Did assigning and renewing an existing Florida mortgage loan, then transferring the property without assuming the payment obligation, trigger additional documentary stamp or nonrecurring intangible tax?

Subject

Assignment and Renewal of Loan Documents

Plain-English summary

The Department concluded that the structured assignment, renewal, and property transfer did not trigger additional Florida documentary stamp tax or nonrecurring intangible tax. The original mortgage debt had already borne the required taxes, and the refinancing did not increase the unpaid principal obligation.

First, the original lender assigned the mortgage, note, and related loan documents to a second lender. The seller, still the original obligor, then renewed, restated, and modified the loan documents with that lender. Because the renewal covered only the unpaid balance and did not enlarge the original contractual obligation, the assignment and renewal were not additionally taxed.

Next, the seller transferred the Florida property to a newly formed out-of-state purchaser subject to the loan. The purchaser agreed to comply with mortgage covenants but expressly did not assume the renewal note or make another promise to pay the loan. The Department therefore found no taxable mortgage assumption or renewal by the purchaser.

The purchaser's guaranty, loan-transfer agreement, and supplemental agreement also were not promissory notes, nonnegotiable notes, written payment obligations, or other noncontingent obligations. They therefore did not create documentary stamp or nonrecurring intangible tax liability.

What this means for you

Under the law applied in this 1997 ruling, an assignment to a new lender and a renewal by the original obligor could avoid additional tax when prior tax had been paid and the renewed principal did not exceed the existing unpaid balance.

The buyer's documents also mattered. Agreeing to mortgage covenants while expressly excluding a promise to pay produced a different result from assuming the note or mortgage. The cited rule said an actual assumption by a new obligor would be a taxable renewal for documentary stamp purposes.

Common questions

Q: Did changing lenders create additional tax? No. The original lender assigned the already-taxed loan to the second lender, and the original obligor renewed only the unpaid balance without increasing it.

Q: Did buying property subject to the mortgage equal assuming the debt? Not on these documents. Neither the deed nor another submitted document showed that the purchaser promised to pay the note or loan.

Q: Would an actual mortgage assumption be treated differently? Yes. The ruling explained that an assumption by someone other than the original obligor is a taxable renewal under section 201.08 and the cited rule.

Q: Why was no additional nonrecurring intangible tax due? The tax had already been paid on the original loan, and the remaining principal at assignment did not exceed the original obligation's unpaid balance.

Citations and references

• Fla. Stat. § 201.08(1) — documentary stamp tax on written obligations to pay money and renewals
• Fla. Stat. § 201.09 — limited exemption for renewals by original obligors and mortgagors
• Fla. Admin. Code R. 12B-4.052(12) — agreements that renew or modify indebtedness
• Fla. Admin. Code R. 12B-4.053(19) — assumptions as taxable renewals
• Fla. Stat. § 199.133 — nonrecurring intangible tax on obligations secured by Florida real property
• Fla. Stat. § 199.145(2)-(4) — prior-tax rules for assignments, assumptions, and renewals
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97M-001

Original ruling text

SUMMARY

Assignment of loan documents from one lender to the other
is not subject to documentary stamp tax under s. 201.08,

F.S. and intangible tax under s. 199.133, F.S.

If a mortgage is not assumed either in the deed or ina
separate document, recorded or not, no tax under s. 201.08,

F.S., is due.

Since the execution of the guaranty, loan transfer
agreement and supplemental agreement to not constitute a
promise to pay, they are not subject to documentary stamp
tax under 201.08, F.S., or the nonrecurring intangible tax

under s. 199.133, F.S.

May 08, 1997

Re: Technical Assistance Advisement No. 97(M)-001
Documentary Stamp Tax and Intangible Tax;
Assignment and Renewal of Loan Documents/Transfer
of Real Property Subject to a Mortgage
ss. 201.08, 199.133 and 199.145, F.S.

XXX (Purchaser)
XXX (Seller)
XXX (Lender 1)
XXX (Lender 2)

Dear:

This is response to your letter dated February 10, 1997,
requesting a Technical Assistance Advisement regarding the
applicability of Documentary Stamp Tax and Intangible Tax under
the facts and documents set forth herein. This request is made
pursuant to Chapter 12-11, F.A.C., and is issued to you under
the authority of s. 213.22, F.S.

Statement of Facts

The following is the description of the transactions

outlined in your letter:

The Purchaser is a newly formed out of state corporation
created for purposes of acquiring, owning and operating real
property located in Florida. Purchaser agreed to purchase the

real property from the Seller.

The property is subject to a mortgage previously held by
Lender 1 which secured indebtedness in the outstanding amount of
approximately $XX, upon which the required Florida documentary

stamp taxes and non-recurring intangible taxes have been paid.

Seller, Purchaser, Lender 1 and Lender 2 structured the

purchase, sale and financing of the property as follows:

1. First, Lender 1's loan was reduced by a cash payment
   from Seller to $XX. Immediately following such loan
   reduction, Lender 1 assigned, without recourse,
   representation or warranty, its mortgage encumbering
   the property and the related promissory note and
   certain other related loan documents evidencing Lender
   1's loan to Lender 2 in consideration for the payment
   by Lender 2 to Lender 1 of the outstanding principal

balance of Lender 1.

Following the acquisition of Lender 1 loan documents
by Lender 2, Lender 2 and Seller executed renewals,
restatements and modifications of Lender 1's loan
documents, together with assignments of leases, rents,
permits, rights and contracts pertaining to the

property. Purchaser executed a guaranty of payment and
performance of certain of Seller's liabilities under

the Lender 1 documents.

Lender 2 loan documents executed by Lender 2 and
Seller provide that the mortgage, as restated,

secured, in addition to the renewal note, any other
obligations and liabilities of Seller, as mortgagee,

and Seller's successors and assigns.

2. Immediately following the assignment of Lender 1's

loan documents from Lender 1 to Lender 2 and the
renewal, modification and restatement thereof by and
between Seller and Lender 2, Seller transferred the
property to Purchaser subject to Lender 2's loan and
for a cash payment from Purchaser to Seller of
approximately $XX at the time of closing. Lender 2
immediately thereafter released Seller from any
further liability under Lender 2's loan documents.
Following the transfer of the property to Purchaser
subject to Lender 2's loan documents, Seller,
Purchaser and Lender 2 executed an agreement regarding
transfer of the property subject to a loan. Lender 2
consented to the transfer of the property to Purchaser
and Purchaser assumed and agreed to comply with all
covenants and obligations contained in the restated
mortgage and other Lender 2 documents, exclusive of
the renewal note and exclusive of any other promise to

pay the renewal note or the loan evidenced thereby.

Pursuant to Lender 2's loan documents executed by
Lender 2 and Seller prior to the transfer of the

property to Purchaser, the obligations of successors
and assigns of Seller to Lender 2 and its successors
and assigns are secured by the restated mortgage.
However, Purchaser has not executed a modification of
the restated mortgage to evidence or otherwise
effectuate the agreement that the restated mortgage

secures its obligations, if any, to Lender 2.

Requested Ruling

Whether, under the facts and circumstances described
above, any Florida documentary stamp tax on promissory
or non-negotiable notes or written obligations to pay
money pursuant to s. 201.08, F.S., is due?

Whether, under the facts and circumstances described
above, any non-recurring intangible personal property

tax pursuant to s. 199.133, F.S., is due?

Provisions of the Law

Relevant to your petition, s. 201.08 (1), F.S., provides
that for a written obligation to pay money that is made,
executed, delivered, sold, transferred, or assigned in the State
and for each renewal of the same, the tax shall be 35 cents on
each $100 or fraction thereof of the indebtedness or obligation

evidenced thereby.

Section 201.09, F.S., exempts certain renewal notes and
mortgages under limited circumstances. The conditions required

for exemption are as follows:

1. The renewal may only be executed by the original
   obligors and original mortgagors,

2. The only amount which may be renewed tax free is the
   unpaid principal balance of the note, without
   increase, and

3. Proper documentary stamp tax was paid on the original

note or recordation of the mortgage.

As stated in Rule 12B-4.052(12), F.A.C., a written
agreement which alters or modifies the contract or obligation of
an original promissory note, mortgage, trust deed, security
agreement or other evidence of indebtedness, such as, extending,
continuing, replacing or assuming the terms of the original
contract or obligation, is a renewal of the original note,
mortgage, trust deed, security agreement or other evidence of

indebtedness.

According to Rule 12B-4.053(19), F.A.C., a person assuming
a mortgage effectively renews or modifies the original note or
mortgage, and would not be exempt from tax under s. 201.09,
F.S., because it includes a person other than the original
obligor. Therefore, an assumption of any note and mortgage,
whether incorporated in a conveyance which is accepted by the
purchaser, or assumed in a separate document, is a taxable
renewal under s. 201.08(1), F.S.

Section 199.133, F.S., imposes a one time non-recurring tax
of 2 mills on each dollar or the just valuation of all notes,
bonds, and other obligations for payment of money which are

secured by a mortgage, deed of trust, or other lien upon real

property situated in this state.

Section 199.145(2), F.S., exempts from additional non-
recurring tax any assignment by an obligee of a note, bond, or
other obligation for the payment of money upon which the non-
recurring tax has previously been paid. Section 199.145(3),
F.S., also provides that no additional non-recurring tax is due
upon the assumption of a note, bond, or other obligation for the
payment of money if the non-recurring tax has previously been
paid and the amount of the indebtedness evidenced by the note
remains unchanged, whether or not the original obligor is
released from liability. Section 199.145(4), F.S., provides that
a note that is renewed with the original obligee or its assignee
is not subject to the non-recurring tax if the principal balance
of the obligation is less than or equal to the unpaid principal
balance of the original obligation plus accrued but unpaid

interest as of the date of the renewal.

Department's Position

Assignment of Lender 1's loan documents to Lender 2,
followed by a renewal of the existing loan documents is not
subject to documentary stamp under s. 201.08, F.S., and
intangible tax under s. 199.133, F.S. The loan documents were
executed by the Seller, the original obligor under Lender 1's
loan documents. Lender 2's loan documents renewed and extended
only the unpaid balance of Lender 1's loan documents without
enlargement in any way of the original contractual obligation.

Proper taxes were paid on the original loan documents.

Upon the sale to the Purchaser, neither the deed nor any
other document submitted showed that the existing mortgage was
assumed. Purchaser only assumes and agrees to comply with all
covenants and obligations contained in the mortgage, assignment
and the other seller loan documents, exclusive of any other
promise to pay the note or the loan. Pursuant to Rules 12B-
4.052(12) and 12B-4.053(19), F.A.C., since the mortgage is not
assumed either in the deed or in a separate document, recorded

or not, no tax under s. 201.08, F.S., is due.

Also, no additional non-recurring tax is due, because the

tax was previously paid on the Lender 1 loan and the remaining
principal balance at the time of assignment of the Lender 1's
loan to Lender 2 did not exceed the unpaid principal balance of

the original obligation.

The execution of the guaranty, loan transfer agreement and
supplemental agreement do not constitute promissory notes, non-
negotiable notes, or written obligations to pay money or any
other non-contingent obligation. Therefore, they are not
subject to documentary stamp tax under s. 201.08, F.S., or the

non-recurring intangible tax under s. 199.133, 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,

Baldan E. Sulker
Senior Tax Specialist
Technical Assistance and Dispute Resolution

Office of General Counsel

BES/mh