How did Florida allocate intangible tax on a mortgage loan secured by both real and personal property?

Subject

Valuation - Mortgages

Plain-English summary

Only 11.9% of the loan was allocated to Florida real-property collateral for the 2-mill nonrecurring intangible tax. The mortgage secured a partnership's leasehold interest and another partnership's fee-simple interest, while personal property also secured the debt. Applying the Department's assigned collateral values, real property represented 11.9% of all collateral.

The remaining 88.1% was the portion secured by personal property. The Department found the bank was not authorized or licensed to do business in Florida and had no Florida legal or commercial domicile or business situs, so it was not subject to the annual intangible tax. On the stated loan-document assumption, that remaining portion was exempt.

What this means for you

For this historical mixed-collateral loan, the Department did not apply the real-property mortgage tax to the full principal. It allocated the debt according to collateral value, then separately tested whether the lender was subject to the annual tax on the personal-property portion.

Common questions

Q: What tax applied to the real-property portion? The ruling applied the 2-mill nonrecurring tax to 11.9% of the loan amount.

Q: Why was the other 88.1% exempt? It was allocated to personal-property collateral, and the lender was not subject to Florida's annual intangible tax because it lacked the required Florida domicile or business situs.

Q: Was the allocation a general percentage for mixed mortgages? No. The 11.9% figure came from the collateral values assigned on this transaction's redacted record.

Citations and references

• Fla. Stat. § 199.133(2) — nonrecurring tax on a mortgage secured by Florida real property
• Fla. Stat. § 199.175 — annual-tax domicile and business-situs test
• Fla. Admin. Code r. 12C-2.004(2) — mixed-collateral allocation
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93C2-010

Original ruling text

Apr 02, 1993

Re: Technical Assistance Advisement 93(C)2-010
Intangible Tax - Valuation - Mortgages
Sections 199.133 and 199.175, F.S.
Rule 12C-2.004(2), F.A.C.
XXX (Partnership)
XXX (Bank)
XXX (Project)
XXX (Partnership I)

Dear :

Your letter requesting assistance in calculating the tax
for a mortgage secured by real property and personal property
has been received by this office. An examination of the
information contained in your correspondence revealed the
following:

Partnership obtained a loan in the amount of XXX from Bank.
The proceeds of the loan are to be utilized in connection
with expansion of Project. Partnership owns A XXX year
ground lease covering virtually the entire Project. The
fee simple title of all but XXX acres of the Project is
vested in Partnership I. The XXX year ground lease held by
Partnership includes all improvements located on the
Project.

In connection with the loan, Partnership has signed a
promissory note in the original principal amount of XXX in
favor of Bank (Note). The Note is secured by a mortgage on
the leasehold interest of Partnership and the fee simple
interest of Partnership I. The mortgage does not cover
three portions of the Project which are subleased. Further
the mortgage does not cover a portion of the project which
was recently purchased by developer. At the time of the
closing Partnership paid 2 mill tax on the full amount of
the loan. As a condition to closing Bank required that
Partnership obtain a determination from the Department of

Revenue as to whether a recurring intangible tax is also
due in connection with the loan.

Section 199.133(2), F.S., States that a nonrecurring tax of
2 mills is due on the portion of a mortgage which is secured by
real property located in Florida. Based upon the information
given in your correspondence and accompanying documentation both
real and personal property have been offered as collateral for
the debt to Bank by Partnership and Partnership I. The question
to be answered is how to allocate the loan value between the
portion secured by real property and the portion secured by
personal property. This question is addressed by Rule 12C2.004(2), F.A.C. This rule describes the allocation procedure
when a loan is secured by both real and personal property. From
the information contained in your correspondence, accompanying
documentation and other information available to this office the
following values have been assigned to each class of property:

Real Property and Improvements

$ XXX

Ground Lease

XXX

Total Value of All Collateral

$ XXX

Based upon these amounts the real property represents 11.9%
of the total value of all collateral offered as security for the
loan. Applying this percentage to the loan amount shows that the
2 mill intangible tax of $XX ($XX X .119 X .002 = $XX) should
have been paid at the time the mortgage was recorded. The
remaining loan value is subject to the annual intangible tax
provided the lender is subject to annual intangible tax.

For a corporation to be subject to the annual intangible
tax it must have a legal or commercial domicile in this state or
have a business situs in this state (s. 199.175, F.S.) A check
of the records of the Department of State, the Department of
Banking and Finance and the Department of Revenue has shown that
Bank is not authorized or licensed to transact business in
Florida. Based upon this information Bank is not subject to
Florida's annual intangible tax. If the loan documents contain
a provision that requires the borrower to pay any taxes which
arise out of the transaction no tax is due because the owner of
the intangible property is not subject to tax in Florida.

Therefore, the 88.1% of the loan value secured by the personal
property is exempt from 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 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,

J.V. Parramore, Jr.
Technical Assistant
Technical Assistance
JVP/mh