Were the original mortgage tax legends sufficient, and was a consolidation and renewal note exempt from additional Florida documentary stamp tax?

Plain-English summary

Florida approved the documentary stamp tax paid on the original mortgages and treated the later consolidation and modification as exempt renewals.

One original note was secured by three mortgages on separate parcels, each bearing a legend that the proper intangible and documentary stamp taxes had been paid. A second lender held separately taxed second mortgages. After the first note and mortgages were assigned, the new lender made an additional, separately taxed loan.

The mortgagor later consolidated the acquired debt and incremental debt into a single renewal note and mortgage modification. The Department found the original mortgage legends adequate and agreed that the initial documentary stamp tax had been properly paid.

The consolidation remained exempt because it continued existing obligations without enlarging their principal balances. The ruling described the renewal conditions as the same original obligors, no increase beyond unpaid principal, and proper tax payment on the original note or mortgage.

What this means for you

• A recorded mortgage could carry the tax with a notation on the note showing where and how much tax was affixed.
• Combining multiple taxed notes did not trigger new tax when it merely continued existing principal.
• Adding obligors, substituting parties, or increasing principal could defeat renewal treatment.

Common questions

Q: Were the legends on the original mortgages sufficient?
A: Yes.

Q: Was the consolidation note additionally taxable?
A: No, because it qualified as an exempt renewal.

Q: What principal could be renewed tax-free?
A: Only the unpaid principal balance, without increase, under the conditions stated in the ruling.

Citations and references

• Fla. Stat. § 201.08(1) — documentary stamp tax on notes and mortgages
• Fla. Stat. § 201.09 — exempt renewal conditions
• Fla. Admin. Code r. 12B-4.053(29) — notes secured by recorded mortgages and tax notation
• Fla. Admin. Code r. 12B-4.054(1)(a) — consolidated renewal notes
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96B4-009

Original ruling text

Jun 21, 1996

Re: Technical Assistance Advisement No. 96(B)4-009
Documentary Stamp Tax;
Proper Legend on Mortgages/Exempt Renewals of a Note and
Mortgage
Sections 201.08(1), and 201.09, F.S.
XXX (Mortgagor)
XXX (Mortgagee 1)
XXX (Mortgagee 2)
XXX (Mortgagee 3)

Dear :

This is in response to your recent request for a technical
assistance advisement.

The following is the description of the transactions
outlined in your letter:

On or about XX, the Mortgagor executed a promissory note in
favor of the Mortgagee 1 in the amount of $XX which was
secured by three separate mortgages on separate parcels of
real property, with two of the parcels being located in XX
County and the third parcel being located in XX County. A
legend appears on these three mortgages stating that proper
intangible and documentary stamp taxes have been paid.

At the same time, Mortgagor also executed a promissory note
in favor of Mortgagee 2 in the amount of $XX which was
secured by second mortgages on each of the three parcels.
Proper intangible and documentary stamp taxes have been
paid on these second mortgages.

On XX, Mortgagee 1 assigned its interest to the note and
mortgage to Mortgagee 3. The outstanding balance at the
time of the assignment was $XX. Mortgagee 3 made an
additional loan to Mortgagor in the amount of $XX.
Mortgagor executed an incremental promissory note

evidencing the indebtedness. The incremental note was
secured by another mortgage encumbering the three parcels.
Proper documentary stamp taxes were paid on this
incremental note and mortgage.

Later on, Mortgagor executed a consolidation and renewal
promissory note and mortgage (Modification Agreement) that
consolidated the indebtedness now owned by Mortgagee 3 with
the incremental note and mortgage into a single obligation
totaling $XX.

Requested Ruling

1. Whether proper amounts of documentary stamp taxes was
   paid on the three mortgages or are there additional
   stamp taxes payable with regard to the initial $XX
   loan made by the Mortgagee 1, the execution of the
   Mortgagee 1 note and the execution and recordation of
   the three Mortgagee 1 mortgages?
2. Whether the renewal note and the modification
   agreement are exempt from further documentary stamp
   taxes under Fla. Stat. s. 201.09?

Discussion and Law

With respect to the requested ruling 1, pursuant to section
201.08(1), F.S., and Rule 12B-4.053(29), F.A.C., all notes or
written obligations to pay money delivered to the lender,
including, but not limited to, master notes, and notes drawn in
connection with a line of credit, letter of credit, bail bond or
otherwise, executed in Florida or approved and accepted in
Florida, are subject to Florida documentary stamp tax. Tax is
due based on the face amount of the note whether or not funds
are advanced at the time of delivery. If the note is secured by
a recorded mortgage, stamps shall be affixed to the mortgage at
the time of recording and a notation made on the note that
proper stamps and amount thereof are affixed to the mortgage.

With respect to the requested ruling 2, a renewal note is
subject to documentary stamp tax unless it meets all of the
conditions of Section 201.09, F.S.:

1. Renewal must be signed only by the original obligor(s)
(without additions or substitutions),

2. The only amount which may be renewed tax free is
   unpaid principal balance of the note, without
   increase, and
3. Proper documentary stamp tax paid on the original note
   or recordation of the mortgage.

According to Rule 12B-4.054(1)(a), F.A.C., when a single
note is given which consolidates two or more notes, so as to
continue the existing contractual obligations, without
enlargement of the existing principal balances, the consolidated
note is exempt as a renewal note.

Department's Position

We concur that the proper amount of documentary stamp taxes
was paid on these three initial mortgages totaling $XX. Also
legends attached to each mortgage adequately address the proper
documentary stamp tax liability.

Likewise, the renewal note and the modification agreement
are exempt from additional documentary stamp taxes under s.
201.08, F.S.

This binding technical advisement only pertains to
documentary stamp tax issues.

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
Senior Tax Specialist
Tax Policy and Dispute Resolution
Office of General Counsel

BES/mh