Did Florida nonrecurring intangible tax apply to loans, notes, mortgages, after-acquired-property liens, and later amendments made under a confirmed Chapter 11 plan?

Plain-English summary

The described plan-related financing instruments and amendments were exempt from Florida nonrecurring intangible tax.

The exemption covered term and revolving loans, their notes, the mortgage and financing statements, later liens on substitute or after-acquired property, and subsequent renewals or modifications. The Department tied the result to the confirmed Chapter 11 plan and the debtor's participation.

What this means for you

The ruling said the exemption was strictly construed and did not extend to documents to which the Chapter 11 debtor was not a party.

Common questions

Q: Were the initial loans and notes taxable?
A: No.

Q: Were mortgage modifications adding property taxable?
A: No.

Q: Were later renewals and modifications taxable?
A: No, under the described plan.

Citations and references

• 11 U.S.C. §§ 1129 and 1146(c) — confirmed-plan exemption relied on in the ruling
• Fla. Stat. ch. 199 — nonrecurring intangible tax
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95C2-014

Original ruling text

Apr 07, 1995

Re: Technical Assistance Advisement No. 95(C)2-014
Intangible Personal Property Tax; Instruments and
Amendments Executed Pursuant to a Confirmed Plan Under
Chapter 11 of U.S. Bankruptcy Code
XXX (Company)

XXX (Lenders)
XXX (Agent)
XXX (Co-Agent)

Dear:

This is in response to your recent request for a technical

assistance advisement.

Facts

Company filed a voluntary bankruptcy petition for
reorganization under Title 11 of the United States Code
(Bankruptcy Code) in the Bankruptcy Court. On the same date,
Company submitted to the Bankruptcy Court its First Amended Plan
of Reorganization, as amended pursuant to notices of technical

modifications filed by Company.

Pursuant to a confirmation order entered by the Bankruptcy
Court, the plan was confirmed under Section 1129 of the
Bankruptcy Code (Confirmed Plan). On the effective date and
pursuant to the Confirmed Plan, Company executed and delivered
that certain Credit Agreement among Company, Lenders, Agent and

Co-Agent.

The Lenders committed credit to Company under the New
Credit Agreement consisting of certain term loans, revolving
credit loans and the issuance of letters of credit for the
account of Company. Under the revolving credit loan facility
provided in the New Credit Agreement (Revolving Credit Loans),
Company may borrow, repay and reborrow funds from time to time.

The Revolving Credit Loans are evidenced by certain promissory

notes (Revolving Credit Notes) that are issued pro rata among

the Lenders in accordance with their respective interests.

Under the term loan facility provided in the New Credit

Agreement, the Lenders made three kinds of term loans to Company
(Term Loans). To evidence the Term Loans, the Company executed
and delivered term loan notes (Term Loan Notes). Amounts repaid

under the Term Loan Notes may not be reborrowed by the Company.

Certain obligations of the Company, including the
obligations of the Company under the New Credit Agreement, are
secured by a lien in favor of the Agent upon substantially all
of the Company's Florida real and personal property. Pursuant
to the New Credit Agreement, and to evidence such liens and
security interests, the Company executed, delivered and recorded
counterparts of a mortgage, which is attached to the New Credit
Agreement (Mortgage), and separate fixture financing statements,
with the Clerk of the Circuit Court in each of the counties in
Florida in which the Company currently owns real property. The
Company also executed and delivered a security agreement and

filed financing statements with the Florida Secretary of State.

The New Credit Agreement also requires the Company to
secure the obligations by granting additional liens in favor of
the Agent from time to time on substitute, replacement, and
after-acquired real and personal property of the Company. This
will be accomplished by filing a mortgage modification of each
mortgage to include the after-acquired property and to file a
counterpart of the mortgage as so modified in any other Florida

county in which after-acquired property is located.

Rulings Requested

Based upon the above facts, Company requests the following

rulings:

Pursuant to Section 1146 (c) of the Bankruptcy Code,
Company is not required to pay any Florida nonrecurring
intangible personal property tax under Chapter 199, Florida
Statutes, on or after the effective date as a result of any

of the transactions consummated or to be consummated

pursuant to the Confirmed Plan and the New Credit

Agreement, including the following:

(a) The making of the Revolving Credit Loans and the Term
Loans to Company;

(b) The execution and delivery of the Revolving Credit
Notes or the Term Loan Notes by Company to Lenders;

(c) Company's borrowing under the Term Loan Notes on the
effective date, and Company's borrowing, repayment and
reborrowing, under the Revolving Credit Notes on and
from time to time after the effective date;

(d) The making, execution, delivery, recordation, or
enforcement of each counterpart of the Mortgage, the
fixture financing statements, the security agreement
and the financing statements, whether executed and
delivered on the effective date or from time to time
thereafter to evidence a lien in favor of the Agent
upon the real and personal property of Company;

(e) Modifications to the Mortgage to spread the lien in
favor of the Agent to include any after-acquired
property or additional security for the obligations,
and the making, execution, delivery, recordation, or
enforcement of all documents required to effect this
action, including mortgage modifications and
counterparts of the Mortgage; or

(f) Any subsequent renewals or modifications of the
Revolving Credit Notes, the Term Loan Notes, the

Mortgage or other security agreements.

Discussion and Law

Chapter 199, Florida Statutes, imposes a nonrecurring tax
of two mills on obligations for the payment of money which are

secured by Florida real property.

Pursuant to Chapter 11, s. 1141(c), U.S.C., the issuance,
transfer, exchange of a security, or the making or delivery of
an instrument of transfer under a plan confirmed under Chapter
11, s. 1129, U.S.C., may not be taxed under any law imposing a
stamp tax or similar tax. A security under Chapter 11, U.S.C.,
is defined to include a note, bond, or debenture. However, as a

tax exemption, s. 1146(c) is strictly construed and does not

extend to documents of which a Chapter 11 debtor is not a party.
Further, 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.

Conclusion

Based upon statutory provisions, the documents and
transactions described in the above paragraphs (a) through (f),
inclusive, will not be subject to the nonrecurring intangible

tax.

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,
Nadine C. Posey
Tax Audit Specialist III

Technical Assistance

NCP/mh