Were a revolving-credit application, line-of-credit agreement, and bank approval letter subject to Florida documentary stamp or nonrecurring intangible tax?

Plain-English summary

The revolving-credit process used three documents: a borrower-signed application, an unsigned line-of-credit agreement, and an approval letter.

The application remained contingent on bank approval and establishment of a credit limit, so it did not contain an unconditional promise to pay a sum certain. The letter lacked the borrower's signature and the required promise, and the agreement likewise lacked the borrower's signature and an unconditional sum-certain obligation.

The documents also did not expressly incorporate one another, so their terms could not be combined to create a taxable written obligation. None owed documentary stamp tax. Because the credit was not secured by a mortgage or lien on Florida real property, nonrecurring intangible tax was inapplicable.

What this means for you

Document tax follows the face of each instrument and only properly incorporated documents. A general statement that documents collectively represent the relationship may not constitute express incorporation.

Common questions

Was the signed application taxable? No, because credit approval and the limit remained contingent.

Could the three documents be read together? No, because they did not expressly incorporate one another.

Why was intangible tax inapplicable? No Florida real-property mortgage or lien secured the credit.

Citations and references

• Fla. Stat. §§ 199.133 and 201.08 and Fla. Admin. Code r. 12B-4.052(6), as cited in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 11B4-008

Original ruling text

Executive Director
Lisa Vickers

TAX: Documentary Stamp Tax and Nonrecurring Intangible Tax
TAA NUMBER: 11B4-008
ISSUE: Line of Credit Agreement
STATUTE CITE(S): Sections 199.133, 201.08, F.S.
RULE CITE(S): Rule 12B-4.052(6), F.A.C.

QUESTION: With respect to a revolving line of credit loan made by a bank to its customers, will
documentary stamp tax be due on an Application for a line of credit, the Line of Credit Agreement, or the
Approval Letter sent to the borrower?
ANSWER: The Application, the Approval letter, and the Line of Credit Agreement do not contain an

unconditional promise to pay a sum certain in money. The Application is signed by the borrower, but is
contingent upon the bank’s approval and establishment of a credit limit on behalf of the borrower. There is
no substantive language integrating the terms of the Application and the Line of Credit Agreement;
therefore, neither document expressly incorporates the other. The Application, the Approval Letter, or the
Line of Credit Agreement does not contain language that expressly incorporates any of the documents.
Therefore, none of these documents is subject to documentary stamp tax. Since neither the Application nor
the Agreement will be secured by a mortgage or lien on Florida real property, pursuant to s. 199.133, F.S.,
the nonrecurring intangible tax is inapplicable.
July 13, 2011
XXX
XXX
XXX
Re: Technical Assistance Advisement No. 11B4-008
Documentary Stamp Tax and Nonrecurring Intangible Tax – Line of Credit Agreement
Sections 199.133, 201.08, F.S.
Rule 12B-4.052(6), F.A.C.
XXX (the “Taxpayer”)
Dear XXX:
This is in response to your letter postmarked XXX, requesting a determination regarding the
imposition of documentary stamp tax on a revolving line of credit product provided by the Taxpayer to its
customers. This response constitutes a Technical Assistance Advisement under Chapter 12-11, Florida
Administrative Code (F.A.C.), and is issued to you under the authority of Section 213.22, Florida Statutes
(F.S.).

Child Support Enforcement – Ann Coffin, Director z General Tax Administration – Jim Evers, Director
Property Tax Oversight – James McAdams, Director z Information Services – Tony Powell, Director

www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement 11B4-008
Page 2

FACTS AS PRESENTED BY PRACTIONER
In its normal course of business, the Taxpayer offers a revolving line of credit product to certain
business customers, referred to as a Quick Line of Credit (“QLOC”). The product involves a two-step
approval process. The documents attached to this request used in connection with the QLOC are described
as follows:

1. Quick Line of Credit Authorization and Personal Guaranty (the “Application”)
2. Quick Line of Credit Agreement – (the “Agreement”)
3. Approval Letter - (the “Letter”)
   The approval process begins with a prospective borrower (“Borrower”) applying for the QLOC by
   filling out and signing the Application. The Application itself contains an authorization agreement,
   personal guaranty, and security agreement. By signing the Application, the Borrower expressly
   acknowledges and agrees to be bound by the terms of the authorization agreement, the personal guaranty,
   and the related security agreement, as well as the terms of the Agreement (presuming the Application is
   approved by the Taxpayer). The Application is the only document in the QLOC process which is signed
   by the Borrower.
   Upon approval of the Application, the Borrower will receive the Agreement accompanied by the
   Letter. The Agreement outlines the terms and conditions applicable to the QLOC product and states the
   amount of the line of credit approved by the Taxpayer. The Agreement is not signed by the Borrower and
   provides that the borrower’s initial use of the QLOC constitutes its acceptance of the terms and conditions
   in the Agreement and reaffirms the Borrower’s obligations under the Application. The Application is not
   expressly incorporated by reference in the Agreement. The heading of Section 9.10 of the Agreement
   refers to “One Agreement,” which provides that the Application and the Agreement “collectively”
   represent the “sum of the understandings and agreements between the Bank and the Borrower.” Neither
   the Agreement, the Letter, nor the Application is secured by a lien on Florida real property, and there will
   be no security agreement or mortgage recorded in Florida.
   Requested Ruling
   The Taxpayer requests a ruling that its QLOC product is not subject to the Florida documentary
   stamp tax or nonrecurring intangible tax, because neither the Application, the Letter, nor the Agreement
   contains all of the requirements for taxability under ss. 201.08(1)(a) or 199.133, F.S.
   Law and Discussion
   Section 201.08(1)(a), F.S., provides that for a written obligation to pay money which is made,
   executed, delivered, sold, transferred, or assigned in the State, and for each renewal of the same, the
   documentary stamp tax shall be $.35 on each $100 or fraction thereof of the indebtedness or obligation
   evidenced thereby. Under section 201.08(6), F.S., the taxability of a document is to be determined solely
   from the four corners of that document and any other document expressly incorporated by reference into
   such document.

Technical Assistance Advisement 11B4-008
Page 3

Section 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.
Rule 12B-4.052(6), F.A.C., dealing with documentary stamp tax, provides that the taxability of a
written obligation to pay money is determined from the form and face of the document. Whether a
document is taxable is determined by reference to that document and any other document or documents
expressly incorporated therein. Express incorporation occurs when words in a document provide that
another document or documents are incorporated therein. Some examples of express incorporation
include:
• [document] is incorporated herein;
• [document] the terms of which are incorporated herein;
• [document] is made a part hereof;
• [document] is a part of this document;
• The agreement consists of this [document] and separate [document] the same as if it were fully set
forth herein;
• [document] shall become a part of document; and
• [document] and document constitute a single document.
In order to be taxable under s. 201.08(1)(a), F.S., a written obligation to pay money must have the
following three elements within the four corners of the document or must expressly incorporate other
documents such that, when the documents are read together, contain these elements:

1. A written promise to pay;
2. A sum certain in money; and
3. The signature of the borrower.
   Pursuant to the Agreement, section XXX (titled “One Agreement”), the language provides:
   This Agreement and any related security or other agreements required by this Agreement,
   collectively:
   (a)
   (b)
   (c)

represent the sum of the understandings and agreements between the XXX and the
Borrower concerning this credit;
replace any prior oral or written agreements between the XXX and the Borrower
concerning this credit; and
are intended by the XXX and the Borrower as the final, complete and exclusive statement
of terms agreed to by them.

In the event of any conflict between this Agreement and any other agreements required by this
Agreement, this Agreement will prevail.

Technical Assistance Advisement 11B4-008
Page 4

Department's Position
The documents submitted for review in connection with the QLOC product are not subject to
documentary stamp tax for the following reasons:
1) Section XXX of the Agreement, does not contain substantive language integrating the terms of the
Application and the Agreement; therefore, neither document expressly incorporates the other.
2) The Application is signed by the Borrower when requesting a credit limit amount; however, it does
not contain an unconditional promise to pay a sum certain in money, as the Application is
contingent upon the XXX’s approval and establishment of a credit limit on behalf of the Borrower.
In addition, the Application does not contain language that expressly incorporates either the Letter
or the Agreement.
3) The Letter is not signed by the Borrower, does not contain an unconditional promise to pay a sum
certain in money, and does not contain language that expressly incorporates either the Application
or the Agreement.
4) The Agreement is not signed by the Borrower, does not contain an unconditional promise to pay a
sum certain in money, and does not contain language that expressly incorporates either the Letter
or the Agreement.
Since neither the Application nor the Agreement will be secured by a mortgage or lien on Florida
real property, pursuant to s. 199.133, F.S., the nonrecurring intangible tax is inapplicable.
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,
Joy. B. Eldred, CPA
Tax Law Specialist

Technical Assistance Advisement 11B4-008
Page 5

Technical Assistance and Dispute Resolution
JBE/tlf
Record ID: 102076