Did merging two out-of-state LLCs that jointly owned mortgaged Florida property trigger documentary stamp tax on the merger?

Plain-English summary

Florida found no documentary stamp tax on the LLC merger itself because title to the Florida property vested in the surviving entity by operation of law. The two foreign LLCs owned one mortgaged Florida property as tenants in common, and one Georgia LLC would survive.

Florida and Georgia merger statutes treated the property as automatically vesting in the survivor. Recording certified merger articles did not turn that statutory vesting into a taxable deed conveyance.

The ruling separated the merger from the planned replacement mortgage. Documentary stamp tax remained due on the new mortgage naming the surviving LLC as sole mortgagor.

What this means for you

Analyze each document in a merger separately. An operation-of-law property vesting may avoid deed tax while a new or modified financing instrument remains taxable.

Common questions

Q: Did the survivor's Georgia organization change the result?
A: No, because the relevant Georgia and Florida merger provisions operated in the same way.

Q: Was the existing mortgage irrelevant?
A: The merger itself was not taxed, but the replacement mortgage was separately taxable.

Q: Did recording merger articles create deed tax?
A: No on the stated operation-of-law merger.

Citations and references

• Fla. Stat. § 201.02 — documentary stamp tax
• Fla. Stat. §§ 608.438 and 608.4383 — historical LLC merger provisions
• Georgia Code § 14-11-905 — parallel merger provision discussed
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03B4-002

Original ruling text

SUMMARY

QUESTION: Is the merger of two non-Florida limited
liability companies owning property in Florida subject to
the documentary stamp tax?

ANSWER - Based on Facts Below. No. No documentary stamp
tax would be required by the surviving entity as a result
of the merger, since the property is conveyed by operation
of law. The fact that the surviving entity is a Georgia
entity is not a factor in the treatment of the merger,
since the statutory requirements in both Florida and
Georgia are the same.

Mar 27, 2003

Re: Technical Assistance Advisement No. 03B4-002
Documentary Stamp Tax - Merger of Non-Florida Limited
Liability Companies
Sections 201.02, 608.438, and 608.4383, F.S.
XXX ("LLC1")
XXX ("LLC2")

Dear :

This is in response to your recent request for a technical
assistance advisement pertaining to the applicability of
documentary stamp tax on a proposed merger of two non-Florida
limited liability companies owning Florida real property.

FACTS PRESENTED BY THE PETITIONER

LLC1 and LLC2 own a single piece of Florida real property
together as tenants in common. Said property was transferred to
LLC1 and LLC2 as tenants in common via a deed recorded in the
public records of XX County, Florida on XX. The property is
encumbered by a mortgage executed by both LLC1 and LLC2. The
ownership percentages of each company, as delineated in the

deed, indicated LLC1 owns an undivided XX% interest in the
property, with LLC2 owning the remaining undivided interest.

LLC1 and LLC2 desire to accomplish a merger, with LLC1
being the surviving entity. Your request goes on to state the
pertinent parts of the Georgia Code, Section 14-11-905,
governing the merger of limited liability companies.

Upon completion of the proposed merger, a certified copy of
the articles of merger will be filed with the Clerk of the Court
in XX County, Florida. Contemporaneously with said filing, a
new mortgage will be placed on the property showing LLC1 as sole
Mortgagor. By placing a new mortgage on the subject property,
documentary stamp taxes on the mortgage are due and owing by
LLC1. However, at issue is whether documentary stamp taxes are
due and owing by virtue of the merger itself between LLC1 and
LLC2.

REQUESTED RULING

You request the issuance of a Technical Assistance
Advisement determining that no documentary stamp tax is due as a
result of the merger of LLC1 and LLC2.

DISCUSSION AND LAW

Section 201.02, F.S., imposes the documentary stamp tax on
deeds and other instruments transferring an interest in Florida
real property. The tax is based on the consideration given at
the rate of $.70 per $100 or fraction thereof. Consideration
includes, but is not limited to, monies paid or to be paid,
discharge of indebtedness, and any mortgages or other
outstanding encumbrances on the property.

Effective June 15, 2000, the Florida statutes pertaining to
mergers were amended. The new law provides that the title to
all real estate owned by each limited liability company and
"other business entity" merging under ss. 608.438 and 608.4383,
F.S., vests in the surviving entity without reversion or
impairment. The surviving entity is required by statute to
record a certified copy of the articles of merger in the county

in which the merging entity holds any interest in real property.

DEPARTMENT'S RESPONSE

In response to your request, no documentary stamp tax would
be required by LLC1 as a result of the proposed merger, as the
property is conveyed by operation of law. The Georgia statutes
parallel the Florida statutes with respect to mergers of limited
liability companies, and they treat mergers in the same fashion.
The fact that LLC1 is a Georgia entity is not a factor in the
treatment of the merger, since the statutory requirements in
both Florida and Georgia are the same.

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 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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