Did Florida's borrower-residence exception apply when individuals borrowed against a home titled to their revocable trust?

Subject

Property Subject to Tax - Mortgages - Revolving Line of Credit

Plain-English summary

The special borrower-residence treatment did not apply to this revolving line of credit. The individual borrowers lived in the home, but they had transferred title to a revocable trust. The trustees—not the individual owners—granted the mortgage lien to the bank.

The cited rule for a borrower's residence allowed the former nonrecurring intangible tax to be paid on the line's maximum amount with no further tax on later borrowing. The Department found that exception unavailable because the mortgaged property was owned by the trust rather than by the borrowers.

Without that exception, the ruling left the equity account under the general future-advance rule described in section 199.143: tax on the initial secured obligation and additional tax as additional amounts were borrowed.

What this means for you

Occupying a home did not by itself satisfy the exception. The Department matched the identity of the borrower against the legal owner of the mortgaged property, making title and lien execution decisive.

Common questions

Q: Did it matter that the borrowers lived in the home? That was not enough. The trust held title.

Q: Why did the individuals sign as both individuals and trustees? The bank required both signatures because the individuals borrowed while the trust owned the collateral.

Q: Could the tax be paid once on the maximum credit line under the residence exception? No, not on these ownership facts.

Citations and references

• Fla. Stat. § 199.133 — former two-mill nonrecurring intangible tax
• Fla. Stat. § 199.135 — time for payment
• Fla. Stat. § 199.143 and § 199.143(3) — future advances and borrower-residence exception
• Fla. Admin. Code r. 12C-2.001(1) — residence and domicile
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93C2-013

Original ruling text

Apr 20, 1993

Re: Technical Assistant Advisement 93(C)2-013
Intangible Tax; Revolving Line of Credit
Sections 199.133, 199.135 & 199.143, F.S.
Rule 12C-2.001(1), F.A.C.
XXX (Bank)
XXX (Trust)
XXX (Individuals) & (Trustees)
XXX (Equity Account)

Dear :

Your letter requesting a Technical Assistant Advisement has
been referred to this office for response.

The specific situation upon which technical advise has been
requested is as follows:

Bank has created a credit facility commonly know as Equity
Account. Through the Equity Account a borrower may
establish a line of credit, the maximum amount of which is
limited by the equity in the borrower's residence. To
secure repayment of the line of credit the borrower grants
a mortgage to Bank. As the line is paid down, the borrower
may take additional advances on the line of credit, so that
over the life of the Equity Account the cumulative amount
advanced may be far greater than the maximum amount of the
line of credit, though at no time should the amount
outstanding be greater than the maximum amount of the line
of credit.

In the course of estate planning Individuals created a
revocable living and transferred title to their residence
to Trust. Individuals made application for an Equity
Account. The residence was offered as collateral for the
Equity Account. Because title to the residence is in the
name of Trust, Bank required the loan documents and
mortgage be signed as Individuals and as Trustees.

Based upon the scenario above you have requested a
Technical Assistance Advisement on the application of s.
199.143, F.S., to the Equity Account.

Provisions of Law

Section 199.143, F.S., states that if a mortgage or other
lien executed after December 31, 1985 secures a line of credit
or otherwise secures future advances, the nonrecurring tax shall
be paid on the initial obligation secured, excluding any future
advance. Each time an additional amount is borrowed, additional
nonrecurring tax shall be paid on the amount advanced. As an
exception to this subsection (3) provides that if the property
subject to the mortgage is a residence of the borrower, then the
nonrecurring tax shall be paid on the maximum amount of the line
of credit and no further tax shall be paid on any borrowing
under the line of credit.

Section 199.133, F.S., states that a one-time tax of 2 mill
is levied on the just value of all notes and other obligations
for the payment of money which are secured by a lien on real
property situated in this state.

Section 199.135, F.S., states that the nonrecurring tax
shall be paid within 30 days of the creation of the obligation
to pay whether or not the document is recorded.

Rule 12C-2.001(1), F.A.C., states for the purpose of
intangible tax that the term residence and domicile are
synonymous terms. The terms domicile and residence describe
where a person has his true, fixed and permanent home and
principal establishment, to which when absent, he has the
intention of returning.

Discussion of Law

The imposition of the nonrecurring intangible tax is upon
an obligation secured by a lien upon real property located in
Florida. Section 199.143, F.S., requires that the impost be upon
an obligation secure by the borrowers real property which is the

residence of the borrower. It is a well established principal
of law that one can not grant a lien against property which one
does not own. The place in which Individuals reside is now
titled in the name of Trust. The mortgage lien is granted by
Trustees to Bank. The mortgaged property is not the property of
the borrower, but the property of the Trust. Therefore, no
residence owned by the borrower was offered as collateral for
the Equity Account. The provisions of subsection (3) of Section
199.143, F.S., do not apply to the Equity Account of
Individuals.

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