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Flint™ Trusts vs. Florida
Department of Revenue ("FLDOR") In March of 1996, after several years of Flint™ Trusts consistently receiving favorable Technical Assistance Advisement Rulings ("TAA Rulings"), the FLDOR decided that the use of the short term irrevocable Flint™ Trust was becoming too wide spread. Further, the FLDOR felt that certain of the provisions should cause Flint™ Trusts to be taxable for Florida Intangible Tax purposes, despite the perfect TAA Ruling track record of Flint™ Trusts. See pre1996 TAA Rulings History. The FLDOR thus chose to not issue any further TAA Rulings to Flint ™ type trusts. By law, TAA Rulings are discretionary rulings and the FLDOR "may" issue these type rulings, in their discretion, but the FLDOR is not required to issue TAA Rulings. The FLDOR’s position of not issuing any further rulings was unacceptable to Charles M. Kelly, Jr. Accordingly, in April of 1996 Mr. Kelly converted all his pending TAA Ruling requests into Petitions for Declaratory Statements ("PDS"). PDS are mandatory rulings. Thereafter, the FLDOR had no choice but to address all of the issues and concerns that the FLDOR had with the provisions of Flint™ Trusts and to litigate those issues at the FLDOR level with Mr. Kelly through the PDS process. TAA Rulings are to Florida law what a Private Letter Ruling is to Federal law. A TAA Ruling is binding against the FLDOR in favor of the taxpayer who receives the Ruling, but it is does not establish legal precedent for all taxpayers. A PDS is an interpretation of the issues covered by the Petition for Declaratory Statement and does establish precedent for all taxpayers to rely upon with regard to those issues. Thus, a PDS is to Florida law what a Revenue Ruling is to Federal Tax law. The style of the PDS were "Charles M. Kelly, Jr., et al, vs. Florida Department of Revenue." The PDS were filed on April 23, 1996. In July of 1996, a draft PDS was issued and was unfavorable to Flint™ type trusts. However, the basis used to deny favorable status, in Mr. Kelly’s opinion, violated both the Florida Constitutional and certain of the Florida Statutes. Mr. Kelly immediately contacted the creators of the 57 Flint™ Trusts who had all previously received favorable TAA Rulings and advised them of the FLDOR’s position and how he felt that the FLDOR would probably not prevail at either the administrative or judicial appeal level. Nearly all of the creators of the then 57 approved Flint™ Trusts agreed to have Mr. Kelly fight the PDS. They also, as a group, contributed significantly in excess of $100,000 to a Flint™ Trust vs. FLDOR defense fund. The FLDOR was advised of the establishment of the fund and Mr. Kelly’s intent to proceed with appeal rights afforded to him and his clients under the PDS process. About a month after the draft PDS had been issued, the FLDOR contacted Mr. Kelly and proposed a settlement. The settlement that was structured meant that all of the Flint™ Trusts involved in the PDS process would receive favorable TAA Rulings, if Mr. Kelly would withdraw the PDS. Even though Mr. Kelly was inclined to litigate the matter and establish additional legal precedent in this area, the settlement achieved what he had set out to do for his clients, i.e., attain tax exempt status for the involved Flint™ Trusts. When Mr. Kelly asked the high ranking FLDOR official in charge of the PDS why the FLDOR was willing to settle the matter he was advised that the FLDOR realized the matter would be extensively litigated, that it would require a significant commitment of resources of the FLDOR for an extended period of time and that the FLDOR felt that Flint™ Trusts would in the end most probably prevail. For a significant period of time following the settlement, the FLDOR consistently issued additional favorable TAA Rulings to Flint™ Trusts, with amazingly quick turn around time as short as 5 business days in many cases. However, around the middle of December of 1996, the FLDOR saw a dramatic increase in the number of TAA Ruling requests and decided that, instead of continuing to issue TAA Rulings a Rule Promulgation Process would be started. The main goal of establishing a rule was to establish "safe harbors" for Flint™ type trusts and eliminate the need for individualized TAA Rulings. Thus, Flint™ Trusts had won the battle in the rulings arena, so the FLDOR was left with the task of trying to administratively change the applicable rules (see Rule Promulgation Process). For more information please write us at: info@flinttrust.com |
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