Were a nonprofit mortgage bank's warehouse notes and collateral assignments exempt from Florida documentary stamp tax?

Plain-English summary

Florida exempted the mortgage-banking corporation's notes and collateral assignments from documentary stamp tax as obligations under a wholesale warehouse mortgage agreement.

The nonprofit corporation financed affordable-housing developers with mortgage loans. Its member lenders funded those loans through a revolving credit arrangement, and each advance was documented by a corporation note secured by the matching developer note, mortgage, and related loan documents.

Documentary stamp and nonrecurring intangible taxes had already been paid on the full face amount of each recorded developer mortgage. The aggregate corporation debt could not exceed the matching developer debt. The Department therefore treated the corporation notes as principal obligations secured by qualifying collateral obligations under section 201.21 and exempted both the notes and collateral assignments from documentary stamp tax.

What this means for you

• The underlying developer obligations had already borne the required Chapter 201 excise tax.
• The mortgage bank's principal debt did not exceed the collateral debt.
• The exemption covered the corporation notes and recorded collateral assignments under the described warehouse structure.

Common questions

Q: Were the corporation notes subject to documentary stamp tax?
A: No.

Q: Were the collateral assignments taxable?
A: No.

Q: Why did the wholesale warehouse exemption apply?
A: The notes were principal obligations secured by taxed collateral obligations, and the principal debt did not exceed the collateral debt.

Citations and references

• Fla. Stat. § 201.21 — wholesale warehouse agreement exemption
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96B4-007

Original ruling text

May 13, 1996

RE: Technical Assistance Advisement No. 96(B)4-007
Documentary Stamp Tax; Collateral Assignments of Notes and
Mortgages; Wholesale Warehouse Mortgage Agreement
XXX (Corporation)
XXX (Members)

Dear :

This is in response to your recent request for a Technical
Assistance Advisement.

Facts

Corporation, a non-profit mortgage banking corporation,
offers financing for affordable housing developments.
Corporation is composed of Members who each provide loans to
Corporation, which then makes mortgage loans to real estate
developers. One of the Members is appointed Agent to act on the
Members' behalves. Each mortgage loan is evidenced by a
promissory note from the developer to Corporation and is secured
by a mortgage on the developer's project. The developer
mortgages are recorded in the local Clerk of Court's office and
documentary stamp taxes and non-recurring intangible taxes are
paid on the full face amount of the developer note secured
thereby.

To obtain funds to extend the developer loans, Corporation
has entered into a Credit and Security Agreement dated as of XXX
with each of its Members pursuant to which the Members have
committed to advance $XX to Corporation. The Credit Agreement
contemplates a revolving line of credit pursuant to which
Corporation may borrow, prepay and reborrow sums to fund the
developer loans. The Credit Agreement also contemplates that
Corporation may sell the developer loans in the secondary
market.

Each advance to Corporation is evidenced by a promissory

note from Corporation to the Agent in an amount equal to the
corresponding developer note, and is secured by a Security
Agreement and Collateral Assignment and Pledge of Note,
Mortgage, etc. The Corporation Collateral Assignment, which is
to be recorded in the same county as the underlying developer
mortgage, pledges the corresponding developer loan documents to
secure payment of the Corporation Note secured thereby. The
Credit Agreement provides that the Agent, as secured party on
behalf of the Members, has a security interest in all developer
loan documents "to secure all obligations of [Corporation] under
which or arise from any [Corporation] loan whether now or
hereafter existing."

The amount of the developer loans and the corresponding
advances to Corporation may be for as much as $XX. However, in
practice, the developer loans are for amounts in the range of
$XX to $XX. While the Members' commitment could theoretically
be exhausted by XXX developer loans, each for the $XX maximum,
it is more likely that the Members will be financing as many as
XX to XX developer loans. As a developer loan is repaid,
Corporation will repay the corresponding Corporation Note,
thereby reducing the aggregate amount outstanding under the
Credit Agreement. Thereafter, Corporation can enter into new
developer loan agreements and obtain additional advances under
the Credit Agreement.

Pursuant to the loan structure established under the Credit
Agreement, the aggregate of the various Members' percentage
interests in each developer loan equals one hundred percent.
The principal obligation under Corporation notes cannot exceed
the aggregate amounts due under the developer notes (the
collateral obligation). The aggregate debts under both the
developer notes and Corporation notes are always identical.

Law and Discussion

Section 201.21, F.S., states in part:

There shall be exempt from all excise taxes imposed by this
chapter all promissory notes, nonnegotiable notes, and
other written obligations to pay money..., hereinafter

referred to as "principal obligations," when the maker
thereof shall pledge or deposit with the payee or holder
thereof pursuant to any agreement commonly known as a
wholesale warehouse agreement, as collateral security for
payment thereof, any collateral obligation or obligations
as hereinafter defined, provided all excise taxes imposed
by this chapter upon or in respect to such collateral
obligation or obligations shall have been paid. If the
indebtedness evidenced by any such principal obligation
shall be in excess of the indebtedness evidenced by such
collateral obligation or obligations, the exemption
provided by this section shall not apply to the amount of
such excess indebtedness; and, in such event, the excise
taxes imposed by this chapter shall apply and be paid only
in respect of such excess of indebtedness of such principal
obligation. The term "collateral obligation" as used in
this section means any note, bond, or other written
obligation to pay money secured by a mortgage, deed of
trust, or other lien upon real or personal property. The
pledging of a specific collateral obligation to secure a
specific principal obligation, if required under the terms
of the agreement, shall not invalidate the exemption
provided by this section.... (Emphasis Supplied)

Determination

Based upon statutory provisions and close examination of
the documents at hand, the advances extended by the Members to
Corporation under the Credit Agreement satisfy the requirements
of a "wholesale warehouse mortgage agreement" since Corporation
notes are "principal obligations" under s. 201.21, F.S., secured
by the developers' pledges pursuant to the Collateral
Assignment. Therefore, Corporation notes and Corporation
Collateral Assignments are exempt from documentary stamp taxes.

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,

Joy Eldred, C.P.A.
Tax Law Specialist
Tax Policy and Dispute Resolution
Office of General Counsel

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