Did a trust or its Florida beneficiary owe 2001 annual intangible tax when two trustees lived in Florida but the beneficiary lacked revocation and appointment powers?

Subject

Taxable Beneficial Interest in Trust Assets

Plain-English summary

Neither the trustees nor the beneficiary owed Florida annual intangible personal property tax for 2001 under the submitted trust terms. The 2001 law exempted intangible property owned, managed, or controlled by a trustee regardless of the trustee's residence.

The Florida beneficiary had a current right to trust income, but she had neither a power to revoke the trust nor a general power of appointment. She therefore did not have the taxable beneficial interest defined by section 199.023(7).

The result depended on the submitted trust document being the only governing document and remaining unmodified.

What this means for you

Trustee residence no longer created the annual obligation under the cited 2001 change. A resident beneficiary still required separate analysis of income rights and powers over the trust.

Common questions

Q: Did two Florida-resident trustees make the assets taxable? No.

Q: Did the beneficiary's income right alone create a taxable beneficial interest? No.

Q: What powers were absent? A power to revoke and a general power of appointment.

Citations and references

• Fla. Stat. § 199.183(4) — trustee exemption from annual intangible tax
• Fla. Stat. § 199.023(7) — taxable beneficial interest definition
• Fla. Stat. § 199.032 — annual intangible tax
• Fla. Admin. Code r. 12C-2.002(1)(c) — beneficial interests in trusts
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01C2-003

Original ruling text

SUMMARY

QUESTION: Is the 2001 intangible personal property tax due
on intangible assets held in trust where 2 of the 3
trustees and the sole beneficiary are Florida residents?

ANSWER - Based on Facts Below: No. As a result of the
recent tax law change (s. 199.183(4), F.S.), the trustees
do not have an intangible personal property tax obligation
for tax year 2001. The beneficiary also does not have an
obligation for tax year 2001 since she does not have either
a power to revoke the trust or a general power of
appointment.

Aug 30, 2001

Re: Technical Assistance Advisement No. 01C2-003
Intangible Tax - Taxable Beneficial Interest in Trust
Assets
Sections 199.183(4) and 199.023(7), F.S., and rule 12C2.002(1)(c), F.A.C.
XXX ("Trust")
XXX ("Trustees")
XXX ("Beneficiary")

Dear :

This is in response to your letter dated July 10, 2001,
requesting a Technical Assistance Advisement regarding
application of Florida's intangible personal property tax as
imposed under s. 199.032, F.S., upon assets held in a trust.

Facts as Presented by Petitioner

The Beneficiary received severe head injuries in an
accident some years back. The Trust was set up to hold and
protect Beneficiary's insurance settlements such that her
resultant lifetime medical needs and care will be provided for.

Distributions are made periodically from the Trust such that
Beneficiary's expenses at an out-of-state rehabilitation center
are covered.

In the past, the Trust has filed and paid Florida
intangible taxes on taxable assets held within the Trust. The
2001 tax year filings for the Trust and Beneficiary are under
extension, awaiting this response.

The governing trust document and the 2000 Florida
intangible tax return were enclosed with your letter for review.

Request for Advisement

You have requested an advisement on whether the Trust or
Beneficiary is liable for Florida's intangible personal property
tax.

Law and Discussion

Section 199.183(4), F.S., states:

Intangible personal property that is owned managed, or
controlled by a trustee of a trust is exempt from annual
tax under this chapter. This exemption does not exempt
from annual tax a resident of this state who has a taxable
beneficial interest, as defined in s. 199.023, in a trust.

Section 199.023(7), F.S., states:

A resident has a "beneficial interest" in a trust if the
resident has a vested interest, even if subject to
divestment, which includes at least a current right to
income and either a power to revoke the trust or a general
power of appointment, as defined in 26 U.S.C. s.
20141(b)(1).

Rule 12C-2.002(1)(c), F.A.C., in defining "beneficial
interest", states:

Beneficial Interest in a Trust - one or more valuable

property rights in a trust. A taxable beneficial interest
in a trust is the current right to income coupled with: the
right to invade the corpus of the trust; or the right to
revoke the trust; or the right to appoint successor
beneficiaries without limitation. A beneficial interest in
a trust is taxable only to the extent the trust corpus
consists of property subject to the annual tax.

Effective for tax years beginning after December 31, 2000,
Florida's annual intangible personal property tax is not
required of a trustee, no matter the state of residency of the
trustee. However, Florida's annual intangible personal property
tax is required of a Florida beneficiary that has a taxable
beneficial interest in the trust.

Position of the Department

As a result of the recent tax law change, the Trustees,
two-thirds of which reside in Florida, do not have intangible
personal property tax obligations for tax years 2001 and beyond.

A review of the trust document provided with your letter
concludes that the Beneficiary, a Florida resident, does have a
right to the income derived from the Trust but does not have
either a power to revoke the trust or a general power of
appointment.

Therefore, Florida's intangible personal property tax is
not required of the Trust or the Beneficiary for tax years
beginning in 2001 so long as the trust document is the only
document governing the Trust and there has been no modification
to the trust document.

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, your request
and related backup documents are public records under Chapter
119, F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Charles T. Phillips
Tax Law Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel

CTP/mh