Were easements and other land interests acquired by a private pipeline company under written threat of condemnation subject to documentary stamp tax?

Subject

Eminent Domain

Plain-English summary

The private pipeline company's deeds and easements obtained through out-of-court condemnation settlements were exempt from documentary stamp tax. Florida Department of Revenue v. Orange County made the exemption turn on the condemnation context rather than whether the condemner was a governmental entity.

The property owners had to receive written notice when the threat of condemnation arose. The company could also seek refunds for tax previously paid on qualifying acquisitions if its claims were within section 215.26's limitation period.

What this means for you

A private entity's acquisition was not automatically taxable when the entity possessed condemnation power and the transfer resolved a genuine, documented condemnation threat.

Common questions

Q: Did the exemption require a government buyer? No, under the cited Orange County decision and revised Department guidance.

Q: Did an out-of-court settlement qualify? Yes.

Q: Was written notice important? Yes. The ruling required written notice to the owners when condemnation was threatened.

Q: Could the company recover tax already paid? Yes, through refund requests filed within the applicable limitation period.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax on real-property transfers
• Fla. Admin. Code rr. 12B-4.013(4) and 12B-4.014(13) — condemnation transfers
• Florida Department of Revenue v. Orange County, 620 So. 2d 991 (Fla. 1993)
• TIP 93(B)4-12R — Department guidance after Orange County
• Fla. Stat. § 215.26 — refund limitation period
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01B4-008

Original ruling text

SUMMARY

QUESTION: Whether an out-of-court settlement transaction
whereby an easement of other real property interest
obtained by a private company possessing the right of
eminent domain, from private property owners under threat
of condemnation is subject to the documentary stamp tax?

ANSWER - Based on Facts Below: In the case where an
easement or other real property is obtained by a private
company which possesses the power of eminent domain, as a
result of an out-of-court settlement, the transaction is
not subject to tax based on the outcome of the Florida
Department of Revenue v. Orange County et al., 620 So.2nd
991,992 (Fla.1993), court decision. All deeds made under
threat of condemnation or as part of an out-of-court
settlement of condemnation proceedings are exempt from tax,
providing written notice is given to the property owners
when threat of condemnation takes place.

Sep 11, 2001

Re: Technical Assistance Advisement No. 01B4-008
Documentary Stamp Tax - Eminent Domain
Section 201.02(1), F.S.
Rules 12B-4.013(4) and 12B-4.014(13), F.A.C.
Tax Information Publication No. 93(B) 4-12R
XXX (Company A)
XXX (Project)
XXX (Commission)

Dear :

This is in response to your recent request for a Technical
Assistance Advisement in connection with the application of the
Florida documentary stamp tax to certain transfers of real
property interests under eminent domain proceedings.

FACTS PRESENTED BY TAXPAYER

Company A was formed to design, construct, own, maintain
and operate a new interstate pipeline transmission system for
the transportation of natural gas from supply areas in other
states to markets in Florida. Company A was granted a
Certificate of Public Convenience and Necessity (the
"Certificate") to construct, operate and maintain the Project by
order of the Commission on XXX, upon the Commission's finding
that the Project is required by the public convenience and
necessity. The Commission has also reviewed and approved
Company A's selection of the route for the project, and Company
A and the Commission determined that it is in the public
convenience and necessity to acquire fee simple, permanent
easement, temporary construction easement, temporary work space
easement and ingress and egress interests in certain lands in
certain counties in Florida.

Pursuant to Section 717f(h) of the Natural Gas Act and by
virtue of holding the Certificate, Company A possessed the power
of eminent domain to acquire property for the construction,
operation and maintenance of the Project. In accordance with
Chapters 73, 74, 361 and 403, F.S., including s. 361.05, F.S.,
thereof ("Right of eminent domain to natural gas companies"),
Company A may acquire the necessary property by eminent domain
proceedings and take title in advance of final judgement.
Company A provides notice to all property owners whose property
may be affected by the Project, informing them of Company A's
intention to acquire the property for public use, including
through eminent domain proceedings, if a voluntary sale cannot
be reached.

In XXX, Company A began obtaining and expects to continue
obtaining, easements and other property interests from various
property owners in furtherance of the Project. Company A has
previously paid documentary stamp tax based on the consideration
paid for certain of these acquired property interests,
notwithstanding that Company A acquired the property interests
through out-of-court settlements under the threat of
condemnation.

REQUESTED RULINGS

1. Whether an out-of-court settlement transaction whereby an
   easement or other real property interest is obtained by
   Company A, a private for-profit entity which possesses the
   power of eminent domain, from private property owners under
   the threat of condemnation is subject to Florida
   documentary stamp tax?

2. Assuming compliance with the Department's rules relating to
   the application for refunds, whether Company A is entitled
   to a refund of all previously paid Florida documentary
   stamp tax if the transaction to which such taxes relate
   were transactions whereby Company A obtained an easement or
   other real property interest under the threat of
   condemnation?

DISCUSSION AND LAW

Section 201.02(1), F.S., generally imposes the documentary
stamp tax on deeds, instruments or writings transferring an
interest in real property, based on the consideration given.

Rule 12B-4.013(4) and Rule 12B-4.014(13), F.A.C., discuss
situations where documentary stamp tax is applicable in the case
of eminent domain proceedings. The former rule exempts
conveyances to governmental entities under threats of
condemnation or as part of an out-of-court settlement. This rule
states in part: "Threat of condemnation exists when a property
owner is informed in writing by a representative of a
governmental body or public official authorized to acquire
property for public use, that such body or official has decided
to acquire the property and the property owner has reasonable
grounds to believe that the necessary steps to condemn the
property will be instituted if a voluntary sale is not arranged.
Conveyances to nongovernmental entities are subject to tax...."

The latter Rule, 12B-4.014(13), F.A.C., states in part:
"Judgements and decrees in eminent domain proceedings by which
title to real property is vested in the condemner are not
subject to state documentary stamp tax. Also, a deed given to a

governmental entity under threat of condemnation or as part of
an out-of-court settlement of condemnation proceedings in not
subject to tax...."

Although these rules distinguish between transfers made as
part of an out-of-court settlement under threat of condemnation
and transfers made pursuant to a judgement or decree in an
eminent domain proceeding (as they relate to governmental
entities), the case of Florida Department of Revenue v. Orange
County et al., 620 So.2nd 991, 992 (Fla. 1993), resulted in the
current treatment of transfers as a result of a threat of
condemnation proceeding and in lieu of eminent domain
proceedings. The question answered by the Court was whether a
property transfer is immune from documentary stamp tax if it
occurs as a result of an out-of-court settlement in a
condemnation proceeding. The Court concluded that "both the
[Florida] Constitution and public policy require that in the
context of condemnation proceedings, the act of transferring
property as part of an out-of-court settlement is immune from
the documentary stamp tax". Id. The Court elected to rephrase
the original question asked by the Department, eliminating any
reference that the condemner must be a governmental entity.

In response to the court case, the Department issued Tax
Information Publication ("TIP") No. 93(B)4-12 on August 10,
1993, and then issued a revised TIP on November 18, 1993,
superseding the previous TIP. The revised TIP stated that if a
deed is given by a nonexempt party to a governmental entity as
part of an out-of-court settlement of condemnation proceedings
or is given under threat of condemnation, the deed is not
subject to documentary stamp tax. The revised TIP removed the
previous references in TIP No. 93(B)4-12 to a governmental
entity, and concluded that all deeds made under threat of
condemnation or as part of an out-of-court settlement of
condemnation proceedings are exempt from tax.

DETERMINATION

Question 1 - Response

In the case where an easement or other real property

interest is obtained by Company A which possesses the power of
eminent domain, as a result of an out-of-court settlement, the
transaction is not subject to documentary stamp tax based on the
outcome of the Florida Department of Revenue v. Orange County et
al., 620 So.2nd 991, 992 (Fla. 1993), court decision. The
revised TIP No. 93 (B) 4-12R, issued November 18, 1993, reflects
the Department's current position that all deeds made under
threat of condemnation or as part of an out-of-court settlement
of condemnation proceedings are exempt from tax. Written notice
must be given to the private property owners when threat of
condemnation takes place.

Question 2 - Response

Company A is entitled to a refund of documentary stamp
taxes previously paid as a result of the transactions where
Company A obtained an easement or other real property interest
under the threat of condemnation, assuming such refund requests
fall within the statute of limitations outlined in Section
215.26, F.S.

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

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