committee is comprised of five individuals, two of whom are currently domiciled in
New York State. The two members of the Committee who are currently domiciled in New York
State are considering resigning from the Committee and it is expected that the three remaining
members of the Committee will fill the vacancies created by the resignation of the two
Committee members who are currently domiciled in New York State by appointing two
individuals who are domiciled outside New York State as Committee members. If the said
Committee members elect to resign from the Committee and two new Committee members,
neither of whom is domiciled in New York State, are appointed to the Committee, the
Committee will then comprise five individuals, none of whom is domiciled in New York
(hereinafter sometimes referred to as the Proposed Committee). The Proposed Committee may,
however, meet from time to time in New York State and will itself retain one or more advisors,
selected by the Proposed Committee, some of whom may be domiciled in New York State.
More specifically, the Proposed Committee will retain a New York law firm to provide it with
ongoing legal advice and representation. Also, the Proposed Committee will retain one or more
investment management firms domiciled in and outside of New York State to provide it
with investment advice and management, including Petitioner and J.P. Morgan Investment
Management, Inc., as more fully set forth above. Also, the two Committee members who are
considering resigning from the Committee, should they decide to resign, will be retained as
independent advisors (without vote) to provide the Proposed Committee with general advice on
distributions and management of the Trusts’ assets. The advisors of the Proposed Committee
will not have any authority or power to direct or control in any manner any decision or action of
the Proposed Committee.
None of the Trusts’ assets includes real or tangible property located in New York State.
None of the Trusts’ assets are used in a trade or business carried on in New York State. All
income and gains of the Trusts are derived from or connected to sources outside of New York
State, determined as if the Trusts were nonresidents.

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Applicable law and regulations
Section 605(b)(3) of the Tax Law defines a resident estate or trust, and provides, in part:
Resident estate or trust. A resident estate or trust means:
(A) the estate of a decedent who at his death was domiciled in this state,
(B) a trust, or a portion of a trust, consisting of property transferred by will of a
decedent who at his death was domiciled in this state, or
(C) a trust, or portion of a trust, consisting of the property of:
(i) a person domiciled in this state at the time such property was transferred to the
trust, if such trust or portion of a trust was then irrevocable, or if it was then revocable
and has not subsequently become irrevocable; or
(ii) a person domiciled in this state at the time such trust, or portion of a trust,
became irrevocable, if it was revocable when such property was transferred to the trust
but has subsequently become irrevocable.
For the purposes of the foregoing, a trust or portion of a trust is revocable if it is
subject to a power, exercisable immediately or at any future time, to revest title in the
person whose property constitutes such trust or portion of a trust, and a trust or portion of
a trust becomes irrevocable when the possibility that such power may be exercised has
been terminated.
Section 605(b)(3)(D) of the Tax Law, as added by Chapter 658 of the Laws of 2003,
applicable to tax years beginning on or after January 1, 1996, provides as follows:
(i) Provided, however, a resident trust is not subject to tax under this article if all
of the following conditions are satisfied:
(I) all the trustees are domiciled in a state other than New York;
(II) the entire corpus of the trusts, including real and tangible property, is located
outside the state of New York; and
(III) all income and gains of the trust are derived from or connected with sources
outside of the state of New York, determined as if the trust were a non-resident trust.

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(ii) For purposes of item (II) of clause (i) of this subparagraph, intangible property
shall be located in this state if one or more of the trustees are domiciled in the state of
New York.
(iii) Provided further, that for the purposes of item (I) of clause (i) of this
subparagraph, a trustee which is a banking corporation as defined in subsection (a) of
section fourteen hundred fifty-two of this chapter and which is domiciled outside the state
of New York at the time it becomes a trustee of the trust shall be deemed to continue to
be a trustee domiciled outside the state of New York notwithstanding that it thereafter
otherwise becomes a trustee domiciled in the state of New York by virtue of being
acquired by, or becoming an office or branch of, a corporate trustee domiciled within the
state of New York.
Section 605(b)(4) of the Tax Law defines a nonresident estate or trust, and provides:
Nonresident estate or trust. (A) A nonresident estate means an estate which is not
a resident.
(B) A nonresident trust means a trust which is not a resident or part-year resident.
Section 105.20(d)(1) of the Personal Income Tax Regulations (Regulations) provides:
Domicile, in general, is the place which an individual intends to be such
individual’s permanent home - the place to which such individual intends to return
whenever such individual may be absent.
Section 105.23(c) of the Regulations provides:
The determination of whether a trust is a resident trust is not dependent on the
location of the trustee or the corpus of the trust or the source of income; provided,
however, no New York State personal income tax may be imposed on such trust if all of
the following conditions are met:
(1) all the trustees are domiciled in a state other than New York State;
(2) the entire corpus of the trust, including real and tangible property is located
outside of New York State; and
(3) all income and gains of the trust are derived or connected from sources outside
of New York State, determined as if the trust were a nonresident.

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Opinion
The Trusts in this case consist of property of the Grantor who was domiciled in
New York State at the time such property was transferred to the Trusts, and when the Trusts
became irrevocable. Accordingly, the Trusts are resident trusts of New York pursuant to section
605(b)(3)(C) of the Tax Law. However, this fact does not, by itself, mean that they are subject to
New York State personal income tax under Article 22 of the Tax Law.
In Charles B. Moss Trust, Adv Op Comm T & F, April 8, 1994, TSB-A-94(7)I, it was
determined that where the three conditions of section 105.23(c) of the Regulations were met, no
New York State personal income tax was imposed on the trust even though the trust was a
New York resident trust pursuant to section 605(b)(3)(C) of the Tax Law. In that case, the sole
trustee was domiciled in Colorado. The corpus of the trust consisted solely of intangibles (cash,
securities and U.S. Government obligations) that were held by Fiduciary Trust Company located
in New York State. These intangibles were deemed to be located at the domicile of the trustee in
Colorado. (See Safe Deposit & Trust Co. v Virginia, 280 US 83; Mercantile-Safe Deposit and
Trust Company v Murphy, 19 AD2d 765, affd 15 NY2d 579; Taylor v State Tax Commission, 85
AD2d 821, 822.) Also, none of the assets of the trust were employed in a business carried on in
New York and all income and gains of the trust were derived from sources outside of New York,
determined as if the trust were a nonresident. A similar conclusion was reached in Harry J.
Benton Trust, Adv Op Comm T&F, October 25, 1996, TSB-A-96(4)I.
Section 605(b)(3)(D) of the Tax Law was added to codify section 105.23(c) of the
Regulations which in turn was promulgated to codify the holding in Mercantile-Safe Deposit and
Trust Co. v. State Tax Commission, supra. In that case, the grantor of an inter vivos trust was
domiciled in New York at the time the trust was created. The trust consisted only of intangible
assets, and the trustee, a Maryland corporation, managed the trust from its principal office in
Maryland. New York State conceded that the Maryland corporation was domiciled in Maryland
for purposes of the personal income tax rules relating to resident trusts. The court held that the
New York taxation of the trust under these circumstances would extend New York’s taxing
power beyond its jurisdiction because the trust had no connection with New York other than the
fact that the grantor of the trust was domiciled in New York at the time the trust was created, and
thus conflicted with the due process clause of the Fourteenth Amendment of the Federal
Constitution. However, since the issue of domicile was conceded, the court did not discuss
whether the domicile determination was based on the fact that the trustee was incorporated in
Maryland or on some other factors.
The term domicile as defined in section 105.20(d) of the Regulations pertains to an
individual. The domicile of a trustee that is a corporation is not addressed in Article 22 of the
Tax Law or the Regulations promulgated thereunder. Therefore, it must be determined what
domicile means with respect to a corporation that is a trustee, within the context of section

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605(b)(3)(D)(i)(I) of the Tax Law and sections 105.20(d)(1) and 105.23(c)(1) of the Regulations
in light of the holding in Mercantile, supra.
It has been held that the domicile of a corporation is the state in which it is incorporated.
(Sease v Central Greyhound Lines, Inc., 306 NY 284.) However, under Article 22 of the Tax
Law, the concept of domicile with respect to an individual is based on the intent of the
individual. Once a domicile is established for an individual, it does not necessarily continue for
the individual’s lifetime. An individual’s domicile may change from time to time as the
individual’s intentions change. Therefore, it would be inappropriate to define domicile for
purposes of section 605(b)(3)(D)(i)(I) of the Tax Law and section 105.23(c)(1) of the
Regulations with respect to a corporation that is a trustee as narrowly as in Sease, supra; that is,
the state of incorporation. To set a rigid standard with respect to a corporation, under which a
domicile could not be changed, would be contrary to the basic domicile concept of intent.
Therefore, for purposes of section 605(b)(3)(D)(i)(I) of the Tax Law and section
105.23(c)(1) of the Regulations, it is held that the domicile of a corporation is the principal place
from which the trade or business of the corporation is directed or managed. A corporation’s
principal place of business is the location where the corporation manages, conducts, or directs its
business. For example, a corporation manages, conducts or directs its business where the main
office and regular meeting place of the board of directors is located, regardless of where the
administrative departments and the physical property of the corporation are situated. A
corporation’s principal place of business may be established by the activity of the corporation
within New York State and the absence of a trade or business conducted by the corporation
elsewhere. A corporation having its principal place of business in New York State is considered
to be domiciled in New York State for purposes of section 605(b)(3)(D)(i)(I) of the Tax Law and
section 105.23(c)(1) of the Regulations regardless of the state of incorporation. This treatment is
consistent with the holding in Mercantile, supra. This definition of a corporation’s principal
place of business for purposes of Article 22 of the Tax Law is consistent with federal diversity
jurisdiction decisions of the United States District Court, Southern District of New York, in
which the court addressed whether it has jurisdiction over a corporation that engages in activities
in different states (see Scot Typewriter Co. v Underwood Corp., 170 F Supp 862 (SD NY 1959);
Center for Radio Information, Inc. v Herbst, 876 F Supp 523 (SD NY 1995)).
Accordingly, for purposes of section 605(b)(3)(D) of the Tax Law and section 105.23(c)
of the Regulations, the domicile of the Proposed Successor Trustee will be the state where its
principal place of business is located, as set forth in the above guidelines for determining the
domicile of a corporation. The determination of domicile is a factual matter that is not
susceptible of determination in this Advisory Opinion. An Advisory Opinion merely sets forth
the applicability of pertinent statutory and regulatory provisions to “a specified set of facts.” Tax
Law, §171.Twenty-fourth; 20 NYCRR 2376.1(a).

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A trustee is defined generally as a person in whom some estate, interest, or power in or
affecting property is vested for the benefit of another (106 NY Jur 2d, Trusts, §6). Trustee is
also used to denote a person to whom the management of the property of others is entrusted. Id.
(See also Re Eptein’s Estate, 278 NYS 260 [1935]).
An advisor to a trustee has been interpreted by the courts to include not only a person
who has been designated by particular terminology in the trust instrument but also any other
individual who, by the terms of the trust instrument, has been given power to direct or control a
trustee in the performance of some part or all of that trustee’s functions and duties, or who has
been invested with a form of veto power over particular actions of a trustee through the medium
or device of requiring that those actions be taken only with the consent and approval of such
advisor (see 56 ALR 3d, Wills; Trusts - Appointment of Advisor, §1).
It is well settled under New York law that a grantor of a trust may limit a trustee’s
powers. In Matter of Rubin, 143 Misc 2d 303, affd 172 AD2d 841, the court addressed the status
of advisors. The court held that the designation of an advisor is a valid limitation on a trustee’s
powers, and noted that the courts have generally considered an advisor to be a fiduciary,
somewhat in the nature of a co-trustee. Another term that may be employed, said the court, is
quasi-trustee or special trustee. The court’s statement “since the relationship between the
fiduciary and the advisor is that of a co-trustee, with the advisor having the controlling power,
the fiduciary is justified in complying with the directives and will not generally be held liable for
any losses,” Id. 307, indicates a tacit acceptance of the characterization of the advisor as a
trustee. However, an advisor that does not have any powers under the terms of the trust
instrument to direct or control a trustee in the performance of some part or all of that trustee’s
functions and duties, and has not been invested with a form of veto power over particular actions
of a trustee through the medium or device of requiring that those actions be taken only with the
consent and approval of the advisor, will not be considered a co-trustee.
Under the facts in this case, the Committee has been granted broad powers over the assets
of the Trusts. For example, the Committee may direct the Trustee to take or refrain from taking
any action which the Committee deems it advisable for the Trustee to take or refrain from taking.
All of the powers of the Trustee under the Trust Agreements are subject to the directions of the
Committee. Since the Committee is an advisor having the controlling power over the Trustee,
following Rubin, supra, the members of the Committee are considered to be co-trustees of the
Trusts. Therefore, for purposes of the first condition under section 605(b)(3)(D)(i) of the Tax
Law and section 105.23(c) of the Regulations, the individuals comprising the Committee are
considered to be trustees of the Trusts.
However, the determination of whether Petitioner or any other investment management
firms or former Committee members that may be retained by the Proposed Committee to provide
investment advice or management services would also be treated as co-trustees of the Trusts for

10
TSB-A-04(7)I
Income Tax
November 12, 2004

purposes of section 605(b)(3)(D)(i) of the Tax Law and section 105.23(c) of the Regulations is a
factual matter that is not susceptible of determination in this Advisory Opinion.
In conclusion, Petitioner states that all real and tangible property included in the corpus
of the Trusts, is located outside New York and all the income and gains of the Trusts are derived
or connected from sources outside of New York State, determined as if the Trusts were a
nonresident. Pursuant to section 605(b)(3)(D)(ii) of the Tax Law, any intangible property
included in the corpus of the Trusts is located in New York State if any of the trustees are
domiciled in New York State. Therefore, the determination of whether the Trusts will be exempt
from New York State personal income tax for purposes of section 605(b)(3)(D) of the Tax Law
and section 105.23(c) of the Regulations will depend on whether the Proposed Successor
Trustee, any member of the Proposed Committee or any other investment advisor or manager
that is considered to be a co-trustee is domiciled in New York State. The Trusts will meet the
three conditions of section 605(b)(3)(D)(i) of the Tax Law and section 105.23(c) of the
Regulations only if all of the trustees are domiciled outside of New York State. In the case of the
Proposed Successor Trustee, pursuant to the concept of domicile with respect to an individual,
the domicile of the corporation is the principal place from which the trade or business of the
corporation is directed or managed. In the case of any member of the Proposed Committee or
any other investment advisor or manager that is considered to be a co-trustee, pursuant to section
105.20(d)(1) of the Regulations, the domicile of an individual is the place which such individual
intends to be such individual’s permanent home.
The New York City personal income tax is similar to the New York State personal
income tax and is administered by New York State the same as Article 22 of the Tax Law.
Accordingly, for the taxable years that the Trusts have not met the three conditions contained in
section 605(b)(3)(D)(i) of the Tax Law and section 105.23(c) of the Regulations, New York
State personal income tax is imposed on the Trusts, and if any of the trustees are domiciled in
New York City, New York City personal income tax authorized under Article 30 of the Tax Law
is imposed on the Trusts for those taxable years that a trustee is domiciled in New York City.

DATED: November 12, 2004

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.