Were a renewal note, mortgage modification, and contingent reimbursement note subject to Florida documentary stamp tax?

Subject

Renewal Note, Mortgage Modification

Plain-English summary

The unchanged renewal note and its mortgage modification were exempt if all section 201.09 conditions were met. The original obligor had to renew only the outstanding principal without increase, and proper documentary stamp tax had to have been paid on the original recorded mortgage.

The reimbursement note was not yet taxable because the amount depended on a future guarantor payment. If that contingency occurred, tax would apply to the amount the mortgagor then had to reimburse.

What this means for you

The ruling was conditional because executed originals were not supplied. Both document identity and the absence of increased principal mattered.

Common questions

Was the $440,181,274.51 renewal automatically exempt? Only if the stated renewal conditions were satisfied.

When would the reimbursement note become taxable? When the guarantor paid an amount that the obligor became required to reimburse.

Citations and references

• Fla. Stat. §§ 201.08, 201.09, and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94B4-006

Original ruling text

Jun 10, 1994

Re: Technical Assistance Advisement No. 94(B)4-006
Documentary Stamp Tax
Renewal Note, Mortgage Modification
Section 201.08, F.S.
XXX (Hereinafter Obligor/Mortgagor)
XXX (Hereinafter Mortgagee)
XXX (Hereinafter Guarantor/Obligee)

Dear:

You have petitioned for a Technical Assistance Advisement
pursuant to Section 213.22, Florida Statutes, and Chapter 12-11,
Florida Administrative Code.

ISSUE

Is the Supplemental Mortgage and Security Agreement and
Financing Statement subject to documentary stamp tax on
recordation if the renewal note is exempt under s. 201.09,
F.S., and if the reimbursement note is not subject to tax
until the contingency is removed?

BACKGROUND

A note from Obligor/Mortgagor providing for future advances
with an outstanding principal balance of $440,181,274.51 is
renewed by the original obligor in that same amount payable to
Mortgagee. A reimbursement note provides that under the
guarantee, any amounts paid by Guarantor/Obligee to Mortgagee,
if there are any, will be reimbursed to Guarantor/Obligee by
Obligor/Mortgagor. A supplemental mortgage and security
agreement and financing statement is to be recorded reflecting
information concerning these renewal notes.

Copies of the executed original note(s) and recorded
executed mortgage were not submitted with this request. The
copies of the documents included were executory or were not

copies of the recorded instruments. Therefore, the question
will be answered based on the information obtained from the
copies submitted.

DISCUSSION AND LAW

Section 201.09, F.S., provides that if the conditions of
this section are met, the renewal note is exempt from taxation
under s. 201.08, F.S. The conditions required for exemption are
these:

1. The renewal note may only be executed by the original
   obligor, and,
2. The only amount which may be renewed tax free is the
   outstanding principal balance of the note without
   increase, and,
3. Proper documentary stamp tax was paid on the original
   recordation of the mortgage.

If all of the above conditions are met, both the renewal
note and the mortgage modification agreement are exempt from
documentary stamp tax under s. 201.09, F.S.

Three conditions must be present in order for a note or
other written obligation to pay money to be subject to tax under
s. 201.08, F.S.:

1. A promise to pay,
2. A sum certain in money, and
3. Signature of the borrower.

Where the sum is contingent upon a future event, only two
of the conditions are met. Therefore, until the contingency has
been removed, the reimbursement note is not subject to
documentary stamp tax under the provisions of s. 201.08, F.S.

If a renewal note(s) is not subject to tax upon renewal,
then the mortgage modification and security agreement which
meets the conditions of s. 201.09, F.S., is likewise exempt from
tax under s. 201.08, F.S.

DEPARTMENT'S POSITION

If the original notes and recorded mortgage modifications
are the same as the copies submitted, our position is as
follows:

Where proper documentary stamp tax was paid on recordation
of the original mortgage, and the renewal note(s) and the
supplemental mortgage and security agreement and financing
statement meet the conditions of s. 201.09, F.S., stated
above, the supplemental mortgage and security agreement and
financing statement would be exempt from documentary stamp
tax under s. 201.09, F.S.

If the contingency is ever removed from the reimbursement
note and certain amounts are paid by the Guarantor/Obligee to
the Mortgagee, the promissory note would then meet the
requirements for imposition of documentary stamp under s.
201.08, F.S., on the amount to be reimbursed to the
Guarantor/Obligee by the Mortgagor/Obligor.

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,

M.E. Clemens
Tax Audit Specialist III
Technical Assistance

MEC/mh