Was a warehouse loan exempt from Florida documentary stamp tax when fully supported by pledged mortgage notes on which the required tax had been paid?

Plain-English summary

Florida approved a documentary stamp tax exemption for the principal warehouse loan because it was backed by qualifying mortgage obligations on which the required tax was paid.

The owner was to execute promissory notes secured by mortgages on Florida real property. Those notes were pledged to a lender under a wholesale warehouse mortgage agreement, and all documentary stamp tax due on the collateral obligations would be paid when the mortgages were recorded.

The owner could draw the warehouse loan in increments, but the outstanding balance could not exceed the aggregate principal of the pledged mortgages. If it did, the owner had to prepay the excess or deliver additional collateral obligations.

Section 201.21 exempted the principal obligation when qualifying taxed obligations were pledged as collateral. On the facts presented, the Department held that the pledged assignments qualified the principal loan for that exemption.

What this means for you

Warehouse lenders and borrowers

The exemption depended on a wholesale warehouse mortgage arrangement, qualifying pledged obligations, and payment of the tax due on those underlying obligations.

Timeshare and real-estate finance businesses

Monitor the relationship between the principal loan balance and aggregate collateral principal. The statute taxed any excess principal indebtedness not supported by qualifying collateral.

Accountants and tax professionals

Preserve recorded mortgages, proof of tax payment, collateral schedules, draw records, and any prepayment or collateral-substitution records supporting the exemption.

Common questions

Q: What property secured the collateral obligations? A: Florida real property associated with timeshare interval interests.

Q: Did tax still have to be paid on the pledged mortgage notes? A: Yes. The ruling assumed all required documentary stamp tax on the collateral obligations would be paid when the mortgages were recorded.

Q: What if the warehouse loan exceeded the pledged collateral principal? A: Section 201.21 would not exempt the excess. The agreement required prepayment or additional collateral to eliminate it.

Q: Was the principal warehouse obligation exempt here? A: Yes, on the facts presented.

Q: Can another financing arrangement rely on this TAA? A: Not automatically. The advisement says it binds the Department only for the specific agreement, collateral, tax-payment, balance, and cure provisions described.

Citations and references

• Fla. Stat. § 201.21 — documentary stamp tax exemption for principal obligations under wholesale warehouse mortgage agreements
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96B4-011

Original ruling text

Oct 04, 1996

Re: Technical Assistance Advisement No: 96(B)4-011 Documentary Stamp Tax; Availability of an Exemption from Documentary Stamp Tax under Section 201.21, F.S. XXX (Lender) XXX (Owner)

Dear :

This is in response to your letter dated August 6, 1996 requesting a technical assistance advisement regarding the exemption of pledged collateral obligations under s. 201.21, F.S.

Statement of Facts

A number of promissory notes are to be executed and delivered in Florida. The notes will be secured by mortgages encumbering Florida real property, (the "Collateral Obligations"). The maker(s) of the Collateral Obligations and the purchaser(s) of the time share interval interests in a time share condominium are the same party (the "Owner"). All required documentary stamp tax due resulting from the Collateral Obligations will be paid upon recording those mortgages.

The Owner will receive a loan pursuant to the wholesale warehouse mortgage agreement. Draws can be made on the loan in increments of $XX. The total amount drawn is not permitted to exceed the aggregate of the principal balance. Should this occur, the Owner is required to prepay the amount necessary to reduce the principal balance of the obligation, or to deliver additional Collateral Obligations to the Lender, sufficient to eliminate the excess, thus keeping the aggregate principal of the mortgages equal to or in excess of the principal obligation.

Advisement

You request the Department's advice whether the pledged

Collateral Obligations qualify for exemption from tax under s. 201.21, F.S.

Provision of the Law

Section 201.21, F.S., provides 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 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 in indebtedness of such principal obligations. 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....

Conclusion

Based on the facts presented in this request, the assignment of Collateral Obligations pledged as security for the principal loan would qualify for the exemption from tax on the principle obligation provided under s. 201.21, F.S.

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,

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

CG/mh