Did extending a revolving promissory note's maturity date through an amended loan agreement trigger more Florida documentary stamp tax?

Subject

Amended Loan Agreement Which Extends the Maturity Date of a Promissory Note

Plain-English summary

No additional documentary stamp tax was due when the loan agreement only extended the revolving note's maturity date, did not increase principal, and was signed by the original obligor. The Department classified the amendment as a renewal of the promissory note but applied the no-additional-tax treatment for a qualifying extension.

The proposed note expressly made its maturity date the date stated in the loan agreement as amended from time to time. The loan agreement allowed lender and borrower to extend that date without directly amending the note.

What this means for you

Calling the document a loan-agreement amendment did not keep it from being a note renewal. The result instead turned on what the amendment did: extend payment time without increasing the unpaid principal balance and keep the original obligor.

Common questions

Q: Was the amended loan agreement a renewal? Yes. The Department said an agreement altering the original note by extending its terms was a renewal.

Q: Why was no additional tax due? The original obligor signed it, it only extended maturity, and it did not increase principal.

Q: Would the same answer apply if principal increased? This ruling did not approve that variation; its no-tax conclusion expressly depended on no increase in principal balance.

Citations and references

• Fla. Stat. §§ 201.08(1), 201.09(1), (2) — notes and renewals
• Fla. Admin. Code rr. 12B-4.051, 12B-4.052(13), 12B-4.054 — renewal and extension rules
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93B4-009

Original ruling text

Apr 01, 1993

Re: Technical Assistance Advisement No. 93(B)4-009
Documentary Stamp Tax; Amended Loan Agreement Which Extends
the Maturity Date of a Promissory Note.

Dear :

Pursuant to s. 213.22, F.S., and Chapter 12-11, Florida
Administrative Code, you have petitioned for a Technical
Assistance Advisement on substantially the following:

Issue

Regardless of the outstanding principal balance of an
original revolving credit promissory note, would the following
language in the promissory note and in a separate loan agreement
allow the maturity date of the said promissory note to be
extended by amendment of the loan agreement without incurring
additional tax under s. 201.08(1), F.S.?

Language in Note: Payments of Principal.

"a. Principal payments shall be made as required and at
the times set forth in the Loan Agreement.
b. Maturity Date and Balloon Payment. The then entire
unpaid principal balance, plus accrued but unpaid
interest shall be due and payable in full on the date
set forth in the Loan Agreement as such Loan Agreement
may be amended from time to time, extending the
maturity date and balloon payment of this note."

Language in Loan Agreement:

"a. Principal payments shall be made on the Note as
follows (inset appropriate language such as $XX for
each unit released from the lien of the mortgage).
b. Maturity Date and Balloon Payment. Unless the
maturity date of the Note is extended in accordance

with subparagraph (c) the then entire unpaid principal
balance and all accrued but unpaid interest of the
Note shall become due and payable on (insert original
maturity date).
c. The maturity date and balloon payment date of the Note
as set forth in subparagraph (b) above, may at the
sole and absolute discretion of Lender, be extended
from time to time by a modification of this Loan
Agreement signed by Lender and Borrower, without a
direct amendment of the Note."

Discussion And Law

The tax on promissory notes and mortgages applies to their
renewals, unless the renewal only extends the unpaid balance of
the original obligation (not including accumulated interest) and
is executed only by the original obligor. Sections 201.08(1),
F.S. and 201.09(1),(2), F.S.; Fla. Admin. Code Rules 12B4.051(1)(2) and 12B-4.054(1). However, a renewal promissory
note meeting the requirements of Fla. Admin. Code Rule 12B4.054(1)(f), may have a face amount greater than the principal
unpaid balance of the original obligation without incurring
additional tax.

Pertinent to your petition Fla. Admin. Code Rule 12B4.052(13) defines a renewal note, mortgage, trust deed, security
agreement or other evidence of indebtedness to be:

"... A written agreement which alters or modifies the
contract or obligation of an original promissory note,
mortgage, trust deed, security agreement or other evidence
of indebtedness, such as, extending, continuing, replacing
or assuming the terms of the original contract or
obligation..." [emphasis added]

Another regulation provides that additional tax is not due
if a note increases the rate of interest and extends the payment
time without changing the balance due. Fla. Admin. Code Rule
12B-4.054(1)(b).

Department's Position

Under Rule 12B-4.052(13), the amendment to the loan
agreement would be a renewal of the promissory note. However,
no additional tax would be due where the amended loan agreement
is signed by the original obligor and only extends the maturity
date without increasing the principal balance due under the
revolving promissory note.

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 and your request
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 by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

W.E. Webb
Technical Assistant
Technical Assistance

WEW/mh