Were a credit union's signed open-end loan application, plan, addendum, and advance request subject to Florida documentary stamp tax?

Plain-English summary

None of the submitted open-end loan forms was subject to documentary stamp tax.

The ruling required a written promise to pay, a sum certain in money, and the borrower's signature. Although the forms were signed, none contained both a payment promise and a determinable amount.

The advance request stated the requested amount but did not contain a promise to pay. It referred to the credit agreement but did not incorporate that agreement by reference.

The Department separately warned that any mortgage filed or recorded as security for a loan would be taxable under section 201.08(1).

What this means for you

The instruments were tested by their face and wording, not by outside evidence about the lending relationship. Small drafting changes could produce a different result.

Common questions

Q: What three features did the ruling identify for a taxable written obligation?
A: A written promise to pay, a sum certain in money, and the borrower's signature.

Q: Why was the advance request not taxable?
A: It stated an amount but did not promise payment or incorporate the agreement.

Q: Did the ruling exempt recorded mortgages?
A: No. A recorded mortgage securing the loan remained taxable.

Citations and references

• Fla. Stat. § 201.08(1) — written obligations and recorded security instruments
• Fla. Admin. Code r. 12B-4.052(6) — written-obligation requirements
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95B4-007

Original ruling text

May 16, 1995

Re: Technical Assistance Advisement No. 95(B)4-007
Documentary Stamp Tax; Open-End Loan Forms
XXX (hereinafter the Credit Union)

Dear :

You have petitioned for a Technical Assistance Advisement
pursuant to s. 213.22, F.S., and Florida Administrative Code
Rule 12-11.003.

Issue

Whether open-end loan forms used by the Credit Union in
making loans to its members are subject to documentary
stamp tax under s. 201.08(1), F.S.

You have enclosed the following forms for our
determination:

1. Credit Union Application; and
2. Credit Union Open-End Credit Plan; and
3. Credit Union Addendum to Open-End Credit Plan; and
4. Credit Union Open-End Credit Plan Advance/Revolving
   Request; and
5. Marked Credit Union Open-End Credit Plan; to be
   reviewed only as alternate opinion if Credit Union
   Open-End Plan under number 3. is held taxable.

Background

The Credit Union Application, which is signed by the
borrower, provides information to determine the member's credit
worthiness, and ability to pay. This document also outlines the
plan and states the amount the borrower requests as well as the
terms of repayment.

The Agreement, which is executed by the borrower, contains

the member's identification, application instructions, finance
charge computation, costs, assigned credit limit, terms and
conditions, a promise to pay all amounts due, and general
information.

The Addendum, which is executed by the borrower, describes
the available loan programs, finance charge, minimum payments,
credit available, and a promise to pay all costs to collect.

The Request, which is executed by the borrower, contains
member identification, amount requested and that the amount is
added to the present account balance subject to the terms and
conditions of the agreement, information concerning interest
rates, payments, and principal balance outstanding.

Discussion and Law

Relevant to your petition, s. 201.08(1), F.S., provides
that:

On promissory notes, nonnegotiable notes, written
obligations to pay money... made executed, delivered, sold,
transferred, or assigned in the state, and for each renewal
of same, the tax shall be 35 cents on each $100 or fraction
thereof of the indebtedness or obligation evidenced
thereby. On mortgages, trust deeds, security agreements,
or other evidences of indebtedness filed or recorded in
this state, and for each renewal of the same, the tax shall
be 35 cents on each $100 or fraction thereof of the
indebtedness or obligation evidenced thereby.... [emphasis
added]

Certain requirements are necessary in order for a note or
other written obligation to be taxable, which are:

1. A written promise to pay; and
2. A sum certain in money; and
3. The signature of the borrower.

See Lee v. Kenan, 78 F. 2d 425 (5th Cir. 1935) (liability
of instrument to stamp duty, as well as amount of such duty, is

determined by form and face of instrument and cannot be affected
by proof of extrinsic facts). Maas Brothers Inc. v. Dickinson,
195 So.2d 193 (Fla. 1967) (neither a revolving charge account
credit agreement nor individual sales receipts were taxable,
since the credit agreement did not contain a stated sum and the
sales receipts, which contained a stated sum and a borrower's
signature, did not contain a promise to pay). Also see Fla.
Admin. Code Rule 12B-4.052(6).

Department's Position

None of the forms submitted contain a written promise to
pay a determinable amount even though they are executed by the
borrower. The Request is executed and contains the amount but
does not contain a promise to pay and only refers to the
Agreement but does not incorporate the Agreement by reference.
Therefore, the forms submitted do not meet the requirements for
taxing purposes and do not require the documentary stamp tax.
Any mortgages filed or recorded in the public records as
security for any loans made by Lender to a borrower would be
subject to tax as prescribed in s. 201.08(1), 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/