Were a bankruptcy-plan deed and related security documents subject to Florida stamp and intangible taxes?

Plain-English summary

A bankruptcy court approved a debtor's sale of Florida real and personal property to its secured creditor in connection with or contemplation of a reorganization plan under section 1129 of the Bankruptcy Code. The order stated that the sale qualified for the federal section 1146(c) exemption from stamp and similar taxes.

The transaction used a deed and several security documents, including a mortgage and security agreement, assignments of rents and leases, a cross-collateral agreement, and a financing statement.

Florida concluded that the deed and security documents were not subject to documentary stamp or nonrecurring intangible tax on these facts.

What this means for you

This 2006 ruling depended on the bankruptcy court's plan-related order and the federal exemption then cited as section 1146(c). The ruling also noted that a transfer would be taxable if the required plan confirmation did not occur.

Common questions

Was only the deed exempt? No. Florida also exempted the identified security documents.

What connected the transfer to the bankruptcy exemption? The court approved it in connection with or contemplation of a section 1129 plan and expressly applied section 1146(c).

Did plan confirmation matter? Yes. The cited Florida rule stated the exemption would not apply if the bankruptcy court did not ultimately confirm the plan as required.

Citations and references

• Fla. Stat. §§ 201.02 and 201.08 (deed and security-document stamp taxes)
• Fla. Stat. § 199.133 (2006 nonrecurring intangible tax)
• Fla. Admin. Code r. 12B-4.014(15) (bankruptcy transfers)
• 11 U.S.C. §§ 1129 and 1146(c) (bankruptcy plan and transfer exemption cited in the ruling)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 06M-001

Original ruling text

SUMMARY
QUESTION: Whether the deed and security documents related to a bankruptcy sale are subject to documentary
stamp and nonrecurring intangible taxes
ANSWER - Based on Facts Below: The documents related to the bankruptcy sale are not subject to documentary
stamp or intangible taxes

January 30, 2006

Re: Technical Assistance Advisement No. 06M-001
Documentary Stamp Tax and Intangible Tax
Bankruptcy Sale
Sections 201.02, 201.08 and 199.133, F.S.
Rule 12B-4.014(15), F.A.C.
XXX (hereinafter Taxpayers)
XXX (hereinafter Debtor)
Dear:
Your letter requesting a Technical Assistance Advisement has been referred to this office for response. The specific
scenario for which advice has been requested is summarized below.
Facts as Presented by Petitioner
The Debtor was the historic owner of certain real property located in Florida. In addition, the Debtor owned various
items of personal property. The Bankruptcy Court approved a sale by the Debtor of the real and personal property to
its secured creditor. The Order specifically provided that "the sale of the assets authorized herein is in connection with
or in contemplation of a plan of reorganization under Section 1129 of the Bankruptcy Code and therefore shall be
exempt from any stamp, documentary or other tax under applicable state law as provided in Section 1146(c) of the
Bankruptcy Code." To facilitate the sale, a series of documents were executed and delivered in the following order:
a. Purchase and Sale Agreement wherein Debtor agreed to sell the real and personal property to the creditor.
b. Assignment by creditor of its rights under the Purchase and Sale Agreement to Taxpayers.
c. Release by creditor of its existing mortgages on the real property.
d. Deed executed by Debtor transferring the real property to the Taxpayers.

e. Mortgage and Security Agreement executed by the Taxpayers in favor of the creditor.
f. Two Collateral Assignments of Rents and Leases executed by the Taxpayers in favor of the creditor.
g. Cross Collateral Agreement by the Taxpayers and creditor.
h. Florida Uniform Commercial Code Financing Statement in favor of the creditor. (The Mortgage, Collateral
Assignments, Cross Collateral Agreement and Finance Statement are hereinafter collectively referred to as the
"Security Documents").
Request for Advisement
A Technical Assistance Advisement is being requested to confirm:

1. The Deed is not subject to documentary stamp tax imposed pursuant to s. 201.02, F.S.
2. None of the Security Documents are subject to documentary stamp tax imposed pursuant to s. 201.08, F.S.; and
3. None of the Security Documents are subject to nonrecurring intangible tax imposed pursuant to s. 199.133, F.S.
   Provisions of Law and Discussion
   Section 201.02(1), F.S., provides:
   On deeds, instruments, or writings whereby any lands, tenements, or other real property, or any interest therein, shall
   be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or any other person by his or
   her direction, on each $100 of the consideration therefor the tax shall be 70 cents. When the full amount of the
   consideration for the execution, assignment, transfer, or conveyance is not shown in the face of such deed,
   instrument, document, or writing, the tax shall be at the rate of 70 cents for each $100 or fractional part thereof of the
   consideration therefor. For purposes of this section, consideration includes, but is not limited to, the money paid or
   agreed to be paid; the discharge of an obligation; and the amount of any mortgage, purchase money mortgage lien, or
   other encumbrance, whether or not the underlying indebtedness is assumed. If the consideration paid or given in
   exchange for real property or any interest therein includes property other than money, it is presumed that the
   consideration is equal to the fair market value of the real property or interest therein.
   Section 201.08(1)(b), F.S., states in part:
   On mortgages, trust deeds, security agreements, or other evidences of indebtedness filed or recorded in this state,
   and for each renewal of the same, the tax shall be 35 cents on each $100 or fraction thereof of the indebtedness or
   obligation evidenced thereby. Mortgages, including, but not limited to, mortgages executed without the state and
   recorded in the state, which incorporate the certificate of indebtedness, not otherwise shown in separate instruments,
   are subject to the same tax at the same rate. When there is both a mortgage, trust deed, or security agreement and a
   note, certificate of indebtedness, or obligation, the tax shall be paid on the mortgage, trust deed, or security

agreement at the time of recordation. A notation shall be made on the note, certificate of indebtedness, or obligation
that the tax has been paid on the mortgage, trust deed, or security agreement....
Rule 12B-4.014(15), F.A.C., provides:
Transfer in Bankruptcy: Sale of real property by trustees, debtors or receivers in federal bankruptcy proceedings is
subject to tax unless the transfer is made pursuant to a plan confirmed under s. 1129 of the Bankruptcy Code, is a
precondition or essential to the confirmation of the plan, or is necessary to consummate or implement a confirmed
plan and the debtor is a party to the transfer. If the bankruptcy court does not ultimately confirm the plan under 11
U.S.C. 1129, the transfer would not be exempt pursuant to 11 U.S.C. 1146(c), and would be subject to tax. (11 U.S.C.
Section 1146(c); In re Jacoby-Bender, Inc., 758 F. 2d 840 (2d. Cir. 1985); In re Smoss Enterprises Corp., 54 Bankr.
950 (E.D.N.Y. 1985)).
Section 199.133(1), F.S., provides:
A one-time nonrecurring tax of 2 mills is hereby imposed on each dollar of the just valuation of all notes, bonds, and
other obligations for payment of money which are secured by mortgage, deed of trust, or other lien upon real property
situated in this state. This tax shall be assessed and collected as provided by this chapter.
Pursuant to 11 U.S.C. Section 1146(c), the issuance, transfer, or exchange of a security, or the making or
delivering an instrument of transfer under a plan confirmed under s. 1129 of the federal Bankruptcy Code is not to be
taxed under any law imposing a stamp tax or similar tax.
Position of the Department
Based on federal and state regulations, the documents and transactions presented in this inquiry would not be
subject to either the documentary stamp tax or intangible 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 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 the date of this letter.
Sincerely,

Celestine Grantham
Technical Assistance and Dispute Resolution
CG/mh
Record ID: 17698