Did a recorded collateral assignment of a note and mortgage owe documentary stamp and nonrecurring intangible tax?

Plain-English summary

A property seller financed $60 million of a $75 million real-estate sale through a note and mortgage. An affiliate of the buyer separately lent the seller $12 million, secured by the seller's collateral assignment of its rights in the $60 million note and mortgage.

Florida imposed documentary stamp tax on the recorded collateral assignment. The cited rule treated a mortgage assignment used as collateral for a new loan as a new taxable mortgage when recorded in Florida.

Nonrecurring intangible tax did not apply to the $12 million loan. Although the obligation was not “contingent,” it was secured by personal property—the assigned note and mortgage—rather than by a direct lien on Florida real property.

What this means for you

The two taxes used different tests. Recording a collateral mortgage assignment triggered documentary stamp tax, while nonrecurring intangible tax required the new obligation itself to be secured by Florida real property.

Common questions

Was documentary stamp tax due on the $12 million collateral assignment? Yes, because the assignment secured a new loan and was recorded in Florida.

Was nonrecurring intangible tax due? No. The new note was secured by personal property rather than a lien on Florida real property.

Did Florida accept the theory that the assignment was a contingent obligation? No. It said the obligation was not contingent, but still found no intangible tax because the security was not real property.

Citations and references

• Fla. Stat. § 201.08(1) (documentary stamp tax on notes and recorded mortgages)
• Fla. Admin. Code r. 12B-4.053(27) (collateral assignments securing new loans)
• Fla. Stat. § 199.133(1) (nonrecurring intangible tax on obligations secured by Florida real property)
• West Flagler Associates, Ltd. v. Department of Revenue, 633 So. 2d 555 (Fla. 3d DCA 1994)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 06M-004

Original ruling text

SUMMARY
QUESTION: Is a loan secured by a Collateral Assignment of Note and Mortgage subject to the documentary stamp
tax and nonrecurring intangible tax?
ANSWER - Based on Facts Below: Per Rule 12B-4.053(27), F.A.C., an assignment of a mortgage given as collateral
security for a new loan is treated as a new mortgage and subject to documentary stamp taxes when recorded in the
state. Nonrecurring intangible taxes are not due on a collateral assignment of a mortgage, since a note secured by a
collateral assignment of note and mortgage is a note secured by personal property, not real property.

October 31, 2006

Re: Technical Assistance Advisement No. 06M-004
Documentary Stamp Tax and Nonrecurring Intangible Tax
Collateral Assignment of Note and Mortgage
Sections 199.133, 201.08(1); F.S; Rule 12B-4.053(27), F.A.C.
XXX ("Corporation 1")
XXX ("LLC")
XXX ("Contract")
XXX ("Corporation 2")
XXX ("Property")
Dear:
This is in response to the request for a Technical Assistance Advisement dated August 2, 2006. Taxpayer requests
clarification and a determination as to whether the nonrecurring intangible property tax is exempt under the
transaction outlined in the following paragraphs.
Facts Presented by the Petitioner
Corporation 1 is the owner of Property and is selling Property to LLC for $75,000,000, pursuant to the Contract. In
connection with the sale of the property, Corporation 1 will be providing LLC with seller financing in the amount of
$60,000,000, as detailed in Section 2.5 of the Contract, which will be evidenced by a Promissory Note and secured by
a Mortgage encumbering the Property, as well as a Security Agreement, UCC Financing Statements, and an
Assignment of Leases, Contracts and Rents. At closing, LLC will arrange for its affiliate, Corporation 2, to lend
Corporation 1 $12,000,000 pursuant to Section 2.6 of the Contract. This $12,000,000 loan will be secured by a
Collateral Assignment of Note and Mortgage given by Corporation 1 to Corporation 2, which will collaterally assign to
Corporation 2 all of Corporation 1’s rights as lender under the $60,000,000 loan.
Ruling Requested

A binding opinion is being requested regarding whether documentary stamp taxes and nonrecurring intangible
taxes are due in connection with the $12,000,000 loan. To the best of your knowledge and belief, Corporation 1 would
owe documentary stamp taxes on the Collateral Assignment of Note and Mortgage, because such document is the
"security agreement" in the $12,000,000 loan transaction and is being recorded in Florida, and because the Collateral
Assignment intentionally incorporates Corporation 1's obligation to pay the $12,000,000 loan by specifically
referencing the $12,000,000 note, bringing the note into Florida's jurisdiction.
For the nonrecurring intangible tax, reliance is being placed on the case of West Flagler Associates, Ltd. v. Dep't of
Revenue, 633 So.2d 555 (Fla. 3d DCA 1994). A binding opinion is being requested relating that the nonrecurring
intangible tax would not be due on the Collateral Assignment of Note and Mortgage because it is a "contingent
obligation" and does not create a direct lien on Florida real property.
Discussion and Law
Section 201.08(1), F.S., imposes the documentary stamp tax at the rate of $.35 per $100, or fraction thereof, on
notes, recorded mortgages, and other promises to pay money which are signed, executed, or delivered to a Florida
lender.
Rule 12B-4.053(27), F.A.C., states:
Assignment of Mortgage: An assignment of a mortgage by a lender (mortgagee or owner of the asset) to a new lender
who has purchased the note and mortgage and becomes the holder of the note and mortgage is not taxable. (State v.
Sweat, 113 Fla.797, 152 So. 432 (1934)) However, where the assignment of a mortgage is given as collateral security
for a new loan, the assignment is taxable when recorded in this state. Cross Reference - subsection 12B-4.054(5),
F.A.C.
The above quoted rule provides that a collateral assignment of a mortgage given as security for a new loan is
taxable as a mortgage for documentary stamp tax purposes.
Section 199.133(1), F.S., levies a one-time nonrecurring intangible tax of 2 mills on notes, bonds, and other
obligations for payment of money which are secured by mortgages on Florida real property. The case of West Flagler
Associates, Ltd. v. Dep't of Revenue, supra, ruled that the nonrecurring intangible tax is not applicable to contingent
obligations; however, a collateral assignment of a mortgage is not a "contingent obligation." Notwithstanding, a note
secured by a collateral assignment of note and mortgage is a note secured by personal property, not real property.
The note is not a contingent obligation, but it is not subject to the nonrecurring intangible tax because the note is not
secured by a lien on Florida real property.
Determination
Based on the referenced statutes and regulations, the Department confirms your understanding that documentary
stamp taxes are due on the $12,000,000 Collateral Assignment of Note and Mortgage. Nonrecurring intangible taxes

would not be due on the same $12,000,000 Collateral Assignment of Note and Mortgage, because it is not secured by
a lien on real property.
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.
If you have any further questions with regard to this matter and wish to discuss them, you may contact me directly
at (850) 922-4844.
Sincerely,
Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance & Dispute Resolution
JBE/mh
Record ID: 23110