Did a mortgage modification trigger more Florida documentary stamp or nonrecurring intangible tax when the lender's recovery remained capped at the amount already taxed?

Plain-English summary

The recorded modification did not trigger additional Florida documentary stamp or nonrecurring intangible tax.

The original mortgage limited the lender's recovery against the Florida property to $5 million, and the borrower had paid both taxes on that amount. Although the broader credit facilities later increased to $75 million and added two borrowers, the recorded mortgage modification kept the lender's Florida-mortgage recourse at the same $5 million.

What this means for you

For this multistate loan, the controlling fact was the unchanged contractual limit on recovery from the Florida mortgage. The ruling does not say every increase or extension of a loan is tax-free.

Common questions

Q: Did increasing the overall credit facilities to $75 million create more tax on the Florida mortgage? A: No, because the mortgage modification continued to cap the lender's recovery at $5 million.

Q: Had tax already been paid on the capped amount? A: Yes. Documentary stamp and intangible taxes had been paid on $5 million when the original mortgage was recorded.

Q: Would a higher mortgage-recovery limit necessarily receive the same result? A: The ruling did not decide that scenario.

Citations and references

• Fla. Stat. § 201.08 — documentary stamp tax on obligations and mortgages
• Fla. Stat. § 199.133(2) — nonrecurring intangible tax
• Fla. Admin. Code r. 12B-4.053(32)(b) — multistate mortgages and limited recovery
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95M-004

Original ruling text

Apr 07, 1995

Re: Technical Assistance Advisement No. 95(M)-004 Documentary Stamp and Intangible Tax Multi-State Mortgage with Limited Lender's Recovery XXX (Borrower) XXX (Lender)

Dear :

This is in response to your recent request for a technical assistance advisement pursuant to s. 213.22, F.S., and Florida Administrative Code Rule 12-11.003.

The following is the statement of facts outlined in your letter:

On or around XX, 1993, Borrower received a revolving credit loan from Lender, a XXX corporation, in an aggregate principal amount not to exceed $14,000,000. To evidence the loan, Borrower executed in favor of Lender, a certain Revolving Loan Note in the amount of the loan. The note was executed and delivered to Lender in XX (i.e., outside of the State of Florida). The loan was secured by real and personal property located both in and outside the State of Florida. A portion of the collateral securing the loan was property located in XX County, Florida. A Real Property Mortgage and Assignment of Rents and Leases was executed by Borrower and recorded in the Public Records of XX County, Florida. Since the principal amount of the loan far exceeded the value of the Property, the Lender expressly limited its recourse under the mortgage to $5,000,000. Appropriate documentary stamps and intangible taxes on
$5,000,000 were paid at the time of recording of the Mortgage.

On XX, 1995, Borrower entered into revised and restated promissory notes and a revised Credit Agreement with Lender, whereby: (i) the aggregate credit facilities were

increased to $75,000,000, (ii) the term of the Loan was extended, and (iii) two affiliates of Borrower were added as additional borrowers (or obligors) under the Loan, but not under the Modification. The restated notes were executed and delivered in XX. A first Amendment to Mortgage was recorded amongst the Public Records of XX County, Florida. No additional parties were added as obligors under the Modification. The Modification expressly provided that the Lender's recourse remained limited to $5,000,000.

You have also enclosed with your letter a copy of the first page of the Mortgage evidencing payment of the tax and a copy of the Modification.

Requested Ruling

Because the Modification continued to secure only
$5,000,000 of the indebtedness and documentary stamp taxes and intangible taxes were paid upon recordation of the Mortgage, are the Modification and the loan secured thereby exempt from further documentary stamp and intangible taxes under ss. 201.08 and 199.133, F.S.?

Discussion and Law

Rule 12B-4.053(32)(b), F.A.C., states that when a note is made in another state and is secured by multi-state mortgage recorded in Florida which describes and pledges the Florida property and the out-of-state property, the documentary stamp tax will be due on the mortgage when filed or recorded in Florida based upon the percentage of indebtedness which the value of the mortgaged property located in Florida bears to the total value of all the mortgaged property. However, where the mortgage limits recovery to less than the amount of the indebtedness secured, the tax is due on the amount to which recovery is limited.

Section 199.133(2), F.S., levies a one-time nonrecurring tax of 2 mills on a note, bond, or other obligation for payment of money only to the extent it is secured by mortgage, deed of

trust, or other lien upon real property situated in this state. Where a note, bond, or other obligation is secured by personal property or by real property situated outside this state, as well as by mortgage, deed of trust, or other lien upon real property situated in this state, then the nonrecurring tax shall apply to that portion of the note, bond, or other obligation which bears the same ratio to the entire principal balance of the note, bond, or other obligation as the value of the real property situated in this state bears to the value of all of the security; however, if the security is solely made up of personal property and real property situated in this state, the taxpayer may elect to apportion the taxes based upon the value of the collateral, if any, to which the taxpayer by law or contract must look first for collection. In no event shall the portion of the note, bond, or other obligation which is subject to the nonrecurring tax exceed in value the value of the real property situated in this state which is the security.

Department's Position

Since the original Mortgage, when recorded, contained such a limitation of recovery, and the Modification, when recorded, continued to limit the Lender's recourse to the same amount, no additional documentary stamp and intangible taxes are due upon recordation of the Modification.

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,

Baldan E. Sulker
Tax Audit Specialist III
Technical Assistance

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