Was a supplemental indenture executed in Florida taxable when it added a subsidiary guarantor but did not amend the indenture or notes or state a sum certain?

Plain-English summary

Executing the described supplemental indenture in Florida was not subject to documentary stamp tax. The instrument made a newly created or acquired subsidiary a guarantor, but it did not amend the underlying indenture or notes, call itself an amendment, state a dollar amount, or contain an unconditional promise to pay.

The Department distinguished that instrument from an amendment of the debt documents themselves. If the indenture or a note were amended in Florida, the amended instrument would be taxable. The conclusion also assumed that no written obligations, evidence of indebtedness, liens, or security agreements were filed or recorded in Florida.

What this means for you

A guarantee-related document is not automatically taxable merely because it is signed in Florida. Its operative language, effect on the existing debt, fixed amount, and any Florida filing or recordation are central to the analysis.

Common questions

Q: Did adding a subsidiary guarantor make this supplemental indenture taxable? Not on the described terms.

Q: What facts kept it outside the tax? It did not amend the indenture or notes, did not contain a sum certain, and did not contain an unconditional promise to pay.

Q: Would an amendment of the note itself receive the same result? No. The Department said an indenture or note amended in Florida would be taxable.

Citations and references

• Fla. Stat. §§ 201.07 and 201.08(1), (7) — indebtedness, written obligations, and recorded security
• Fla. Admin. Code rr. 12B-4.052(12) and 12B-4.054(4) — renewals and nonfixed promises
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02B4-005

Original ruling text

SUMMARY

QUESTION: Is execution of a contingent "Supplemental
Indenture" within the State of Florida which does not amend
any provision of the Indenture or the Notes and does not
contain any specific dollar amount or any other "sum
certain" taxable?

ANSWER - Based on Facts Below: Since the execution of the
"Supplemental Indenture" within the State of Florida does
not amend any provision of the Indenture or the Notes, it
would not be subject to the documentary stamp tax.
However, if the Indenture or the Note itself were amended
in the State of Florida, the amended Indenture or the Note
would be subject to the documentary stamp tax. The
discussion and conclusion assumes that no written
obligations to pay money, no evidences of indebtedness, and
no liens or other security agreements are recorded or filed
in Florida.

Jul 17, 2002

Re: Technical Assistance Advisement No. 02B4-005
Documentary Stamp Tax
Execution of a "Supplemental Indenture" within the State of
Florida
Sections 201.07, 201.08(1) and (7), F.S.
Rules 12B-4.052(12), 12B-4.054(4), F.A.C.
XXX (hereinafter Company)

Dear :

This is in response to your request for a Technical
Assistance Advisement in which you ask whether the execution of
a "Supplemental Indenture" within the State of Florida would be
subject to the documentary stamp tax under Section 201.07 or
201.08(1), F.S. The specific facts for which advice has been
requested are presented below.

Facts Presented by Petitioner

Company, a non-Florida corporation, has entered into an
Indenture with a national banking association, as Trustee
pursuant to which Company issued its unsecured Senior Notes in a
"Rule 144A" transaction under the Securities Act of 1933, as
amended. Company's obligations under the Indenture and the
Senior Notes were guaranteed by certain of Company's
subsidiaries who were Subsidiaries on the closing date.

At closing, each of the following events occurred outside
of the State of Florida: (a) Company, Subsidiaries and the
Trustee executed and delivered the Indenture; (b) Company
executed and delivered the Notes in an aggregate principal
amount equal to the principal amount of the Notes being issued
on the closing date; (c) each Note executed at closing included
a "Guarantee" and the Guarantee was executed and delivered by
each of the Subsidiaries; (d) the Trustee authenticated each
Note issued at closing by executing the "authentication"
included in the Note; and (e) each of the initial purchasers of
the Notes accepted delivery of the Notes and disbursed the net
proceeds from the issuance of the Notes to Company. Any Notes
issued in the future (whether in connection with the issuance of
additional Notes, replacement of Notes that have been
transferred, lost or destroyed or otherwise) will be executed
and delivered to the Trustee, and authenticated by the Trustee,
outside of the State of Florida.

Section 2.1(a) of the Indenture incorporates the terms and
provision of the Notes by reference and Section 4 of each Note
provides that the Note includes the terms of the Indenture.
Sections 4.16 and 10.3 of the Indenture require, subject to
certain exceptions, that any New Subsidiary acquired or created
by Company after the closing date must guarantee Company's
payment and performance of the Notes and the Indenture by
executing and delivering to the Trustee a Supplemental
Indenture.

Company, the New Subsidiary and the Trustee must execute
each Supplemental Indenture. Except for the reference to the

definitions of the Indenture, the Supplemental Indenture does
not incorporate the Indenture or any of the Notes by reference,
and neither the Indenture nor the Notes incorporate the
Indenture or any of the Notes by reference, and neither the
Indenture nor the Notes incorporate any Supplemental Indenture
by reference. In addition, the Supplemental Indenture does not
(1) amend any provision of the Indenture or the Notes, or
otherwise state it is an amendment to the Indenture or the
Notes, (2) contain any reference to a specific dollar amount of
Notes or any other "sum certain", or (3) contain any
unconditional promise to pay.

Upon the creation or acquisition of a New Subsidiary,
Company proposes to have the Supplemental Indenture for that New
Subsidiary executed by Company and the New Subsidiary within the
State of Florida and delivered to the Trustee either within or
outside of the State of Florida.

Requested Ruling by the Petitioner

You seek the Department's confirmation that the execution
of a "Supplemental Indenture" as described above, within the
State of Florida, would not be subject to the documentary stamp
tax under Section 201.07 or 201.08(1), F.S. Even though the
Supplemental Indenture is a contingent obligation, you are
concerned that the Supplemental Indenture may be deemed to an
amendment of the Indenture.

Law and Discussion

The discussion and conclusion assumes that no written
obligations to pay money, no evidences of indebtedness, and no
liens or other security agreements are recorded or filed in
Florida.

Section 201.07, F.S., imposes a documentary stamp tax on
bonds, debentures, and certificates of indebtedness. Section
201.08(1), F.S., imposes a documentary stamp tax on promissory
notes, written obligations to pay money, or assignments of wages
or other compensation made, executed, delivered, sold,
transferred, or assigned in the state. Pursuant to section

201.08(7), F.S., a mortgage, trust deed, or security agreement
filed or recorded in this state which is given by a taxpayer
different than or in addition to the taxpayer obligated upon the
primary note or which is given to secure a guaranty of a primary
note, shall for purposes of this section be deemed to evidence
and secure the primary note and such tax shall be paid once.

As stated in Rule 12B-4.052(12), F.A.C., a written
agreement which alters or modifies the contract or obligation of
an original promissory note, mortgage, trust deed, security
agreement or other evidence of indebtedness, by adding one or
more obligors, increasing the principal balance, changing the
interest rate, changing the maturity date, changing the payment
terms, or assuming the terms of the original contract or
obligation is a renewal of the original note. A Renewal which
changes the interest rate, maturity date or the payment terms is
not subject to tax where the tax was paid on the original
obligation. A renewal which adds one or more obligors,
increases the unpaid principal balance of a term loan, or
increases the face amount of a revolving line of credit, or
where the tax was not paid on the original document, is subject
to tax.

When a promissory note references terms (interest rate,
payment terms or maturity date) contained in a loan agreement
and neither document expressly incorporates the other, a
modification or amendment of such terms contained in the loan
agreement is not considered to be a renewal of the promissory
note. However, if the promissory note itself is amended, the
modifying document is a renewal.

As Rule 12B-4.054(4), F.A.C., states, a written promise to
pay money which is not fixed and absolute at the time of
execution is not subject to tax.

Conclusion

The Supplemental Indenture you enclosed with your letter
does not amend any provision of the Indenture or the Notes, or
otherwise state that is an amendment to the Indenture or the
Notes. Therefore, the execution of the Supplemental Indenture

within the State of Florida would not be subject to the
documentary stamp tax under ss. 201.07, 201.08(1) or 201.08(7),
F.S. However, if the Indenture or the Note itself were amended
in the State of Florida, the amended Indenture or the Note would
be subject to the documentary stamp tax.

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 interpretation of the
statutes or rules upon which this advise 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
199, 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,

Baldan E. Sulker
Senior Tax Specialist
Technical Assistance & Dispute Resolution
Office of General Counsel

BES/mh