Were Chapter 243 revenue bonds and their security documents subject to stamp or intangible tax?

Subject

Tax Exemption

Plain-English summary

The Chapter 243 revenue bonds and the related financing and security documents were exempt from Florida documentary stamp and nonrecurring intangible taxes. The Department applied the statutory exemption to the bonds, letter-of-credit agreement, mortgage, and collateral assignments executed in connection with the bonds.

Because those instruments were exempt, payment of the two taxes was not a prerequisite to enforcing them. The usual enforcement restrictions in sections 201.08(1) and 199.282(5) therefore did not apply.

What this means for you

The result depended on the instruments' connection to the described exempt university revenue-bond financing. The ruling did not announce an exemption for unrelated credit or mortgage documents.

Common questions

Q: Were the revenue bonds subject to documentary stamp tax? No.

Q: Did the exemption extend to the letter-of-credit agreement and mortgage? Yes, along with the related collateral assignments described in the ruling.

Q: Did tax have to be paid before the bank could enforce those instruments? No.

Citations and references

• Fla. Stat. § 159.31 — tax exemption for qualifying bond instruments
• Fla. Stat. § 243.33 — tax exemption for Chapter 243 bonds
• Fla. Stat. § 201.08(1) — documentary stamp tax and enforceability
• Fla. Stat. § 199.133(1) — nonrecurring intangible tax
• Fla. Stat. § 199.282(5) — intangible-tax enforceability restriction
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00M-003

Original ruling text

SUMMARY

QUESTION: Are the bonds and the collateral assignments
executed in connection with the bonds under Chapter 243,
F.S., subject to the documentary stamp tax and/or the nonrecurring intangible tax?

ANSWER - Based on Facts Below: Section 243.33, F.S.,
provides that bonds issued under that chapter are free from
taxation of every kind by the state, the county and by the
municipalities and other political subdivisions of the
state. This exemption also applies to the collateral
assignments executed in connection with the bonds, Letter
of Credit, and Mortgage Agreement. Since the latter are
exempt from taxes, the payment of such taxes is not a
prerequisite to the enforcement of such instruments.

Sep 11, 2000

Re: Technical Assistance Advisement No. 00M-003
Documentary Stamp Tax and Intangible Tax
Sections 201.08(1) and 199.133(1), F.S.
Tax Exemption, Chapter 243, F.S.
XXX (University)
XXX (Authority)
XXX (Bank)

Dear :

This is in response to your request for a Technical
Assistance Advisement dated June 23, 2000, regarding the
application of documentary stamp tax and intangible taxes to the
transaction subscribed herein.

FACTS PRESENTED BY TAXPAYER

The University is a Florida not-for-profit corporation.
The Authority is a public body, corporate and politic, duly

created and organized pursuant to Chapter 243, Part II, Florida
Statutes. The Authority is also a local agency pursuant to
Chapter 159, Part II, Florida Statutes. The Authority assists
institutions of higher education in the financing of certain
projects by issuing revenue bonds, and loaning the proceeds of
such bonds to institutions of higher education, such as the
University. Effective as of XXX, the Authority entered into an
Indenture of Trust with the Bank, with respect to the issuance
of the $XX Authority Revenue Bonds Series 2000A (University
Project). The Authority subsequently loaned the proceeds of the
Bonds to the University pursuant to a Loan Agreement dated as of
XX.

As further security for the repayment of the Bonds, the
Bank agreed to issue its irrevocable letter of credit ("Letter
of Credit"). This is a common method of "credit enhancement"
enabling the Bonds to obtain a higher credit rating, thereby
lowering the interest rate on the Bonds. The Letter of Credit
shall be drawn upon for monthly payments of interest, and annual
payments of principal, or as may be otherwise required to make
any necessary payments under the Bonds. The University agreed
to reimburse the Bank for any payments made by the bank under
its Letter of Credit, pursuant to the Letter of Credit Agreement
between the University and Bank. As additional security for the
obligation of the University under the Letter of Credit
Agreement, the University executed a Mortgage Deed and Security
("Mortgage") and related documents in favor of the Bank.

REQUEST FOR RULING

The taxpayer requests a Technical Assistance Advisement
that:

(a) No documentary stamp taxes or intangible taxes are due
in connection with the execution or recording of the
Letter of Credit Agreement and/or the Mortgage, and
accordingly;

(b) No payment of documentary stamp taxes or intangible
taxes shall be required to be paid as a requisite for
the Bank to enforce any of its remedies thereunder.

DISCUSSION AND LAW

Section 159.31, F.S., provides in part:

... The bonds issued under the provisions of this part,
their transfer, and the income therefore (including any
profit made on the resale thereof), and all notes,
mortgages, security agreements, letters of credit, or other
instruments which arise out of or are given to secure the
repayment of bonds issued in connection with a project
financed under this part, shall at all times be free from
taxation by the state or any local unit, political
subdivision, or other instrumentality of the state....

Section 243.33, F.S., provides that bonds issued under
Chapter 243 are:

... Free from taxation of every kind by the state, the
county and by the municipalities and other political
subdivisions in the state....

The exemption includes not only the bonds themselves, but
also the collateral assignments executed in connection with the
bonds, the Letter of Credit Agreement and the Mortgage. Since
the Letter of Credit Agreement and the Mortgage are exempt from
the imposition of the documentary stamp taxes and intangible
taxes, payment of such taxes is not a prerequisite to the
enforcement of such instruments, as would otherwise be required
in s. 201.08(1), F.S., or s. 199.282(5), F.S.

DETERMINATION

Based on the language contained within s. 159.31, F.S., and
s. 243.33, F.S., it is the determination of the Department that
the documentary stamp tax imposed on notes, mortgages and other
written obligations to pay money under s. 201.08(1), F.S., is
not applicable to the revenue bonds, Letter of Credit Agreement,
and Mortgage. The tax does not have to be paid in order to
enforce the payment of these instruments.

As to the nonrecurring intangible tax imposed under s.
199.133(1), F.S., the same exemption is applicable to the
revenue bonds, Letter of Credit Agreement, and Mortgage. As to
the enforcement of such instruments, s. 199.282(5), F.S. , would
not apply.

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. 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 from that
which is expressed in this response.

You are further advised that this response, your request
and related backup 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,

Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance and Dispute Resolution
Office of the General Counsel

JE/mh