Did collateral assignments of already-taxed purchase-money loan documents and mortgage modifications adding land trigger more Florida documentary stamp tax?

Plain-English summary

Florida found no additional documentary stamp tax on the collateral assignments or the mortgage modifications described.

The real-estate developer had bank and mezzanine debt secured by first and second mortgages, with documentary stamp and intangible tax already paid. When portions of the property were sold, the developer could take properly taxed purchase-money notes and mortgages and pledge them as additional security for the existing loans.

The Department rejected the claim that the documents formed an exempt wholesale warehouse mortgage agreement because each note was directly secured by its assigned note and mortgage. Even so, the collateral assignments were not additionally taxed: the original notes had been taxed, the assignments supplied only additional collateral, and they did not secure a new loan.

Mortgage modifications could also spread the existing liens to newly acquired land without additional stamp tax when they merely added or substituted collateral, involved the same obligors, and did not enlarge the outstanding balance or otherwise modify the debt. The revolving note did not need to be fully funded when the modification was recorded.

What this means for you

• The no-additional-tax result rested on existing taxed debt and collateral changes that did not create new indebtedness.
• The Department reached the result even though it rejected the claimed wholesale-warehouse classification.
• An assignment securing a new loan or a modification increasing the obligation would require a different analysis.

Common questions

Q: Were the purchase-money loan assignments additionally taxable?
A: No. They were additional collateral for already-taxed existing loans.

Q: Was the arrangement an exempt wholesale warehouse mortgage agreement?
A: No, according to the Department.

Q: Could the lien be spread before the revolver was fully funded?
A: Yes, because the modification added or substituted collateral without modifying the note.

Citations and references

• Fla. Stat. § 201.09 — renewals of written obligations
• Fla. Stat. § 201.21 — wholesale warehouse mortgage agreements
• Fla. Admin. Code r. 12B-4.054(1), (4), (6) — renewals, warehouse agreements, and mortgage assignments
• Fla. Admin. Code r. 12B-4.053(28) — collateral mortgage assignments
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96B4-010

Original ruling text

Jul 18, 1996

Re: Technical Assistance Advisement No. 96(B)4-010
Documentary Stamp Tax; Collateral Assignments of Notes and
Mortgages; Mortgage Modification and Spreading Agreement
XXX (Partnership)
XXX (Inc.)
XXX (Bank)
XXX (Trustee)

Dear :

You have petitioned for a Revision of Technical Assistance
Advisement 95(M)-007 pursuant to s. 213.22, F.S., and Rule 1211.003, F.A.C.

Issues

Whether the collateral assignment of the purchase money
loan documents and the spreading of the lien to additional land
would be subject to the documentary stamp tax. Further, whether
recording mortgage modifications, where the revolving credit
agreements were not fully funded, would subject the revolver to
additional documentary stamp tax.

Facts

Taxpayers are engaged in real estate development in
Florida. To finance its land acquisition and development,
Partnership engaged in two financing transactions, (i) a loan
from Bank, as agent (Bank Loan) and (ii) the issuance of its XXX
Senior Subordinated Secured Notes (collectively, the Mezzanine
Notes). Both financing transactions were guaranteed by Inc. The
structure of the Bank Loan and Mezzanine Notes are summarized
below:

(a) Bank Loan. Bank Loan consists of a term loan facility
and a revolver credit facility. The total loan is in the
amount of $XX and is evidenced by a Senior Revolving Note

of $XX and a Senior Amortizing Term Note of $XX which make
up the Bank Notes, both dated XXX. Both the Senior
Revolving and the Senior Term were subsequently broken down
and assigned to different lenders without enlargement of
the principal balance. The Bank Loan is also evidenced by
a Senior Secured Facility Credit Agreement dated XXX. The
Bank Notes are secured by, inter alia, a Mortgage and
Security Agreement and a Collateral Assignment Loan
Document dated XXX. Documentary stamp tax of $XX was paid
representing both the Bank Notes and the guaranty by Inc.
with intangible tax of $XX paid upon recording the Bank
Mortgage in Florida. Together, the various documents
executed in connection with the Bank Loan financing are
referred to as the Bank Loan Documents.

(b) The Mezzanine Financing. The Mezzanine Notes are in the
aggregate principal amount of $XX. Trustee is holder of
the Mezzanine Notes under a certain Supplemental Indenture.
Partnership entered into note purchase agreements with each
of the purchasers of the Mezzanine Notes. The Mezzanine
Notes, Indenture and note purchase agreements are secured
by a second mortgage (Second Mortgage) in favor of the
Bank, as Collateral Agent (together with successors and
assigns, the Collateral Agent). Intangible tax in the
amount of $XX and documentary stamp tax in the amount of
$XX, representing documentary stamp tax on both the
Mezzanine Notes and Inc. guaranty, were paid on the
recording of the Second Mortgage in Florida.
(c) Operation of Business. The Bank may partially release
the lien of the Bank Mortgage and Second Mortgage. Further,
additional collateral may be added as security for the Bank
Notes and Mezzanine Notes with the lien of the Bank
Mortgage and Mezzanine Mortgage spread to encumber
additional real property owned by the Partnership and Inc.
(i) Collateral Assignment of Purchase Money Loan Documents.
Partnership and Inc. propose to subdivide and sell off
portions of the property. A portion of the proceeds will
be used to repay amounts due under the notes. The
Partnership may take a part of the sale proceeds as a
purchase money note and mortgage (Purchase Money Loan
Documents), with proper documentary stamp tax and

intangible tax paid. In order for the Bank and Collateral
Agent to release the Bank Mortgage and Second Mortgage, the
Purchase Money Mortgages will be pledged as additional
security pursuant to the Collateral Assignment. The
collaterally assigned Purchase Money Loan Documents
encumber the same real property that is encumbered by the
Bank First Mortgage and the Second Mortgage.

Second, the Partnership and Inc. may purchase additional
land in Florida which may be pledged as security for the
Bank Notes and Mezzanine Notes by spreading the lien of the
Bank Mortgage and the Second Mortgage. The additional land
will increase the borrowing base and thus enable the
Partnership to obtain additional draws under the Senior
Revolving Credit Note. In either situation, the
Partnership and Inc. will execute and deliver to Bank and
Collateral Agent mortgage modifications agreements to
evidence the spreading of the lien of both mortgages to
encumber the additional land. The mortgage modification
agreements will not enlarge the outstanding balance, will
be executed only by the same obligors, and will not modify
any terms or conditions, except to amend the legal
description of the real property encumbered by the
mortgages. The Senior Revolving Credit Note will not be
fully funded at the time the mortgage modifications are
recorded.

Taxpayer's Analysis

Your position is that the collateral assignment of loan
documents is an absolute assignment of a mortgage on Florida
real property to a new lender who has purchased the note and
mortgage and thereby becomes the holder of that note and
mortgage and is therefore not subject to additional documentary
stamp tax. You contend that the assignment is not to secure a
new loan, but is merely substitute collateral for the existing
loans. Specifically, the Bank Loan Documents and the Mezzanine
Financing Documents had full documentary stamp tax paid and
affixed to the mortgages. Further, the assignment of the
Purchase Money Loan Documents is not security for a new loan,
but is merely substitute collateral for existing term loans and

not taxable. In addition, you contend that the Collateral
Assignment is a "wholesale warehouse mortgage agreement" and not
subject to tax under s. 201.21, F.S.

As to the spreading of the lien of the Bank Mortgage and
Second Mortgage to encumber any additional land acquired by
Partnership or Inc., regardless as to how the property was
obtained, the mortgage modifications are exempt from additional
documentary stamp tax. The principal balance of the Senior
Revolving Credit Note will vary and will not be fully funded at
the time the mortgage modifications are recorded. The mortgage
modification agreements will only evidence the pledge of
additional collateral and will not constitute new evidences of
indebtedness subject to documentary stamp tax and are exempt
from tax.

Law and Analysis

Section 201.21, F.S., provides:

Notes and other written obligations exempt under certain
conditions.-- There shall be exempt from all excise taxes
imposed by this chapter all promissory notes, nonnegotiable
notes, and other written obligations to pay money bearing
date subsequent to July 1, 1955, 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
mortgage agreement, as collateral security for the 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 to 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 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. The temporary removal of the document or
documents representing one or more collateral obligations
for a reasonable commercial purpose, for a period not
exceeding 60 days, shall not invalidate the exemption
provided by this section."

In addition, Rule 12B-4.054, F.A.C., provides in part:

Exempt Transactions.

(1) Renewal Notes, Mortgages, Trust Deeds, Security
Agreements, or Other Evidences of Indebtedness: When any
note, mortgage, trust deed, security agreement, or other
evidence or indebtedness is given in renewal of the note,
mortgage, trust deed, security agreement, or other evidence
of indebtedness, the document shall not be subject to stamp
tax provided all of the requirements under s. 201.09, F.S.,
have been met. A renewal note shall have attached to it
the original note, showing full payment of tax due. A
renewal mortgage, trust deed, security agreement, or other
evidence of indebtedness shall state the official book and
page number of the original mortgage or other security
document being renewed which evidences prior payment in
full of stamp tax due, or shall have attached to it for
recording the original note or a copy thereof with evidence
of proper stamp tax affixed. Examples of exempt note
transactions are as follows (same rationale is applicable
to mortgages, trust deeds, security agreements, or other
evidences of indebtedness):...
(d) The insertion of the name of a new payee, who has
become holder of the original note and is entitled to
receive payment of the obligation, does not make the note
taxable if all other provisions of s. 201.09, F.S., are
met. (1962 Op. Att'y. Gen. Fla. 062-139 (Oct. 23, 1962))...
(4) Wholesale Warehouse Mortgage Agreements: All promissory

notes, non-negotiable notes and other written obligations
to pay money given pursuant to a wholesale warehouse
mortgage agreement as provided under s. 201.21, F.S., shall
be exempt from tax.
(6) Assignment of Mortgage: An assignment of a mortgage by
a lender (mortgagee or owner of the asset) to a new lender
who has purchased the note and mortgage and becomes the
holder of the note and mortgage is not taxable. (State v.
Sweat, 152 So. 432 (1934)) However, where the assignment
of a mortgage is given as collateral security for a new
loan, the assignment is a taxable mortgage when recorded in
this state. Cross Reference - Rule 12B-4.053(28), F.A.C.

Department's Position

The documents do not constitute an exempt wholesale
mortgage warehouse agreement under s. 201.21, F.S., as each note
is secured directly by the assignment of the note and mortgage.
However, tax is not due on the collateral assignment of the
Purchase Money Loan Documents pursuant to the Collateral
Assignment based on the fact that tax was paid on the original
note and that the collateral assignment is only additional
collateral and does not secure a new loan. Further, the lien of
the Bank Mortgage and the Second Mortgage may be spread without
incurring any additional documentary stamp tax since tax was
paid on the original notes and the spreading is merely to add
additional collateral or substituting collateral. In addition,
the Senior Revolving Credit Note does not have to be fully
funded at the time of executing and recording the mortgage
modification agreements to evidence the spreading of the lien of
the Bank Mortgage and/or the Second Mortgage, as the
modification does not modify the note; it merely adds or
substitutes collateral.

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
Tax Policy and Dispute Resolution
Office of the General Counsel

Jes/mh