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/