Were deeds, a third-party mortgage and note, and the secured obligation exempt when executed under a confirmed Chapter 11 plan?

Plain-English summary

The Florida Department of Revenue concluded that two hotel deeds and related third-party financing documents were exempt from documentary stamp and nonrecurring intangible taxes because they were necessary transactions under a confirmed Chapter 11 plan.

The deeds transferred Florida hotels after plan confirmation. A non-debtor purchaser's mortgage, security agreement, and note to an affiliated third-party lender were also contemplated by and necessary to the confirmed plan. Federal bankruptcy law's exemption was not limited to transfers by the debtor or of estate property.

The financing conclusion depended on the documents and obligations remaining within the confirmed financing arrangement and on the stated lender affiliation.

What this means for you

Chapter 11 transaction teams

Tie each deed and financing document expressly to a plan confirmed under 11 U.S.C. § 1129 and preserve the record showing it is necessary to consummation.

Lenders and purchasers

Non-debtor status did not defeat the exemption here, but the precise confirmed-plan facts and relationships were conditions of the ruling.

Common questions

Q: Were the hotel deeds exempt?
A: Yes.

Q: Were the non-debtor mortgage and note also exempt?
A: Yes, on the confirmed-plan facts described.

Citations and references

• Fla. Stat. §§ 201.02, 201.08(1)(a) and (b), 199.133, and 213.22
• 11 U.S.C. §§ 1129 and 1146(a)
• Florida Department of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33 (2008)
• T.H. Orlando Ltd. v. Kesler, 391 F.3d 1287 (11th Cir. 2004)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 13B4-003

Original ruling text

Executive Director
Marshall Stranburg

QUESTION: Is documentary stamp tax due on deeds executed pursuant to a plan confirmed under s. 1129 of the U.S.
Bankruptcy Code?
ANSWER: Deeds executed pursuant to a plan confirmed under s. 1129 of the U.S. Bankruptcy Code are exempt from
documentary stamp tax.
QUESTION: Is documentary stamp tax due on a mortgage given to a third-party lender executed by a non-debtor pursuant to
a plan confirmed under s. 1129 of the U.S. Bankruptcy Code exempt from documentary stamp tax?
ANSWER: A mortgage given to a third-party lender executed by a non-debtor is exempt from documentary stamp tax if the
mortgage is executed pursuant to a plan confirmed under s. 1129 of the U.S. Bankruptcy Code. In T.H. Orlando LTD, 391 F.
3d 1287 (11th Cir. 2004), the 11th Circuit Court of Appeals concluded that “the plain language of 1146(c) exempts from stamp
taxes or similar taxes any transfer that is necessary to the consummation of a Chapter 11 plan. Nothing in the plain language of
1146(c) restricts the exemption to the transactions involving the debtor and estate property.” Rule 12B-4.054(30), F.A.C.
would be superseded by this ruling if the facts presented are limited to the facts of T.H. Orlando LTD.
QUESTION: Is documentary stamp tax due on a note given to a third-party lender executed by a non-debtor pursuant to a plan
confirmed under s. 1129 of the U.S. Bankruptcy Code.
ANSWER: A note given to a third-party lender executed by a non-debtor is exempt from documentary stamp tax if the
mortgage is executed pursuant to a plan confirmed under s. 1129 of the U.S. Bankruptcy Code. In T.H. Orlando LTD, 391 F.
3d 1287 (11th Cir. 2004), the 11th Circuit Court of Appeals concluded that “the plain language of 1146(c) exempts from stamp
taxes or similar taxes any transfer that is necessary to the consummation of a Chapter 11 plan. Nothing in the plain language of
1146(c) restricts the exemption to the transactions involving the debtor and estate property.” Rule 12B-4.054(30), F.A.C.
would be superseded by this ruling if the facts presented are limited to the facts of T.H. Orlando LTD.
QUESTION: Is nonrecurring intangible tax due on an obligation secured by a mortgage given to a third-party lender executed
by a non-debtor pursuant to a plan confirmed under s. 1129 of the U.S. Bankruptcy Code.
ANSWER: An obligation secured by a mortgage given to a third-party lender executed by a non-debtor is exempt from
nonrecurring intangible tax if the obligation is executed pursuant to a plan confirmed under s. 1129 of the U.S. Bankruptcy
Code. In T.H. Orlando LTD, 391 F. 3d 1287 (11th Cir. 2004), the 11th Circuit Court of Appeals concluded that “the plain
language of 1146(c) exempts from stamp taxes or similar taxes any transfer that is necessary to the consummation of a Chapter
11 plan. Nothing in the plain language of 1146(c) restricts the exemption to the transactions involving the debtor and estate
property.” Rule 12B-4.054(30), F.A.C. would be superseded by this ruling if the facts presented are limited to the facts of T.H.
Orlando LTD.

June 19, 2013
XXX
XXX
XXX
Re:

Technical Assistance Advisement No. 13B4-003
Documentary Stamp Tax and Nonrecurring Intangible Tax – Bankruptcy Sale
Sections 201.02, 201.08 (1)(a), (b), and 199.133, Florida Statutes, (F.S.)
XXX (LLC 1)
XXX (LLC 2)
XXX (LLC 3)
Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – James McAdams, Director  Information Services – Tony Powell, Director

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

Technical Assistance Advisement 13B4-003
Page 2

XXX (LLC 4)
XXX (LLC 5)
XXX (LLC 6)
XXX (Hotel 1)
XXX (Hotel 2)
Dear XXX:
This is in response to your request dated XXX, for a Technical Assistance Advisement (TAA) pursuant to
s. 213.22, F.S., and Rule 12-11, Florida Administrative Code (F.A.C.), regarding whether documentary
stamp tax is due on a deed that is executed pursuant to a plan confirmed under s. 1129 of the Bankruptcy
Code. You also requested a ruling whether documentary stamp tax or intangible tax are due on a loan
evidenced by a promissory note and recordation of a mortgage that is also executed pursuant to a plan
confirmed under s. 1129 of the Bankruptcy Code. On XXX, you submitted a revised request in order to
include LLC 4 as a taxpayer in regards to the nonrecurring intangible tax. An examination of your letter
has established that you have complied with the statutory and regulatory requirements for issuance of a
TAA. Therefore, the Department is hereby granting your request for a TAA.
FACTS PRESENTED BY PRACTIONER
LLC 1 owned and operated Hotel 1 in XXX and LLC 3 owned and operated Hotel 2 in XXX. LLC 1 and
LLC 3 filed for Chapter 11 Bankruptcy and were jointly administered by the bankruptcy court. On XXX,
the bankruptcy court entered an order that approved LLC 3’s sale of Hotel 2 to LLC 5. Also on XXX, the
bankruptcy court entered an order that approved LLC 1’s sale of Hotel 1 to LLC 2, a bankruptcy remote
special purpose entity, and the financing agreement with LLC 6, or its affiliates. You stated that for the
purposes of your request, LLC 6 is an affiliate of LLC 4. The loan proceeds to LLC 2 will be used to pay
off a secured creditor holding a mortgage against Hotel 1. LLC 3’s sale of Hotel 2 to LLC 5, LLC 1’s sale
of Hotel 1 to LLC 2, and the subsequent financing from LLC 4 to LLC 2 were all made pursuant to a
confirmed Chapter 11 bankruptcy plan.
The documents presented for examination are as follows:
1.
2.
3.
4.

Order Directing Joint Administration of Cases, dated XXX. (Doc XXX)
Joint Plan of Reorganization for LLC 1 and LLC 3, dated XXX. (Doc XXX)
Modifications to Joint Plan of Reorganization for LLC 1, and LLC 3, dated XXX. (Doc XXX)
Order Confirming Joint Plan of Reorganization, as Modified, Submitted by LLC 1, LLC 3, and
XXX, dated XXX. (Doc XXX)

5. Amended Order Approving LLC 3’s Motion Pursuant to Bankruptcy Code 363(f), for an Order
   Approving the Sale of Real Purchased Assets Free and Clear of all Liens, Claims and Interests
   dated XXX. (Doc XXX)
6. Order Granting LLC 1’s Motion, Pursuant to Bankruptcy Code 11 USC 105, 363(f), and 364 for an
   Order Approving the Sale of Real Property and Financing Agreement, dated XXX. (Doc XXX)
7. Special Warranty Deed recorded XXX, in Official Records of XXX Book/Page XXX that
   transferred Hotel 2 from LLC 3 to LLC 5.

Technical Assistance Advisement 13B4-003
Page 3

8. Special Warranty Deed recorded XXX, in Official Records of XXX Book/Page XXX that
   transferred Hotel 1 from LLC 1 to LLC 2.
9. Mortgage and Security Agreement recorded XXX, in Official Records of XXX Book/Page XXX
   between LLC 2 and LLC 4. (Mortgage and Security Agreement)
   REQUESTED RULING
   You request the Department confirm:
10. The deed transferring Hotel 2 is not subject to documentary stamp tax, as the transfer is being
    made pursuant to a plan confirmed under s. 1129 of the Bankruptcy Code.
11. The deed transferring Hotel 1 and the loan from LLC 4 to LLC 2 evidenced by a promissory note
    and recordation of the mortgage are not subject to documentary stamp tax or nonrecurring
    intangible tax pursuant to T.H. Orlando LTD, 391 F. 3d 1287 (11th Cir. 2004), as they are being
    executed pursuant to a plan confirmed under s. 1129 of the Bankruptcy Code.
    LAW AND DISCUSSION
    Section 201.02(1)(a), F.S., imposes documentary stamp tax on deeds, instruments, or writings whereby
    any lands, tenements, or other real property, or any interest therein, shall be granted, assigned, transferred,
    or otherwise transferred to, or vested in, the purchaser or any other person by his or her direction. The tax
    rate is 70 cents on each $100 of the consideration or portion thereof, for the property interest transferred.
    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. Where property other than
    money is exchanged for interests in real property, there is the presumption that the consideration is equal
    to the fair market value of the real property interest being transferred.
    Section 201.08(1)(a), F.S., imposes documentary stamp tax on promissory notes, nonnegotiable notes,
    written obligations to pay money, or assignments of salaries, wages, or other compensation made,
    executed, delivered, sold, transferred, or assigned in the state, and for each renewal of the same. The tax
    rate is 35 cents on each $100 or fraction thereof of the indebtedness or obligation evidenced thereby. The
    tax on any document described in this paragraph may not exceed $2,450. 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 the signature of the obligor.
    Section 201.08(1)(b), F.S., imposes documentary stamp tax on mortgages, trust deeds, security
    agreements, or other evidences of indebtedness filed or recorded in this state, and each renewal of the
    same. The tax rate is 35 cents on each $100 or fraction thereof of the indebtedness or obligation
    evidenced thereby.
    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. The tax rate is 2 mills (total
    obligation secured multiplied by .002).

Technical Assistance Advisement 13B4-003
Page 4

The Supreme Court of the United States concluded that 11 U.S.C. Section 1146(a) affords a stamp-tax
exemption only to transfers made pursuant to a Chapter 11 bankruptcy plan that has been confirmed under
11 U.S.C. Section 1129 (Florida Department of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33
(2008)).
DEPARTMENT’S POSITION
According to Doc XXX, the sale of Hotel 2, the sale of Hotel 1, and the financing from LLC 6 to LLC 2
are included in “the central transactions contemplated by, and necessary to effectuate the Plan.” The
deeds transferred Florida real properties pursuant to a bankruptcy plan under 11 U.S.C. Section 1129 after
the bankruptcy plan had been confirmed. Based on the facts presented, documentation provided, federal
regulations, and Piccadilly, the deed transferring Hotel 2 to LLC 5, and the deed transferring Hotel 1 to
LLC 2 are exempt from documentary stamp tax.
The Mortgage and Security Agreement were executed pursuant to a bankruptcy plan under 11 U.S.C.
Section 1129 after the bankruptcy plan had been confirmed. As long as the Mortgage and Security
Agreement and the obligations evidenced thereby exist pursuant to the Financing Agreement that was
ordered on XXX of Doc XXX and as long as LLC 4 is affiliated with LLC 6, the Mortgage and Security
Agreement and the note evidencing the obligations given by LLC 2 to LLC 4 as contemplated by the
confirmed plan are exempt from documentary stamp tax.
An obligation executed pursuant to and after a plan confirmed under s. 1129 of the Bankruptcy Code,
would be exempt from nonrecurring intangible tax. Based on the facts presented, documentation
provided, federal regulations, and Piccadilly, the obligation secured by the mortgage on Hotel 1 is exempt
from nonrecurring 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 documents are public records under
Chapter 119, F.S., which are subject to disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details, which might lead to identification of the taxpayer, must be
deleted before disclosure. In an effort to protect the confidentiality of such information, we request you
provide the undersigned with an edited copy of your request for Technical Assistance Advisement, backup
material and response within fifteen days of the date of this advisement.
Sincerely,

Technical Assistance Advisement 13B4-003
Page 5

Henry Small
Tax Law Specialist
Technical Assistance and Dispute Resolution
HJS/tlf
Record ID: 127556