Were the Chapter 11 loan assignments, renewals, and mortgage changes subject to Florida stamp or intangible tax?

Subject

Instruments and Amendments Executed Pursuant to a Confirmed Plan Under Chapter 11 of U.S. Bankruptcy Code

Plain-English summary

Florida imposed no documentary stamp or intangible tax on the stated assignment and qualifying renewal of notes originally issued under a confirmed Chapter 11 plan. The same exemption covered the stated amendments and restatements of the loan agreement and guaranties and the renewal and consolidation of the mortgages, insofar as they related to the renewal notes.

New future advances were different: documentary stamp and intangible taxes had to be paid on the advance-note amount. Once those taxes were paid, the ruling required no additional tax for the related amendments, mortgage renewal and consolidation, added collateral, or consolidated term notes described in the request.

The official PDF cross-references TAA 95M-005 dated May 17, 1995.

What this means for you

The exemption depended on continuity. The renewal principal matched the outstanding balance, the original obligors remained the obligors on the renewal documents, and the confirmed plan and prior TAAs covered the relevant renewals and modifications. A new advance did not inherit the original exemption automatically.

Common questions

Was tax due when the existing notes were assigned to new holders? No, on the described assignment and renewal structure.

Were the renewal notes and consolidated renewal mortgage taxable? No, to the extent they renewed the exempt existing debt under the stated conditions.

Were new advances exempt? No. The ruling required documentary stamp and intangible taxes on the future-advance amount.

Did paying tax on the advance trigger more tax on every related document? No. Once tax was paid on the advance notes, the specified related amendments, mortgage changes, added collateral, and consolidated term notes required no additional tax.

Citations and references

• 11 U.S.C. § 1146(c), as cited in the advisement
• Fla. Stat. §§ 199.145, 201.09, and 213.22
• Fla. Admin. Code rr. 12C-2.004(2), 12B-4.051(1), 12B-4.053(32), and 12B-4.054(1)
• City of New York v. Jacoby-Bender, Inc., 758 F.2d 840 (2d Cir. 1985)
• City of New York v. Smoss Enterprises Corp., 54 Bankr. 950 (E.D.N.Y. 1985), as cited in the advisement

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94M-009

Original ruling text

Status: Cross Reference - TAA 95M-005 dated May 17, 1995

Sep 22, 1994

Re: Technical Assistance Advisement No. 94(M)-009
Documentary Stamp Tax and Intangible Tax; Instruments and
Amendments Executed Pursuant to a Confirmed Plan Under
Chapter 11 of U.S. Bankruptcy Code
XXX (the "Company")
XXX (Debtor Subsidiaries), Company (Mortgagors)
XXX (Assignees)

Dear :

This is in response to your letters of August 11, 1994, and
September 1, 1994, in which you have petitioned for a Technical
Assistance Advisement pursuant to s. 213.22, F.S., and Rule 1211.003, F.A.C.

Issue

Whether the execution, recordation, renewals and assignment
from time to time of mortgages encumbering Florida real
property as substitute collateral securing exempt notes
previously issued by Borrower pursuant to a plan of
reorganization as confirmed by the U.S. Bankruptcy Court
(Confirmed Plan) under Chapter 11 of the U.S. Bankruptcy
Code (Code) are subject to the Documentary Stamp Tax or the
Intangible Tax.

I. BACKGROUND AND STATEMENT OF FACTS

In April 1990 the Company and the Debtor Subsidiaries filed
voluntary bankruptcy petitions for reorganization under
Chapter 11 of the Code in the United States Bankruptcy
Court for the XXX District of Florida. On March 27, 1992,
the bankruptcy court confirmed the Company's plan of
reorganization (the "Confirmed Plan"), which directed the
Company to execute a Working Capital and Term Loan

Agreement dated as of March 31, 1992 (the "Loan Agreement")
and certain negotiable promissory notes (the "Notes") in
favor of each of the various banks extending credit
thereunder to the reorganized Company. The Notes evidence
two credit facilities under the Loan Agreement: (i) a
revolving line of credit in the maximum principal amount of
$20,000,000 (the "Working Capital Loan") under which the
Company may borrow, repay and reborrow funds from the Note
holders, and (ii) a term loan facility (the "Term Loan") in
the original principal amount of $25,000,000 under which
repayments by the Company cannot be reborrowed.

As required by the original Loan Agreement executed
pursuant to the Confirmed Plan, the Debtor Subsidiaries executed
guaranties of payment of the Company's Notes (the "Guaranties"),
and the Mortgagors issued and recorded mortgages (the
"Mortgages") on certain Florida real property owned by them to
secure the Notes and the Guaranties. The original Loan
Agreement also requires the Mortgagors to secure the
indebtedness by granting additional liens from time to time on
properties subsequently acquired by them. The Mortgages were
made in favor of XXX Company (now known as XX Bank) as
collateral agent (the "Collateral Agent") for the benefit of the
holders of the Notes (the "Assignors"). The original Loan
Agreement contemplates the transfer and assignment of Notes from
one holder to the next holder.

The Notes and the Mortgages were and are exempt from
documentary stamp taxes and intangible taxes pursuant to 11
U.S.C. s. 1146(c) of the Code. The Department issued its
Technical Assistance Advisement No. 92(M)-006 (the "First TAA)
confirming, among other things, this s. 1146(c) exemption. The
Confirmed Plan as well as the Department's First TAA both state
that subsequent renewals and modifications of the various exempt
Notes, Mortgages and other security documents issued under the
Confirmed Plan would also be exempt from Florida documentary
stamp taxes and intangible taxes under s. 1146(c). The First
TAA states that in the Department's opinion future advances
would not be exempt from these taxes.

In addition, the Department also issued a Technical

Assistance Advisement No. 94(M)-006 (the "Second TAA")
confirming that the s. 1146(c) exemptions include mortgage liens
on real property that the Company is required to grant under the
credit documents and the Confirmed Plan as substitute,
replacement or additional security for promissory notes that
were issued by the Company under the Confirmed Plan and are
exempt under s. 1146(c).

The Assignees have offered to purchase the Loan Agreement
and the Notes from the Assignors for the aggregate principal
amount outstanding under the Working Capital Loan and the Term
Loan. When the Notes are purchased, the principal amount
outstanding under the Working Capital Loan will be the maximum
amount of the line of credit ($20,000,000), but a principal
payment will reduce the amount outstanding under the Term Loan
to $12,500,000. The Notes would be assigned and endorsed by all
of the Assignors to all of the Assignees, and the Company would
then renew these Notes by executing two renewal notes (the
"Renewal Notes") in favor of each of the Assignees in the
aggregate principal amount purchased by each Assignee. One
Renewal Note for each Assignee would evidence its share of the
renewed Working Capital Loan ("Renewal Revolving Note") and the
other Renewal Note for that Assignee would evidence its share of
the renewed Term Loan (the "Renewal Term Note"). In connection
with the assignment and renewal of the Notes, the Company and
the Debtor Subsidiaries would amend and restate the Loan
Agreement and the Guaranties to reflect the payment terms and
other covenants required by the Assignees and the Mortgages
would all be renewed and consolidated into one Mortgage securing
the amended and restated Loan Agreement and Guaranties. The
Collateral Agent or Successor Agent would remain the mortgagee
named in the consolidated renewal Mortgage and would continue to
hold the consolidated renewal Mortgage as security for the
Renewal Notes held by the Assignees. Notwithstanding the
assignment, amendment, restatement, consolidation and renewal of
these loan documents, (i) no obligors other than the Company
would execute the Renewal Notes, (ii) no obligors other than the
original Mortgagors would execute the Loan Agreement and
Guaranties as amended and restated, (iii) no obligors other than
the original Mortgagors would execute the consolidated renewal
Mortgage, and (iv) the aggregate outstanding principal balance

of the Renewal Notes would be identical to the aggregate
outstanding principal balance of the Notes at the time of
renewal. Separately from the Mortgagors, other affiliates of
the Company will also guarantee the amended and restated loans,
but their separate guaranties will not be secured by the
consolidated renewal Mortgage.

In addition to the purchase of the Notes, the Assignees
have offered to make an additional term loan to the Company in
the amount of $12,500,000, which will be evidenced by additional
new promissory notes from the Company to the respective
Assignees (the "Advance Notes"), will be guaranteed by the
Debtor Subsidiaries and will be a future advance secured under
the consolidated renewal Mortgage. Florida documentary stamp
taxes and intangible personal property taxes will be paid by the
Company based on the aggregate principal amount of the Advance
Notes upon recordation of a notice in the public records
evidencing the future advance under the consolidated renewal
Mortgage.

The notice of future advance will also spread the lien of
the consolidated renewal Mortgage to encumber additional
property of the Company as required by the original Loan
Agreement and the Confirmed Plan.

The Assignees have requested that the Company consolidate
the Renewal Term Notes with the Advance Notes held by the
Assignees by executing and delivering a consolidated renewal
term note to each Assignee (the "Consolidated Term Notes"). The
Renewal Revolving Notes would not be consolidated and the
maximum principal amount of the renewed Working Capital Loan
would not be increased. Because the Renewal Term Notes are
exempt from documentary stamp taxes and intangible taxes and
because all such taxes are being paid for the Advance Notes, the
taxpayers believe that the Consolidated Term Notes would be
exempt from such taxes. However, the Company and the Assignees
do not wish to incur taxes unnecessarily and wish to obtain the
Department's advice before executing or delivering any such
Consolidated Term Notes.

II. RULING REQUESTED

Based on the foregoing facts of the transaction and the
relevant authorities, the taxpayers respectfully request the
Department's ruling that:

1. No Florida documentary stamp taxes or intangible taxes
   are due on the assignment of the Notes from the
   Assignors to the Assignees, on the execution and
   delivery of the Renewal Notes, or on the repayment and
   borrowing of funds from time to time under the Renewal
   Revolving Notes, because the Notes are exempt from
   such taxes under 11 U.S.C. s. 1146(c), or because the
   Renewal Notes are exempt renewals under s. 201.09,
   F.S., and exempt refinancings under s. 199.145, F.S.
2. Insofar as they pertain to the Renewal Notes (as
   distinguished from the Advance Notes), the amendment
   and restatement of the Loan Agreement and the
   Guaranties and the renewal and consolidation of the
   Mortgages are not subject to Florida documentary stamp
   taxes or intangible taxes because renewals and
   modifications of instruments exempt under 11 U.S.C. s.
   1146(c) are authorized and exempted under the
   Confirmed Plan and the First TAA, or because these
   amendments, restatements and consolidations are exempt
   renewals under s. 201.09, F.S., and exempt
   refinancings under s. 199.145, F.S.
3. Provided that documentary stamp taxes and intangible
   taxes are paid on the amount of the future advance
   evidenced by the Advance Notes, then no other
   documentary stamp taxes or intangible taxes will be
   required on the proposed amendment and restatement of
   the Loan Agreement and the Guaranties, on the renewal
   and consolidation of the Mortgages, or on the
   spreading of the consolidated renewal Mortgage to
   encumber additional property of the Company as
   security.
4. Provided that documentary stamp taxes and intangible
   taxes are paid on the amount of the future advance
   evidenced by the Advance Notes, then no other
   documentary stamp taxes or intangible taxes will be
   required on the execution and delivery of any

Consolidated Term Notes because they would qualify as
exempt renewals under s. 201.09, F.S., and exempt
refinancings under s. 199.145, F.S.

III. RELEVANT AUTHORITIES

Pursuant to 11 U.S.C. s. 1146(c) of the Code, the issuance,
transfer or exchange of a security, or the making of or delivery
of an instrument of transfer under a plan confirmed under 11
U.S.C. s. 1129 may not be taxed under any law imposing a stamp
tax or similar tax. Furthermore, federal case law has held that
acts in furtherance of a confirmed plan of reorganization are
exempt from the imposition of stamp taxes and similar taxes
pursuant to 11 U.S.C. s. 1146(c) of the Code. City of New York
v. Jacoby-Bender, Inc., 758 F.2d 840 (2d Cir. 1985); City of New
York v. Smoss Enterprises Corp., 54 Bankr. 950 (E.D.N.Y. 1985).

The Notes were originally delivered by Company pursuant to
the Confirmed Plan and are therefore exempt from Florida
documentary stamp tax and intangible tax. As provided in the
Confirmed Plan and the Department's First and Second TAA, the
Notes and the security documents securing the Notes may be
renewed or modified without affecting the tax exemption. The
Renewal Notes, the amended and restated Loan Agreement and
Guaranties and the consolidated renewal Mortgage, including the
spreading of the Mortgage lien to additional property, are
renewals and modifications within the Confirmed Plan and are
therefore exempt.

Even if the Confirmed Plan had not included renewals and
modifications, however, the Renewal Notes and the amendment and
restatement of the Loan Agreement and Guaranties and the
consolidated renewal Mortgage would still be exempt from Florida
documentary stamp taxes because they meet all the requirements
for exempt renewal notes and mortgages under s. 201.09, F.S.,
and exempt refinancings under s. 199.145, F.S. Specifically,
the aggregate principal amount of the Renewal Notes is equal to
the aggregate principal amount outstanding under the Notes when
renewed, and no new obligors are executing the Renewal Notes or
the amended and restated Loan Agreement and Guaranties or the
consolidated renewal Mortgage.

The proposed Consolidated Term Notes would also be exempt
from these taxes because each would renew and consolidate a
Renewal Term Note and an Advance Note. The Renewal Term Note
would be exempt under the federal s. 1146(c) exemption and the
Florida renewal and refinancing exemptions, and the Advance Note
would be eligible for further exempt renewal and refinancing
because all required taxes would have been previously paid.

Discussion and Law

Intangible Tax

Where deeds, mortgages, notes, or other instruments are
issued under a Chapter 11, s. 1146(c) plan of the Bankruptcy
Code which has been confirmed, no taxes are due.

Chapter 199, F.S., imposes a nonrecurring tax of two mills
on obligations for the payment of money which are secured by
Florida real property. In addition, s. 199.145, F.S., provides
that when a mortgage secures an identical debt where the tax was
paid on the original, no additional tax will be due. Rule 12C2.004(2), F.A.C., provides that the nonrecurring intangible tax
on a note or obligation for the payment of money secured by
realty located both in and out of Florida is apportioned based
on the value of the Florida property to the total property
secured times the amount of the obligation secured. Further,
future advances are taxable at the time each advance is made
based on the amount advanced.

Documentary Stamp Tax

Where deeds, mortgages, notes, or other instruments are
issued under a Chapter 11, s. 1146(c) plan of the Bankruptcy
Code which has been confirmed, no taxes are due.

Rule 12B-4.051(1), F.A.C., provides that tax is required on
a note executed in Florida with the tax measured by the amount
of the note. In addition, a document executed or recorded which
renews or extends an existing obligation is subject to tax,
unless it meets the requirements of s. 201.09, F.S. Rule 12B-

4.054(1), F.A.C., provides that an original note may be renewed
for the unpaid balance of the amount which was previously
disbursed provided all other requirements of s. 201.09, F.S.,
are met without additional tax due. Section 201.09, F.S.,
provides that a note may be renewed without tax due when it
extends or continues the identical contractual obligations as
the original. In order to be exempt, the renewal note shall not
be executed by any person other than the original obligor and
must renew and extend only the unpaid balance of the original.

Finally, Rule 12B-4.053(32), F.A.C., provides that the
documentary stamp tax on mortgages securing out-of-state notes
secured by Florida property is taxable. If the mortgage secures
only Florida property, the tax is based on the percentage of the
indebtedness which the value of the mortgaged property located
in Florida bears to the total value of all mortgaged property,
but not less than the value of the Florida property, unless the
amount recoverable is limited. If the mortgage recorded in
Florida secures the property located in Florida and all other
property wherever located, the tax is due on the prorated
amount.

U.S. Bankruptcy Code

Chapter 11, s. 1146 (c), U.S.C., provides that the
issuance, transfer or exchange of a security or the making of or
delivery of an instrument of transfer under a confirmed plan is
exempt from a stamp tax or similar tax.

Department's Position

1. Based on the provisions of 11 U.S.C. s. 1146(c), and
   since the Renewal Notes are exempt renewals under
   F.S., s. 201.09 and exempt refinancings under F.S., s.
   199.145, no Florida documentary stamp taxes or
   intangible taxes are due on the assignment of the
   Notes from the Assignors to the Assignees, on the
   execution and delivery of the Renewal Notes, or on the
   repayment and borrowing of funds from time to time
   under the Renewal Revolving Notes.
2. Also based on the provisions of 11 U.S.C. s. 1146(c),

and since the Renewal Notes are exempt renewals under
s. 201.09, F.S., and exempt refinancings under s.
199.145, F.S., the Renewal Notes (not the Advance
Notes), the amendment and restatement of the Loan
Agreement and the Guaranties and the renewal and
consolidation of the Mortgages are not subject to
Florida documentary stamp taxes or intangible taxes as
stated in the First and Second TAA.

3. Provided that documentary stamp taxes and intangible
   taxes are paid on the amount of the future advance
   evidenced by the Advance Notes, then no other
   documentary stamp taxes or intangible taxes will be
   required on the proposed amendment and restatement of
   the Loan Agreement and the Guaranties on the renewal
   and consolidation of the Mortgages, or on the
   spreading of the consolidated renewal Mortgage to
   encumber additional property of the Company as
   security.
4. Provided that documentary stamp taxes and intangible
   taxes are paid on the amount of the future advance
   evidenced by the Advance Notes, then no other
   documentary stamp taxes or intangible taxes will be
   required on the execution and delivery of any
   Consolidated Term Notes as they would qualify as
   exempt renewals under s. 201.09, F.S., and exempt
   refinancings under s. 199.145, F.S.

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,

James E. Silvey
Tax Law Specialist
Technical Assistance

JES/jes