When did Florida's $2,450 documentary-stamp cap begin, and did later new money trigger more tax after the cap was reached?

Plain-English summary

Florida's $2,450 documentary stamp tax cap for the described unsecured obligations took effect May 1, 2002. In each example, the original note or notes had generated $1,750 of tax, and the borrower renewed and increased the debt to $1 million. Another $700 was due, bringing cumulative tax to the cap.

After $2,450 had been paid on a single note or qualifying series of renewals, later new money did not produce additional tax. The conclusion assumed the renewal requirements in section 201.09 were met and the notes were not secured by a mortgage, trust deed, or other evidence of indebtedness filed or recorded in Florida.

What this means for you

The cap applied cumulatively to the qualifying renewal chain described in the ruling. Security and recordation facts were critical; this was not a blanket cap for every loan document connected with Florida.

Common questions

Q: What was the effective date? May 1, 2002.

Q: How much additional tax was due in the examples before reaching the cap? $700 on a $200,000 taxable base.

Q: Did later new money create more tax after the cap? No, assuming the renewal and unsecured-instrument conditions remained satisfied.

Citations and references

• Fla. Stat. § 201.08(1)-(2) — tax and cap on written obligations
• Fla. Stat. § 201.09 — renewal notes
• Ch. 2002-26 and Ch. 2002-218, Laws of Florida — 2002 cap legislation
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02B4-007

Original ruling text

SUMMARY

QUESTION: Is the effective date of the documentary stamp
tax cap May 1, 2002?

ANSWER - Based on Facts Below: The provision was effective
upon becoming law and, had effective date of May 1, 2002.

QUESTION: Once documentary stamp tax in the amount of
$2,450.00 has been paid on a single or series of renewals,
are additional taxes due when new money is added to the
indebtedness?

ANSWER - Based on Facts Below: No additional taxes need to
be paid when new money is added to the indebtedness once
documentary stamp tax in the amount of $2 450.00 has been
paid on a single or series of renewals.

Aug 14, 2002

Re: Technical Assistance Advisement No. 02B4-007
Documentary Stamp Tax
Tax Limitation on Unsecured Obligations/New Legislative
Change
Section 201.08(1) & (2), F.S.
XXX ("Corporation")

Dear :

This is in response to your request in which you ask the
Department to issue a Technical Assistance Advisement regarding
the imposition of documentary stamp tax under to Chapter 201,
F.S., pursuant to newly enacted legislative law changes. The
specific facts for which advice has been requested are presented
below.

Facts Presented by Petitioner

Corporation is a trade association representing the
interests of numerous banks, savings associations and other
financial institutions doing business in the state of Florida.
Members of the Corporation are generally involved in the
business of lending money and are therefore routinely involved
in making compliance decisions for documentary stamp tax issues.

On March 21, 2002, the Florida Legislature passed CS/SB 426
(Chapter 2002-218, L.O.F.), which was approved by the governor
on May 1, 2002. The Bill amended s. 201.08, F.S., to provide
that the maximum tax on any promissory note, non-negotiable
notes or other written obligations to pay money not secured by a
mortgage, trust deed or security agreement filed or recorded in
this state is $2,450.00. The provision was effective upon
becoming law and, therefore, had an effective date of May 1,
2002.

On March 22, 2002, the Florida Legislature passed CS/SB 462
(Chapter 2002-26, L.O.F.), which was signed by the governor on
April 16, 2002. This bill contained the identical amendment to
s. 201.08, F.S., but carried an effective date of July 1, 2002.

The legislation is silent on the potential interaction
between the $2,450.00 cap on instruments taxable pursuant to s.
201.08, F.S., and renewals of those instruments pursuant to s.
201.09, F.S.

Requested Ruling by the Petitioner

You seek the Department's confirmation on the following
issues:

1. The effective date of the documentary stamp tax cap is
   May 1, 2002.

2. The determination of the documentary stamp tax
   consequences of the three following renewal note
   transactions:

A. Borrower establishes a revolving line of credit
with lender in the amount of $500,000.00.

Documentary stamp tax in the amount of $1,750.00
on a tax base of $500,000.00 is paid on the
promissory note evidencing the revolving line of
credit. At a time when the principal balance of
the revolving line of credit is $400,000.00,
borrower and lender renew and increase the loan
to a $1,000,000.00 revolving line of credit.

B. Borrower enters into a $500,000.00 term loan with
lender and documentary stamp tax in the amount of
$1,750.00 on a tax base of $500,000.00 is paid on
the promissory note evidencing the term loan. At
a time when the principal balance has been
reduced to $400,000.00, borrower and lender renew
and increase the loan to $1,000,000.00.

C. Borrower and lender enter into term loan A in the
amount of $250,000.00, and term loan B in the
amount of $250,000.00. Documentary stamp tax in
the amount of $875.00 is paid on a tax base of
$250,000.00 on the promissory note evidencing
term loan A and documentary stamp tax in the
amount of $875.00 is paid on a tax base of
$250,000.00 on the promissory note evidencing
term loan B upon which documentary stamp tax is
paid. In time when the principal balance of term
loan A is $200,000.00 and term loan B is
$200,000.00, borrower and lender agree to
consolidate term loan A and term loan B and
increase the amount loaned to $1,000,000.00.

This is with the assumption that in each of the above
examples that the renewal amount of $1,000,000.00 is evidenced
by a promissory note which is not secured by a mortgage, trust
deed or other evidence of indebtedness filed or recorded in the
state of Florida.

Corporation respectfully requests the Department's
determination that once documentary stamp tax in the amount of
$2,450.00 has been paid on a single note or series of renewals,
thereafter, no additional tax need be paid when new money is

added to the indebtedness. For each of the scenarios set forth
in issue number 2 above, Corporation requests the Department's
confirmation that additional documentary stamp tax in the amount
of $700.00 on a tax base of $200,000.00 is due. Once the
aggregate amount of $2,450.00 of taxes paid, no additional tax
will be due on any subsequent renewal which would otherwise
qualify under s. 201.09, F.S., even when new funds are added at
the time of renewal.

Law and Discussion

Section 201.08(1) and (2), F.S., imposes documentary stamp
tax on promissory notes, non-negotiable notes and other
evidences of indebtedness when executed or delivered in the
state of Florida.

Chapter 2002-26, L.O.F., and Chapter 2002-218, L.O.F., each
amend s. 201.08, F.S., to provide that the maximum tax on
instruments not secured by a mortgage, trust deed or other
evidence of indebtedness filed or recorded in this state is
$2,450.00.

Conclusion

We confirm that the effective date of the documentary stamp
tax cap is May 1, 2002. (Please see the Department's newly
published Tax Information Publication No. 02B04-01, issued May
23, 2002.)

We also confirm your interpretation of the new legislative
change on the above examples. Once documentary stamp tax in the
maximum amount of $2,450.00 has been paid on a single note or
series of renewals, no additional tax need be paid when new
money is added to the indebtedness. Additional documentary
stamp tax in the amount of $700.00 on a tax base of $200,000.00
is due in each of the scenarios described in issue number 2
above. Our determination is with the understanding that the
requirements in s. 201.09, F.S., are met and the promissory
notes are not secured by a mortgage, trust deed or other
evidence of indebtedness filed or recorded in the state of
Florida.

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