After Florida's 1997 express-incorporation amendment, were a credit union's separate open-end credit agreement and advance request subject to documentary stamp tax?

Plain-English summary

The credit union's separate Loanliner credit agreement and advance request were not subject to Florida documentary stamp tax after July 1, 1997. This revised ruling reversed the practical result of the original TAA 97B4-003 under the intervening express-incorporation statute.

The credit agreement contained the borrower's promise to repay advances and required a signature. The advance-request voucher stated the requested and approved loan amounts and required the borrower to sign either the form or the advance check.

Together the two forms supplied a repayment promise, a sum certain, and a borrower signature. But neither expressly incorporated the other. Section 201.08(6) required taxability to be determined from a document's face and only those separate papers it expressly incorporated. Because neither form alone contained all three elements, the Department found no tax.

What this means for you

For multi-document loan packages, the economic transaction is not enough. After the cited statutory change, Florida looked for express incorporation before combining separate documents to determine documentary-stamp tax. A standing promise in one form and a loan amount in another did not create a taxable document when the forms failed that drafting test.

Common questions

Q: Did the two forms together contain the usual elements of a taxable obligation? A: Yes. Between them they contained a promise to pay, an approved sum certain, and a borrower signature.

Q: Why were they still not taxed?
A: Neither form expressly incorporated the other, so section 201.08(6) prevented the Department from combining them.

Q: When did this result apply?
A: The ruling expressly applied the statutory rule effective July 1, 1997.

Q: Did the Department review the advance-proceeds check's wording? A: No. The check was not provided, so the Department could not determine whether it contained a promise to pay money.

Citations and references

• Fla. Stat. § 201.08 — documentary stamp tax on written obligations to pay money
• Fla. Stat. § 201.08(6) — taxability from the document's face and expressly incorporated documents
• Chapter 97-123, § 2, Laws of Florida — July 1, 1997 effective date
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97B4-003R

Original ruling text

Status: Revised version of TAA 97(B)4-003 dated March 13, 1997

              Jan 12, 1998

Re: Technical Assistance Advisement No. 97(B)4-003 REVISED Documentary Stamp Tax; Credit Union Forms Section 201.08, F.S. XXX (Lender)

Dear :

This is in response to your recent request for a Technical Assistance Advisement in which you ask if the Florida documentary stamp tax imposed by s. 201.08, F.S., is due upon several forms used by the lending institution.

           Proposed Transaction

The forms under consideration are:

1. Loanliner - Application (Form # AST 013 6826LL)
2. Loanliner - Credit Agreement (Form # BFL218 6849LL)
3. Loanliner - Advance Request Voucher and Security
   Agreement (Form # VFL065 6826LL)
4. Loanliner - Credit Agreement and Insurance Certificate
   -Member's Copy (Also: Form # BFL218 6849LL)
5. Loanliner - Addendum (Form # MST103 6826LL) (This is
   the member's copy.)

            Requested Ruling
   

The requester believes the forms submitted do not require imposition of documentary stamp tax under s. 201.08, F.S.

            Discussion and Law

These two documents (#1 and #2 below) represent the Loanliner Open-End Plan:

Page 2

1. The Loanliner - Application (Form # AST 013 6826LL)
   states the amount of loan requested. It does not
   contain a promise to pay. It requires the signature
   of the borrower. This document is retained by the
   credit union for future use in securing future
   "Loanliner Open-End Plan" loans.
2. The Loanliner - Credit Agreement (Form # BFL218
   6849LL) contains the promise to repay all advances
   made to the borrower. It requires the signature of
   the borrower.

This form is submitted originally and each time an open-end loan is requested:

3. The Loanliner - Advance Request Voucher and Security
   Agreement (Form # VFL065 6826LL) states the amount of
   loan requested and the amount of the loan approved
   (sum certain) as well as the current payment due. The
   signature of the borrower is required either on this
   security agreement or on the back of the advance
   proceeds check. This form states that endorsement
   (signature of the borrower) on the back of the check
   constitutes the borrower's agreement to be bound by
   the promises made in the security agreement.

The following two forms are originally part of the first Loanliner Open-End Plan loan. Thereafter, they are not submitted with future loan requests:

4. The Loanliner - Credit Agreement and Insurance
   Certificate - Member's Copy (Same Form # BFL218
   6849LL) is a duplicate of #2 above and has attached
   the Loanliner Certificate of Insurance. The
   Certificate of Insurance incorporates by reference the
   Loanliner Credit Agreement Application and requires
   the signature of the borrower. This form is retained
   by the borrower for their records and is not submitted
   to the credit union.
5. The Loanliner - Addendum (Form # MST103 6826LL)
   incorporates by reference the Loanliner Credit
   Agreement and the Loanliner Advance Request Voucher.

Page 3

  It contains information for the borrower. It does not
  require the signature of the borrower or give the
  amount of the advance. It is retained by the borrower
  for their records and is not submitted to the credit
  union.

Initially, when the Loanliner Open-End Plan loan is first applied for, forms #1, #2 #3 and #5 listed above are considered as part of the contract to borrow from the credit union. After the first Loanliner Open-End Plan loan is obtained by the borrower, a new loan may be secured from the credit union by submitting only #3 above, the Loanliner - Advance Request and Security Agreement. The remaining documents, #1, #2, #4 and #5 are not re-submitted. Forms #1 and #2 are kept on file for future use in the Loanliner Plan for that credit union member. No advance proceeds check was received. Thus, the department could not ascertain whether it contains a promise to pay money.

Section 201.08, F.S., imposes tax on a written obligation to pay money, signed by the borrower.

Under s. 201.08 (6), F.S., as created by section 2, Chapter 97-123, L.O.F., effective July 1, 1997:

Taxability of a document... shall be determined solely from the face of the document and any separate document expressly incorporated into the document. Taxability of a document pursuant to this section shall not be determined by reference to any separate document referenced or forming part of the same contract or obligation unless the separate document is expressly incorporated into the document....

           Department's Position

The two unrecorded documents submitted as part of the Loanliner Open-End Loan Plan (Forms #2 and #3 above) together contain a promise to pay a sum certain, signed by the borrower. However, neither document expressly incorporates the other form. Therefore, effective July 1, 1997, the documents are not subject to documentary stamp tax under s. 201.08 (6), F.S., since neither contains all three elements necessary for the imposition

Page 4

of tax.

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 treatment different from that 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,

M.E. Clemens, C.P.A.
Senior Tax Specialist
Technical Assistance and Dispute Resolution Office of General Counsel

MEC/mh