Did replacing an existing Florida mortgage with an indenture trigger additional documentary stamp or nonrecurring intangible tax?

Plain-English summary

The borrower planned to replace a recorded mortgage with an indenture securing the same longstanding promissory notes. Florida ruled that recording the substitute mortgage would not create additional documentary stamp tax if full tax had already been paid and neither the notes nor the obligors changed.

No additional nonrecurring intangible tax was due if that tax had also been fully paid, no new money was added, and the notes were not satisfied. The result followed the principle that tax is imposed on the debt obligation and is due only once even when more than one mortgage or lien secures it.

The ruling separately warned that the indenture contained a dragnet clause. Future payment obligations secured by that clause could produce additional documentary stamp and nonrecurring intangible tax.

What this means for you

A collateral substitution can avoid a second tax only when it truly secures the same already-taxed debt. Changes to the debt, parties, principal, or later secured obligations can change the result.

Common questions

Was tax due merely because the replacement indenture would be recorded? No, under the stated unchanged-debt and prior-payment conditions.

What conditions applied to the intangible-tax conclusion? Full prior payment, no new money, and no satisfaction of the notes.

Could the dragnet clause create tax later? Yes, if the indenture later secured additional obligations to pay money.

Citations and references

• Fla. Stat. §§ 201.08(1)(a), (1)(b), and (7) and 199.133(1), as discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09B4-005

Original ruling text

SUMMARY
QUESTION: Is Florida’s documentary stamp tax as imposed under section 201.08, F.S., and
nonrecurring intangible tax as imposed under section 199.133(1), F.S., due on an indenture
provided as a mortgage given in substitution of a former mortgage subject to documentary stamp
tax and/or nonrecurring intangible tax if full and proper taxes were paid on the original mortgage
or the underlying notes.
ANSWER: Documentary stamp tax as imposed under paragraph 201.08(1)(a), F.S., is due on
any instrument executed, signed, or delivered in Florida that contains an unconditional written
obligation to pay money. The taxability of a document under this paragraph is determined solely
from the face of the document and any separate document expressly incorporated into the
document. Documentary stamp tax as imposed under paragraph 201.08(1)(b), F.S., is due on any
mortgage or other lien filed or recorded in Florida.
Subsection 201.08(7), F.S., provides that the documentary stamp tax is due only once with
respect to a note or obligation to pay money, notwithstanding that more than one mortgage or
lien is filed or recorded to secure the note or obligation. The substitution of collateral or release
of a mortgage does not result in additional tax if there is no change in the note or obligation
secured thereby, so long as full and proper tax has been paid on the note or former mortgage.
Subsection 199.133(1), F.S., imposes nonrecurring intangible tax on notes and other written
obligations to pay money to the extent secured by a mortgage on Florida real property. The tax
is imposed on the obligation to pay money, not the mortgage. The tax rate is 2 mills and the tax
is due at the time the obligation is secured by Florida real property. The tax is due even if the
mortgage is not recorded. The tax is to be paid on the mortgage when recorded or paid directly
to the Department of Revenue no later than 30 days following the date the obligation is secured
by Florida real property, whichever occurs first.
It is determined that the Indenture is a mortgage that encumbers Florida real property and that it
secures the Notes. The Indenture is a substitute mortgage and will not be subject to
additional documentary stamp tax at the time of recordation so long as full and proper
documentary stamp tax was paid on the Notes or the Mortgage and so long as there is no change
in any form to the Notes and there are no new obligors. No additional nonrecurring intangible
tax is due on the obligations evidenced by the Notes so long as full and proper nonrecurring
intangible tax was paid on the obligations, there is no new money and so long as the Notes are
not satisfied.

August 3, 2009

XXX

Re:

Technical Assistance Advisement No. 09B4-005
Documentary Stamp Tax and Nonrecurring Intangible Tax – Line of Credit Agreement
Paragraphs 201.08(1)(a) and (b), and subsections 201.08(7) and 199.133(1), F.S.
XXX

XXX:
This is in response to your letter dated June 29, 2009, requesting a Technical Assistance
Advisement regarding application of Florida’s documentary stamp tax as imposed under s.
201.08(1)(a), F.S., and nonrecurring intangible tax as imposed under s. 199.133(1), F.S., when an
indenture is recorded in Florida as security for a number of debt obligations and where the
indenture is given as a substitute for a mortgage already recorded. This response to your request
constitutes a Technical Assistance Advisement under Chapter 12-11, Florida Administrative
Code, and is issued to you under the authority of s. 213.22, Florida Statutes.
Facts as Presented by Petitioner
XXX (“Taxpayer”) has borrowed money over approximately a thirty three year period
through a series of promissory notes (“Notes”). Taxpayer’s cumulative existing debt under the
Notes has been and remains secured under a restated mortgage (“Mortgage”) dated as of July 1,
2005, along with three subsequent supplements thereto. You state that full and proper
documentary stamp tax and nonrecurring intangible tax have been paid on the Notes, the full
amount of the obligations evidenced by the Notes or upon the original mortgage that secured the
Notes.
It is understood that the Taxpayer and the mortgage holders intend to replace the
Mortgage with an indenture (“Indenture”). Taxpayer will record the Indenture in the public
records and then terminate the Mortgage. There will be no increase or other change or alteration
to the Notes and the obligor and obligees will remain the same. All debt secured by the
Indenture shall be the same debt currently secured by the Mortgage.

Page 2
Request for Advisement
You request a determination by the Department of Revenue as to whether documentary
stamp tax as imposed under s. 201.08(1)(a) and nonrecurring intangible tax as imposed under s.
199.133(1), F.S., are due on any document or obligation under this transaction. A copy of the
Indenture and spread sheets noting that proper taxes were paid on the Notes and Mortgage were
provided for review via electronic media.
Law and Discussion
Paragraph 201.08(1)(a), F.S., imposes documentary stamp tax on promissory notes and
other written obligations to pay money, executed, signed or delivered in Florida. A document
executed, signed or delivered in Florida is taxable if it contains an unconditional obligation to
pay, or repay, a sum certain in money and is signed by an obligor. The tax is based on the
amount of the obligation at the rate of $.35 per $100 or fraction thereof.
Paragraph 201.08(1)(b), F.S., imposes documentary stamp tax on mortgages or liens filed
or recorded in Florida. The tax is based on the total amount of all obligations secured thereby at
the rate of $.35 per $100 or fraction thereof. When there is a taxable note or obligation to pay
money and a taxable recorded mortgage or lien given to secure the obligation, tax is due only
once and shall be paid on the recorded mortgage or lien at the time of recordation or directly to
the Department of Revenue no later than the 20th day of the month following the month of the
note’s execution, whichever occurs first.
Subsection 201.08(7), F.S., provides that the documentary stamp tax is due only once
with respect to a note or obligation to pay money, notwithstanding that more than one mortgage
or lien is filed or recorded to secure the note or obligation. The substitution of collateral or
release of a mortgage does not result in additional tax if there is no change in the note or
obligation secured thereby, so long as full and proper tax has been paid on the note or former
mortgage.
Subsection 199.133(1), F.S., imposes nonrecurring intangible tax on notes and other
written obligations to pay money to the extent secured by a mortgage on Florida real property.
The tax is imposed on the obligation to pay money, not the mortgage. The tax rate is 2 mills and
the tax is due at the time the obligation is secured by Florida real property. The tax is due even if
the mortgage is not recorded. The tax is to be paid on the mortgage when recorded or paid
directly to the Department of Revenue no later than 30 days following the date the obligation is
secured by Florida real property, whichever occurs first.

Page 3
Position of the Department
It is determined that the Indenture is a mortgage that encumbers Florida real property and
that it secures the Notes. The Indenture is a substitute mortgage and will not be subject to
additional documentary stamp tax at the time of recordation so long as full and proper
documentary stamp tax was paid on the Notes or the Mortgage and so long as there is no change
in any form to the Notes and there are no new obligors. No additional nonrecurring intangible
tax is due on the obligations evidenced by the Notes so long as full and proper nonrecurring
intangible tax was paid on the obligations, there is no new money and so long as the Notes are
not satisfied.
It is noted that a dragnet clause is provided on page 1 of the Indenture. This clause
provides that the Indenture will secure other obligations for the payment of money that may be
executed in the future. Additional documentary stamp tax and nonrecurring intangible tax may
be due on the Indenture if there are future obligations to pay money secured thereby. Additional
documentary stamp tax may also be due if there are obligations to pay money executed, signed
or delivered in 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 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,

Charles T. Phillips
Tax Law Specialist
Technical Assistance and Dispute Resolution
CTP/
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