Did a timeshare receivables loan qualify for Florida's wholesale warehouse mortgage exemption, avoiding added tax on collateral assignments?

Plain-English summary

The timeshare receivables agreement qualified as a wholesale warehouse mortgage agreement. As a result, recording collateral assignments of consumer notes and mortgages did not create additional documentary stamp or nonrecurring intangible tax, provided all required tax had already been paid when each consumer mortgage was recorded.

The receivables promissory note and lender advances were also outside those two Florida taxes. They were executed and delivered outside Florida, and the receivables loan was not directly secured by a mortgage on Florida real property.

The Department warned that annual intangible tax liability could still arise on the receivables loan. The ruling addressed the documentary stamp and nonrecurring taxes, not every possible tax on the financing.

What this means for you

The warehouse exemption prevents a second tax layer when already-taxed consumer mortgage obligations are pledged to finance the originator. It does not excuse tax due on the original Florida consumer mortgages.

Direct Florida real-property security for the warehouse lender or Florida execution and delivery of the principal obligation would change the facts supporting the result.

Common questions

Q: Were the consumer mortgages taxed? Yes. Required stamp and nonrecurring intangible taxes were paid on their full principal when recorded.

Q: Were the later collateral assignments taxed again? No, because the receivables agreement qualified for the warehouse exemption.

Q: Was the receivables note itself taxed? No. It was executed and delivered outside Florida and lacked direct Florida real-property security.

Q: Did the ruling eliminate annual intangible tax? No. It expressly said annual intangible-tax liability might arise.

Citations and references

• Fla. Stat. § 201.21 — wholesale warehouse mortgage exemption
• Fla. Stat. § 201.08 — documentary stamp tax
• Fla. Stat. § 199.133 — nonrecurring intangible tax tied to Florida real-property security
• Fla. Stat. § 199.145(2) — no additional nonrecurring tax after assignment of a taxed obligation
• Fla. Admin. Code r. 12B-4.053(28) — collateral assignments generally taxable absent an exemption
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97M-002

Original ruling text

SUMMARY

The Department held that a Receivables Agreement does qualify as a wholesale warehouse agreement. Therefore, based on the exemption, no Florida documentary stamp tax or nonrecurring intangible personal property tax shall be due on the recordation of the collateral assignments of the consumer Notes and Mortgages, provided that all required stamp taxes and intangible taxes are paid upon recordation of the consumer Mortgages. As to the Receivables Note and the advances made under the Receivables Loan, neither the documentary stamp tax nor the nonrecurring intangible tax is due, since the note and advances are made outside of Florida and not directly secured by Florida real property. Note that annual intangible tax liability may arise on the Receivable Loan.

Jul 10, 1997

Re: Technical Assistance Advisement No. 97(M)-002 Documentary Stamp Tax and Intangible Tax: Wholesale Warehouse Mortgage Agreement XXX (Hereafter "Borrower") XXX (Hereafter "Lender") XXX (the "Resort")

Dear :

You have petitioned for a Technical Assistance Advisement pursuant to s. 213.22, F.S., and Rule 12-11.003, F.A.C.

Issues

Whether the Receivables Agreement constitutes a Wholesale Warehouse Mortgage Agreement under s. 201.08, F.S., and whether documentary stamp tax or nonrecurring intangible personal property tax is due on the Receivables Note or advances or the recordation of the collateral assignments of the consumer Notes

and Mortgages.

Background and Statement of Facts

The Borrower is the developer of a timeshare condominium project in Florida known as the Resort. The Borrower sells timeshare intervals in the Resort to consumer purchasers and accepts purchase-money notes ("Notes") and purchase-money mortgages ("Mortgages") from the consumer purchasers in payment of up to ninety percent (90%) of the respective purchase price for the timeshare intervals. Each Mortgage in favor of the Borrower is recorded with the Clerk of Circuit Court in the County where the Resort is located, and all required documentary stamp taxes under s. 201.08, F.S., and non-recurring intangible personal property taxes under s. 199.133, F.S., are paid on the recorded Mortgage based on the full principal amount of the respective Note made by the consumer purchaser payable to the Borrower.

To finance the Notes and Mortgages received by the Borrower from these consumer purchasers on which all required Florida taxes have been paid, the Borrower and the Lender have entered into an Interval Receivables Loan and Security Agreement (the "Receivables Agreement"). The Receivables Agreement provides for advances from the Lender to the Borrower from time to time (the "Receivables Loan"), evidenced by a Receivables Promissory Note in the maximum principal amount of $XX (the "Receivables Note"). The Receivables Agreement and the Receivables Note and the other documents executed by the Borrower in connection with the Receivables Loan were executed and delivered to the Lender outside of the State of Florida. The Receivables Loan is not secured by any mortgage of Florida real property made directly to the Lender, and the Lender does not have any offices in the State of Florida.

The Receivables Loan is secured by the pledge and collateral assignment of the Notes and Mortgages from the Borrower to the Lender. Upon completion of each interval sale in which the Borrower receives a Note and Mortgage, the Borrower records in the county public records a collateral assignment of the Note and Mortgage to the Lender, and the Borrower deposits

the original Note and Mortgage with a custodian that holds all of the pledged Notes and Mortgages for the benefit of the Lender. The Borrower continues to collect all payments made by the consumers under the Notes and Mortgages pursuant to a Servicing Agreement between the Borrower and the Lender. Subject to other lending limitations under the Receivables Agreement, the Borrower may borrow from the Lender advances of between 75% and 85% of the principal amount outstanding under each consumer Note, depending upon the payment history of the respective consumers.

Discussion and Law

Rule 12B-4.053(28) of the F.A.C., provides that where the assignment of a mortgage is given as collateral security for a new loan, the assignment is subject to the documentary stamp tax under s. 201.08, F.S., when recorded in Florida. However, s. 201.21, F.S., provides that there shall be exempt from all excise taxes imposed by s. 201.08, F.S., all promissory notes, nonnegotiable notes, and other written obligations to pay money (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, provided all taxes imposed by this chapter upon or in respect to such collateral obligation or obligations have been paid.

Section 199.133, F.S., provides that a one-time nonrecurring intangible tax shall apply to a note, bond, or other obligation for payment of money only to the extent it is secured by mortgage, deed of trust, or other lien upon real property located in this state. Section 199.145(2), F.S., provides, however, that no additional nonrecurring tax shall be due upon the assignment of a note and mortgage on which the nonrecurring tax has been paid. In addition, because a note and a mortgage are personal property under Florida law rather than real property, the collateral assignment of a note and mortgage does not constitute a lien on real property. Accordingly, the Receivables Note and the Receivables Loan in this transaction are not subject to the Florida nonrecurring intangible tax

because they are not secured by any lien on Florida real property.

Department's Position

Therefore, the Receivables Agreement does qualify as a wholesale warehouse agreement. Based on the exemption, no Florida documentary stamp tax or nonrecurring intangible personal property tax shall be due on the recordation of the collateral assignments of the consumer Notes and Mortgages, provided that all required stamp taxes and intangible taxes are paid upon recordation of the consumer Mortgages. As to the Receivables Note and the advances made under the Receivables Loan, neither the documentary stamp tax nor the nonrecurring intangible tax is due, since the note and advances are made outside of Florida and not directly secured by Florida real property. Note that annual intangible tax liability may arise on the Receivables Loan.

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
Technical Assistance and Dispute
Resolution
Office of General Counsel

JESS/mh