Did five trusts have a Florida taxable situs when most trustees and the bank's management authority were outside Florida?

Plain-English summary

Florida found that the five trusts would not have a Florida situs for annual intangible personal property tax after the proposed changes. Each trust would have three trustees: one Florida resident, one individual outside Florida, and an out-of-state bank acting through officers and a committee outside Florida. Because a majority of the trustees would reside outside Florida, the cited rule did not treat the trusts as having a Florida situs.

The location of real authority mattered too. Florida-based bank officers could continue advising the trustees about investment selection and other trust issues, but they could not exercise discretion, judgment, management, or control over the trust assets. Books, day-to-day administration, and decision-making authority were to be moved outside Florida.

The TAA was limited to the trusts' own annual intangible-tax liability. It expressly did not address any potential liability of the beneficiaries.

Common questions

Did one Florida-resident trustee create a Florida situs? No. On the stated facts, most of the three trustees were outside Florida.

Could Florida bank officers still advise the trustees? Yes, if the advice involved no discretion or judgment and the Florida officers had no legal authority, management, or control.

Could trustee meetings be conducted from Florida? The plan said no trustee action concerning intangible assets would occur at meetings held in Florida, although the Florida trustee could join out-of-state meetings by telephone.

Did the ruling decide whether beneficiaries owed tax? No. It expressly left beneficiary liability unaddressed.

Citations and references

• Fla. Stat. § 199.052(1) and (5)
• Fla. Stat. § 199.175(1)
• Fla. Admin. Code r. 12C-2.006(3)(f)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99C2-001

Original ruling text

SUMMARY

In this instance, the Trusts will have three trustees: an
individual residing in Florida; an individual residing out
of state; and an out of state bank, operating through trust
officers and a trust committee located outside of Florida.
Since the majority of the trustees are not residing in
Florida, under Rule 12C-2.006(3)(f), F.A.C., the trust is
not deemed to have a Florida situs, and is not subject to
annual intangible tax.

As long as the trust officers located in Florida will not
have legal authority to act with respect to the Trusts and
will not have any management or control authority, the
Trusts will not be subject to Florida intangible tax.
Florida officers providing advice and counsel to the
trustees on investment selection without the use of
discretion or judgment will not constitute control or
management of intangible assets. This advisement does not
address potential liability of beneficiaries of the trusts.

Jan 05, 1999

Re: Technical Assistance Advisement No. 99(C)2-001
Florida Annual Intangible Tax/Trusts
ss. 199.052(1),(5), 199.175(1), F.S.
Rule 12C-2.006(3)(f), F.A.C.
XXX (Trust 1)
XXX (Trust 2)
XXX (Trust 3)
XXX (Trust 4)
XXX (Trust 5)
XXX (Grantor)
XXX (Trustee 1)
XXX (Co-Trustee)
XXX (Trustee 2)
XXX (Trustee 3)

Dear :

You have petitioned for a technical assistance advisement
pursuant to s. 213.22, F.S., and Rule 12-11.003, F.A.C.

Statement of Fact Presented by Petitioner

The facts and the transactions described in your letter are
described below. You have also attached to your letter copies
of the three trust agreements creating the Trusts for our
review.

The Trusts were established by three written irrevocable
trust agreements in XXX, between the Grantor and Trustees.
Trust 1 and Trust 5 were established under one agreement. The
other three Trusts (Trust 2, Trust 3 and Trust 4) were
established under one agreement. The trustee succession and
other administrative provisions of the three agreements are
essentially identical.

The Grantor retained no power or control over any of the
Trusts. He subsequently died in XXX.

By written instruments, the Co-Trustee resigned as a cotrustee of each Trust. Under the terms of each agreement, CoTrustee was succeeded in that position by Trustee 1, who is a
legal resident of the State of Florida.

Trustee 2 has remained co-trustee of each Trust. Trustee 2
is presently a legal resident of the State of Florida, but
anticipates relocating to another state.

Trustee 3 remains co-trustee of each trust. Trustee 3 is a
national bank with its principal place of business outside the
state of Florida. With respect to the Trusts, Trustee 3 has
been acting through trust officers who, for the most part, are
located in its office in the state of Florida.

Each Trust contains substantial intangible assets which
would be subject to the annual Florida intangible personal
property tax if the Trust were deemed situated in Florida. No

intangibles owned by any of the Trusts have a business situs in
Florida.

Under the terms of each trust agreement, the concurrence of
Trustee 3 and at least one individual trustee is required on all
acts connected with the administration and distribution of each
Trust or all acts otherwise required or permitted under the
agreement. Otherwise, the three trustees share equally in the
ownership, management and control of each Trust's assets,
including each Trust's intangible assets.

No trust agreement requires that the trustees, or any
trustee, be Florida residents. No trust agreement requires that
Florida be the situs of the Trusts created under it, although
each trust agreement is to be interpreted in accordance with
Florida law.

The following actions are scheduled to occur prior to
January 1, XX, and you ask that the Department, for purposes of
this ruling, assume that they do occur:

1. Trustee 2 will establish legal residence in another
   state.

2. Trustee 3 will move its share of the administration of
   the Trusts from its office in Florida, to its office
   in another state. The following steps will be taken
   in that regard:

a. The books and records of the Trusts (which have
been customarily retained by Trustee 3) will be
moved to another state and maintained there.

b. Trustee 3's share of the administration of the
Trusts will be reassigned from trust officers
domiciled in Florida to trust officers domiciled
in another state, who will thereafter handle such
administration on a day-to-day basis.

c. Authority over certain decisions with respect to
Trustee 3's share of the administration of the

Trusts will continue to be vested in a trust
committee. Such decisions shall include
discretionary distributions of principal or
income; investment reviews; and the purchase and
sale of assets. At least a majority of the
members of such trust committee will be domiciled
outside of Florida. The members of such
committee shall be appointed by and ultimately
report to the management and board of directors
of Trustee 3, located in another state.
Authority over all other decisions shall be
vested in trust officers domiciled outside of
Florida.

d. Trustee 3's trust officers domiciled in Florida,
who have traditionally been advising the
trustees, may continue to provide advice and
counsel to the trustees on investment selection
and other trust issues. However, they will not
exercise any management or control.

3. The trustees will manage and exercise control over the
   intangible assets of each Trust. No trustee action
   with respect to such assets shall be taken at meetings
   held in Florida; however, the one trustee domiciled in
   Florida may attend some meetings held outside Florida
   by conference telephone. Any actions taken by the
   trustees in Florida with respect to intangible assets
   shall be purely ministerial; that is, they shall not
   involve the use of discretion or judgment.

Requested Advisement

The trustees request a ruling that, assuming the
transactions described above take place prior to January 1, XX,
the taxpayers will not be liable for Florida intangible personal
property taxes for year XXX and subsequent years.

Discussion and Law

Section 199.052(1), F.S., requires that every person who

owns, controls or manages intangible personal property that has
a taxable situs in Florida must file an intangible tax return.
Section 199.175(1), F.S., states that intangible personal
property has 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.

Under s. 199.052(5), F.S., the 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.

Department's Position

In this instance, the Trusts will have three trustees: an
individual residing in Florida; an individual residing out of
state; and an out of state bank, operating through trust
officers and a trust committee located outside of Florida.
Since the majority of the trustees are not residing in Florida,
under Rule 12C-2.006(3)(f), F.A.C., the trust is not deemed to
have a Florida situs, and is not subject to annual intangible
tax.

As long as the trust officers located in Florida will not
have legal authority to act with respect to the Trusts and will
not have any management or control authority, the Trusts will
not be subject to Florida intangible tax. Florida officers
providing advice and counsel to the trustees on investment
selection without the use of discretion or judgment will not
constitute control or management of intangible assets. This
advisement does not address potential liability of beneficiaries
of the trusts.

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,

Baldan E. Sulker
Senior Tax Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel

BES/mh