What Florida documentary stamp and intangible tax applied when a partnership-converted LLC assigned and refinanced its mortgage?
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This page answers the general question as of 2001. Ezel answers yours, under current Florida tax law, with citations.
Subject
Mortgage Modification/Assignment of Mortgage
Plain-English summary
Assigning the original mortgage to the new lender triggered neither documentary stamp tax nor nonrecurring intangible tax. The limited partnership's statutory conversion made the LLC the continuing entity and owner of the mortgaged property, so it could qualify as the original mortgagor for the renewal rule.
If the original mortgage was not satisfied and all section 201.09 conditions were met, renewing the outstanding original principal was exempt. Documentary stamp and nonrecurring intangible tax applied only to the additional amount advanced by the new lender plus accrued but unpaid interest.
What this means for you
The result depended on entity continuity and preserving the original mortgage rather than satisfying it. The amount of genuinely new debt, not the full renewed balance, formed the taxable increase under the stated conditions.
Common questions
Q: Was the lender-to-lender mortgage assignment taxable? No.
Q: Was the existing principal taxed again on renewal? No, if the original mortgage remained unsatisfied and section 201.09 applied.
Q: What amount was taxable? New funds advanced plus accrued but unpaid interest.
Citations and references
- Fla. Stat. §§ 201.08 and 201.09 — mortgage documentary stamp tax and renewal exemption
- Fla. Stat. § 199.145(2) and (4)(b) — assignment and increased-principal intangible tax
- Fla. Stat. § 608.439(6) — partnership conversion by operation of law
- Fla. Admin. Code r. 12B-4.052(12) — renewal of original mortgage debt
- Fla. Stat. § 213.22 — Technical Assistance Advisements
Source
- Landing page: Florida Tax Law Library
- Advisement: TAA 01M-001
Original ruling text
SUMMARY
QUESTION: After conversion of a general partnership to a
limited liability company, is the assignment of a mortgage
and the refinancing of the original mortgage by a new
lender subject to documentary stamp tax and/or nonrecurring
intangible tax?
ANSWER - Based on Facts Below: No documentary stamp tax is
due and no nonrecurring intangible tax is due with respect
to the assignment of the original mortgage from the
original lender to the new lender. If the original
mortgage is not satisfied and the refinanced mortgage meets
the conditions of s. 201.09, F.S., documentary stamp tax
and nonrecurring intangible tax will be due only on the
additional funds loaned by the new lender plus any accrued
but unpaid interest.
Jan 09, 2001
Re: Technical Assistance Advisement No. 01M-001
Documentary Stamp Tax - Mortgage Modification for
Partnership Converted to LLC
Sections 201.08, 201.09, F.S.
Rule 12B-4.052(12), F.A.C.
Intangible Tax - Assignment of Mortgage
Section 199.145(2), (4), F.S.
XXX (hereinafter, Limited Partnership)
XXX (hereinafter, LLC1)
XXX (hereinafter, Holding LLC)
XXX (hereinafter, Purchaser)
Dear :
This is in response to your request for a technical
assistance advisement, asking for an opinion on whether the
assignment of mortgage and the refinancing of the original
mortgage by a new lender would be subject to documentary stamp
tax and/or nonrecurring intangible tax.
SUMMARY OF FACTS AS PRESENTED BY PETITIONER
Purchaser is a general partnership that desired to acquire
mortgaged property held by Limited Partnership. The following
steps were taken:
A. Limited Partnership was converted by operation of law
under s. 608.439, F.S., to a new entity, LLC1.
B. The continuing entity, LLC1, is now the owner of the
real property formerly owned (before conversion) by
Limited Partnership. This real property is subject to
a mortgage originally executed by Limited Partnership.
C. The former partners of Limited Partnership obtained
membership interests in the converted entity (LLC1) in
the same percentages as they formerly held in Limited
Partnership.
D. A holding company (LLC Holding) was formed, and
membership interests were issued to its members in the
same percentages those same members held in LLC1.
E. At this point, the members held the same percentages
of interest in both LLC1 and LLC Holding.
F. The members then transferred their membership
interests in LLC1 to LLC Holding for later exchange of
the cash or property to be put up by Purchaser.
G. LLC Holding then owned all the membership interests in
LLC1.
H. LLC Holding then sold all of the membership interests
it held in LLC1 to Purchaser.
I. At this point Purchaser held all the membership
interests in LLC1 (which owned the desired real
property).
J. The original lender assigned the original mortgage on
the property to a new lender.
K. The new lender renewed the original note and mortgage
at the then outstanding principal balance plus an
additional amount of $XX. The renewal note and
mortgage were executed by the owner of the real
property, LLC1.
DISCUSSION AND LAW
Documentary Stamp Tax:
Effective October 1, 1999, under s. 608.439, F.S., where
all requirements under the applicable statutes are met for the
conversion, by operation of law (s. 608.439(6), F.S.), no deed
is required to evidence the transfer of real property from the
old entity (Limited Partnership) to the converted entity (LLC1).
The property was still subject to a mortgage executed by Limited
Partnership.
Since the current owner of the real property, LLC1,
acquired the property by operation of law from the original
owner/mortgagor, Limited Partnership, the current owner (LLC1)
is considered the same entity as the original owner. As the
original owner/mortgagor, it qualifies as the original mortgagor
under s. 201.09, F.S. Provided this mortgage is not satisfied
and all the conditions of s. 201.09, F.S., are met, the new
lender may renew the outstanding principal balance of this
original mortgage exempt from imposition of documentary stamp
tax. However, the additional amount loaned in the refinanced
mortgage in excess of the original principal amount of the
original mortgage plus any accrued but unpaid interest is
subject to documentary stamp tax under s. 201.08, F.S. See Rule
12B-4.052(12), F.A.C.
Intangible Tax:
Under s. 199.145(2), F.S., no additional nonrecurring
intangible tax is due on the assignment to a new lender by the
obligee of the original note and mortgage upon which the proper
nonrecurring intangible tax has been paid. Nonrecurring
intangible tax is due under s. 199.145(4)(b), F.S., upon the
excess of the principal balance of the new obligation over the
principal balance of the original obligation, plus any accrued
but unpaid interest.
CONCLUSION
No documentary stamp tax is due and no nonrecurring
intangible tax is due with respect to the assignment of the
original mortgage from the original lender to the new lender.
If the original mortgage is not satisfied and the
refinanced mortgage meets the conditions of s. 201.09, F.S.,
documentary stamp tax and nonrecurring intangible tax will be
due only on the additional funds loaned by the new lender plus
any accrued but unpaid interest.
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 this letter.
Sincerely,
M.E. Clemens, C.P.A.
Senior Tax Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel
MEC/mh
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