Did two out-of-state merger steps trigger Florida documentary stamp tax on real property?

Subject

Corporate Mergers

Plain-English summary

Neither merger step triggered documentary stamp tax when the Florida real property vested in the survivor by operation of law. The first step merged a Florida corporation into a surviving Delaware corporation. The second merged that Delaware corporation into a surviving Delaware LLC under Delaware law.

This revised advisement clarified earlier TAA 00(B)4-001. It also drew a firm line: if title did not pass by operation of law and a deed was required, documentary stamp tax would be due.

What this means for you

The no-tax result depended on the legal effect of the merger statutes, not merely on calling a transaction a merger. Confirm whether applicable state law automatically vests the real property in the surviving entity or requires a separate conveyance.

Common questions

Q: Was the Florida-to-Delaware corporate merger taxable? No, on the stated statutory facts.

Q: Was the Delaware corporation-to-LLC merger taxable? No, when Delaware law vested the Florida property in the LLC by operation of law.

Q: What if a deed was needed? Documentary stamp tax would be due.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax on real-property conveyances
• Fla. Stat. § 607.1106(1)(a)-(b) — effect of merger
• Fla. Stat. § 607.1107(4) — Florida and foreign corporation merger
• Fla. Stat. § 607.1108(7) — domestic and foreign corporation mergers
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00B4-001R

Original ruling text

SUMMARY

QUESTION: Will transfers of Florida real property from a
Florida corporation to a Delaware corporation, then from
the Delaware corporation to a Delaware limited liability
company by operation of law as a result of corporate
mergers be subject to tax?

ANSWER - BASED ON FACTS BELOW: The merger of a Florida
corporation into a Delaware corporation is not subject to
tax. The merger of a Delaware corporation into a Delaware
LLC by operation of law is not subject to tax where the
Florida real property becomes vested in the surviving LLC.
Where the transfer is not by operation of law, and a deed
is required, tax will be due.

Refer to TAA 00(B)4-001

May 15, 2000

Re: Technical Assistance Advisement No. 00(B)4-001 Revised
Documentary Stamp Tax - Corporate Mergers
Sections 201.02(1), 607.1106, 607.1107, F.S.,
XXX (hereinafter Taxpayer)

Dear :

Your letter requesting clarification of Technical
Assistance Advisement No. 00(B)4-001 has been received by this
office for response. The specific scenario for which advice has
been requested is summarized below.

Facts as Presented by Petitioner

The proposed transaction involves two steps. The first
step is to merge a Florida corporation owning Florida real
property with a surviving Delaware corporation. The second step
is to merge the surviving Delaware corporation into a Delaware

limited liability company (LLC).

Request for Advisement

Technical Assistance Advisement No. 00(B)4-001 concluded
that the mergers were not taxable for purposes of the Florida
documentary stamp tax unless the mergers were governed by the
laws of Florida. Clarification is requested that this statement
refers only to the merger of the Delaware corporation into a
Delaware (LLC) and not to the Florida corporation's merger into
the Delaware corporation.

Provisions of Law

The tax levied by s. 201.02(1), F.S., is an excise tax on
deeds, instruments, or writings that transfer any interest in
real property. The tax rate is 70 cents for each $100 of
consideration. Consideration includes, but is not limited to,
money paid or to be paid, the discharge of an obligation, and
the amount of any mortgage, purchase money mortgage, or other
encumbrance. If the consideration is other than money, the
consideration is presumed to be equal to the fair market value
of the real property being transferred.

Pertaining to mergers, when a merger becomes effective, s.
607.1106(1)(a) and (b), F.S., provides that every other
corporation that merges into a surviving corporation ceases to
exist. Title to all real estate owned by each corporation party
to the merger is vested in the surviving corporation without
revision or impairment.
Pursuant to s. 607.1107(4), F.S., a Florida corporation
that merges with or into a foreign corporation has the same
effect as in the case of the merger of a domestic corporation if
the corporation which survives is to be governed by Florida law.
If the surviving corporation is governed by the laws of any
other state, the effect of the merger shall be the same as a
merger of a domestic corporation, except if the laws of such
other state provide otherwise.

Furthermore, s. 607.1108(7), F.S., provides:

Notwithstanding any provision of this section or ss.
607.1109 and 607.11101, any merger consisting solely of the
merger of one or more domestic corporations with or into
one or more foreign corporations shall be consummated
solely in accordance with the requirements of s. 607.1107.

Position of the Department

Based on the foregoing authorities and facts presented, it
is the position of the Department that the merger of a Florida
corporation into a Delaware corporation is not subject to
documentary stamp tax. Furthermore, the merger of a Delaware
corporation into a Delaware LLC under Delaware law, where the
Florida real property becomes vested in the surviving LLC by
operation of law, is not subject to the tax. However, if the
real property is not transferred by operation of law, and a deed
is required to transfer the real property, tax will be due.
This is a clarification of the Department's position issued in
Technical Assistance Advisement No. 00(B)4-001.

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,

Celestine Grantham
Senior Tax Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel

CG/mh