Could a borrower credit Florida stamp and nonrecurring intangible tax paid on existing mortgages when recording a new mortgage securing the same out-of-state debt?

Plain-English summary

The company could credit documentary stamp and nonrecurring intangible tax previously paid on existing Florida mortgages against the tax otherwise due when it recorded a new mortgage securing the same out-of-state credit obligations with additional Florida property. Proper stamp tax remained due only after accounting for the earlier payments and the added Florida collateral.

For nonrecurring intangible tax, the statute capped the taxable portion at the value of the Florida real property securing the debt. The company had overpaid that tax on earlier mortgages, and the allowed credit exceeded the amount otherwise due on the new mortgage, so no additional nonrecurring tax was payable at recordation.

The Department did not decide whether the remaining claimed overpayment should be refunded. It required a separate, timely refund application with supporting documents. The new UCC financing statements required no additional tax because the related mortgage tax had been paid and nonrecurring intangible tax did not apply merely to filing those statements.

What this means for you

A new Florida mortgage securing an existing out-of-state loan must be analyzed with the full history of Florida collateral and tax payments. Prior payments can prevent duplicate taxation, but the borrower must substantiate the values, ratios, recovery limits, and amounts already paid.

A credit determination is not automatically a refund determination. Even when an overpayment can offset current liability, recovering any excess requires the Department's separate refund process.

Common questions

Q: Could prior documentary stamp tax be deducted when the new mortgage was recorded? Yes. The Department approved the credit under the stated calculations.

Q: Was additional nonrecurring intangible tax due on the new mortgage? No. Earlier overpayment credited against the new liability exceeded the amount otherwise due.

Q: Did the ruling grant a cash refund of the remaining overpayment? No. It expressly left the refund issue open for a separate application and review.

Q: Did filing new UCC financing statements create more tax? No additional documentary stamp or nonrecurring intangible tax was due on those filings under the stated facts.

Q: What limited the nonrecurring intangible-tax base? It could not exceed the value of the Florida real property serving as security.

Citations and references

• Fla. Stat. § 201.08 — documentary stamp tax on obligations and Florida-recorded mortgages
• Fla. Stat. § 201.09 — mortgage renewal or extension provision applied to an earlier amendment
• Fla. Stat. § 199.133(2) — allocation of nonrecurring tax and cap at Florida real-property value
• Fla. Admin. Code r. 12B-4.053(32)(c) — ratio method for a Florida mortgage securing an out-of-state loan
• Fla. Admin. Code r. 12B-4.052(12) — consolidation, spreading, and amendment requirements
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

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

Original ruling text

SUMMARY

The Department held where appropriate amounts of
documentary stamp tax and non-recurring intangible tax were
paid at the time of the recordation of a mortgage to secure
an out of state note, taxpayer could deduct the amount of
previously paid taxes from the amount due on the
recordation of a new mortgage securing additional property
that secured the same out of state note. Taxes would be
due only on the increased value of the Florida real
property that secures the new mortgage.

Aug 08, 1997

Re: Technical Assistance Advisement No. 97(M)-003
Documentary Stamp Tax and Intangible Tax: New Mortgage
Recorded in Florida
XXX (Hereafter "Company")
XXX ("Affiliate")
XXX (the "Agent")

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 Corrective Renewal Mortgage and the Future
Renewal Mortgage are taxable for documentary stamp tax under s.
201.08, F.S.

Questions Presented

Were the appropriate amounts of Florida documentary
stamp taxes, calculated pursuant to Rule 12B4.053(32)(c), F.A.C., paid at the times of recording
the Mortgages and the New Mortgage?

1. Were the appropriate amounts of nonrecurring
intangible personal property taxes paid at the times
of recording the Mortgages and calculated as due on
the New Mortgage?

In connection with the calculation and payment of
documentary stamp taxes and nonrecurring intangible
personal property taxes on the New Mortgage, was the
Company entitled to take credits for documentary stamp
taxes and nonrecurring intangible personal property
taxes previously paid on the Mortgages, and were the
appropriate credits taken?

Is the Company entitled to a refund for overpayment of
non-recurring intangible personal property taxes in
the amount of $XX, which represents the difference
between the amount of intangible taxes owed on the
Mortgages (based on the value of the Florida real
property encumbered by those Mortgages), plus the
amount of intangible taxes owed on New Mortgage, and
the amount of intangible taxes actually paid at the
time of recordation of the Mortgages?

5. Was the Company obligated to pay any further
   documentary stamp taxes or nonrecurring intangible
   personal property taxes because of the filing and
   recording of the New Financing Statements?

Description of the Transaction as Described by the Company

The Company entered into a Credit Agreement dated XX (the
"Credit Agreement") with the Agent for a group of lenders
(referred to as the Lenders in the Credit Agreement)
(collectively herein, the "Lenders"), pursuant to which the
Lenders agreed to extend credit in the form of loans and letters
of credit (collectively, the "Original Loans") to the Company in
an aggregate principal amount not to exceed $XX. The Original
Loans were evidenced by certain term notes, certain revolving
notes, and a certain swing line note (collectively, the
"Original Notes"). The Credit Agreement, the Original Notes and

other related documents were executed and delivered outside the
State of Florida.

The Original Notes were secured by certain mortgage liens
on real property located in AAA and BBB Counties, Florida, and
by mortgage liens on real property located in other states. The
Original Notes were also secured by certain security agreements
(the "Security Agreements"), each dated as of XX, 199X, by and
between the Agent and the Company and the Affiliate. The
Affiliate was subsequently merged with and into the Company and
its obligations under the Security Agreement were assumed by the
Company, granting security interests in personal property
located in Florida and outside the State of Florida. The
Security Agreements were executed and delivered outside the
State of Florida and were not recorded in Florida.

UCC-1 Financing Statements were executed by the Company and
the Affiliate and filed or recorded with the Florida Secretary
of State and in the Public Records of AAA and BBB Counties,
Florida (collectively, the "Financing Statements").

The mortgage liens encumbering the Florida real property
were evidenced by mortgage agreements which were executed by the
Company and the Affiliate. The Affiliate was subsequently
merged with and into the Company and its obligations under the
mortgage agreements assumed by the Company and which were
thereafter recorded in AAA and BBB Counties, Florida.

Florida documentary stamp taxes and nonrecurring intangible
personal property taxes due in Florida were apportioned and paid
on the mortgages recorded in AAA and BBB Counties. The
mortgages are referred to in the Credit Agreement as fee
mortgages and leasehold mortgages. Legends were placed on the
first page of each mortgage recorded in Florida noting that
payment of the applicable documentary stamp taxes and
nonrecurring intangible personal property taxes was made as set
out in Sections of each mortgage. Tax payment information was
stamped on the fee and leasehold mortgages recorded in Florida.
The AAA County Fee and Leasehold Mortgages and the BBB County
Fee Mortgage are sometimes collectively referred to as the
Mortgages or the Florida Mortgages.

No Florida documentary stamp taxes or nonrecurring
intangible personal property taxes were paid in connection with
the filing and recording of the Financing Statements.

Florida documentary stamp taxes and nonrecurring intangible
personal property taxes were computed using the respective ratio
approaches for out-of-state loans that are secured by a mortgage
recorded in Florida. Under the ratio method, documentary stamp
tax in the amount of $XX was paid on the AAA County Fee
Mortgage, documentary stamp tax in the amount of $XX was paid on
the AAA County Leasehold Mortgage, and documentary stamp tax in
the amount of $XX was paid on the BBB County Fee Mortgage.

Intangible personal property taxes in the amount of $XX
were paid on the AAA County Fee Mortgage. Intangible tax in the
amount of $XX was paid on the BBB County Fee Mortgage.

Pursuant to the terms of the Mortgages executed by the
Affiliate and recorded in AAA County, Florida (the "AAA County
Mortgages") and the Mortgage executed by the Company and
recorded in BBB County (the "BBB County Mortgage"), the AAA
County Mortgages each secured an aggregate principal amount of
indebtedness not to exceed $XX and the BBB County Mortgage
Secured an aggregate principal amount of indebtedness not to
exceed $XX.

In August, 1995, the Company amended and restated the
Credit Agreement pursuant to that certain Amended and Restated
Credit Agreement dated as of XX, 1995 (the "First Restated
Credit Agreement"), under the terms of which the Lenders made
additional loans (the "First Restatement Loans") to the Company
in an aggregate principal amount of $XX evidenced by certain
term notes (the "First Restatement Notes"). The First Restated
Credit Agreement and the First Restatement Notes were executed
and delivered outside the State of Florida, and were not
recorded in Florida. The principal amount of the Original Loans
and the Original Notes was not affected by this amendment and
restatement.

In connection with the execution of the First Restated

Credit Agreement and the First Restatement Notes, the Company
and the Agent executed, delivered and recorded a First Amendment
to each of the Mortgages providing that the Mortgages continued
to secure the Original Loans and also secured the First
Restatement Loans under the First Restated Credit Agreement, and
further providing that the aggregate principal amount of
indebtedness outstanding at any one time and secured by (i) the
AAA County Mortgages would not exceed $XX and by (ii) the BBB
County Mortgage would not exceed $YY. Because the aggregate
principal amount of indebtedness secured by the Mortgages, as
modified by the First Amendments, did not increase, no Florida
documentary stamp taxes and no Florida nonrecurring intangible
personal property taxes were paid in connection with the
execution, delivery and recordation of the First Amendments to
the Mortgages.

In XXX, the Company amended and restated the First Restated
Credit Agreement pursuant to that certain Amended and Restated
Credit Agreement dated as of XX, 1996 (the "Second Restated
Credit Agreement"), under the terms of which the Lenders made
additional loans (the "Second Restatement Loans") to the Company
in an aggregate principal amount not to exceed $ZZ evidenced by
certain term and revolving notes (collectively, the "Second
Restatement Notes"). The principal amount of the Original
Loans, Original Notes, First Restatement Loans and First
Restatement Notes was not affected by this amendment and
restatement. The Second Restated Credit Agreement and the
Second Restatement Notes were executed and delivered outside the
State of Florida, and were not recorded in Florida.

In connection with the execution of the Second Restated
Credit Agreement and the Second Restatement Notes, the Company
and the Agent executed, delivered and recorded a Second
Amendment to each of the Mortgages providing that the Mortgages
continued to secure the Original Loans and First Restatement
Loans and also secured the Second Restatement Loans under the
Second Restated Credit Agreement, and further providing that the
aggregate principal amount of indebtedness outstanding at any
one time and secured by (i) the AAA County Mortgages would not
exceed $XX and by (ii) the BBB County Mortgage would not exceed
$ZZ. Because the aggregate principal amount of indebtedness

secured by the Mortgages, as modified by the First Amendments
and by the Second Amendments, did not increase, no Florida
documentary stamp taxes and no Florida nonrecurring intangible
personal property taxes were paid in connection with the
execution, delivery and recordation of the Second Amendments to
the Mortgages.

A title report on the AAA County property obtained in XXX,
revealed that the Company had released its leasehold interest in
the leased property and had accepted a deed to a portion of the
leased property. The Second Amendment recorded in AAA County
consolidated, spread and amended the AAA County Fee Mortgage.
The lien of the AAA County Leasehold Mortgage was released from
the original leased property and the AAA County Fee Mortgage
lien was spread to the new fee parcel acquired by the Company in
1995. Since the Second Amendment recorded with respect to the
AAA County Mortgages complied with all of the requirements under
s. 201.09, F.S., and Rule 12B-4.052(12), F.A.C., additional
documentary stamp taxes were not due. However, since intangible
taxes had not been paid on the AAA County Leasehold Mortgage,
pursuant to the provisions of s. 199.133, F.S., additional
intangible taxes were paid based on the value of the new fee
parcel onto which the lien of the AAA County Fee Mortgage was
spread. Documentation of payment of intangible taxes was set
out in Section XX of the Second Amendment to the AAA County Fee
Mortgage.

The Second Restated Credit Agreement was further amended in
XXX, pursuant to that certain Second Amendment of Credit
Agreement dated as of 1996 (the "Second Amendment"). Pursuant
to the terms of the Second Amendment, the Company agreed to
grant the Agent and the Lenders a mortgage lien on the real
property of the Company located at its mill in BBB County and a
personal property lien on the fixtures and personal property of
the Company located at the Mill.

Accordingly, the Company executed, delivered and recorded a
new mortgage on the Mill (the "New Mortgage") and executed and
filed or recorded, as appropriate, amendments to the Financing
Statements and a new Form UCC-1 Financing Statement in the
Official Records of BBB County, Florida (collectively, the "New

Financing Statements"). The New Mortgage secures all of the
Company's liabilities under the Second Restated Credit
Agreement, now in the aggregate principal amount not to exceed
$WWW.

In conjunction with the execution and delivery of the
Second Amendment, the AAA County Fee Mortgage and the BBB County
Mortgage were not amended. Accordingly, the aggregate principal
amount of indebtedness outstanding at any one time and secured
by (i) the AAA County Fee Mortgage continues to be an amount not
to exceed $XX and by (ii) the BBB County Mortgage continues to
be an amount not to exceed $ZZ.

The New Mortgage secures the Company's current obligations
to the Lenders under the Second Restated Credit Agreement and
evidences payment of Florida documentary stamp taxes and
nonrecurring intangible personal property taxes.

Florida documentary stamp taxes in the amount of $XX were
paid on the recordation of the New Mortgage. Documentary stamp
taxes due on the New Mortgage were calculated comparing the
value of all of the Company's mortgaged property in Florida
($XX) to the value of all of the Company's mortgaged property
wherever located ($XX), times the portion of the Company's
liabilities already secured by the Mortgages ($ZZ), to arrive at
a Florida tax base of $XX.

With respect to the portion of the company's liabilities
additionally secured by the New Mortgage ($XX), taxes were
calculated comparing the value of the new mortgaged property
($XX) to the value of all of the Company's mortgaged property
wherever located ($XX), times the additional portion of the
liabilities secured by the New Mortgage, for a Florida tax base
of $XX. To arrive at the amount of documentary stamp taxes to
be paid on the New Mortgage, the Company took a credit for
documentary stamp taxes previously paid on the Mortgages ($XX).

With respect to payment of nonrecurring intangible personal
property taxes on the New Mortgage, calculations were made
pursuant to s. 199.133, F.S., based on the value of the
mortgaged property under the New Mortgage ($XX). The Florida

tax base was calculated comparing the value of all of the
Company's mortgaged real property in Florida ($XX) to the value
of all of the Company's mortgaged property wherever located
($XX), times the portion of the liabilities already secured by
the Mortgages ($XX), to arrive at a Florida tax base of $XX.

Then, with respect to the portion of the Company's
liabilities additionally secured by the New Mortgage ($XX), the
Florida tax base of $XX was obtained by comparing the value of
the mortgaged real property under the New Mortgage ($XX) to the
value of all of the Company's mortgaged property wherever
located ($XX). Since the Florida tax base exceeded the value of
the mortgaged real property under the New Mortgage, intangible
taxes were paid based on the value of the mortgaged Florida real
property ($XX).

No additional nonrecurring Florida intangible personal
property taxes were actually paid in connection with the
recording of the New Mortgage. When the Mortgages were
recorded, intangible taxes in the aggregate amount of $XX had
been paid based on the same apportionment approach taken for
documentary stamp taxes on the Mortgages. Intangible taxes in
the amount of $XX were paid on the Second Amendment to the AAA
County Mortgages recorded in AAA County, Florida. The Company
took a credit for nonrecurring Florida intangible personal
property taxes previously paid on the Mortgages to offset the
intangible tax obligations otherwise due on the New Mortgage
pursuant to s. 199.133, F.S.,in the amount of $XX. Therefore,
no additional intangible taxes were paid on the recordation of
the New Mortgage. Furthermore, since the aggregate value of the
real property encumbered by the Mortgages was only $XX ($XX for
the AAA County fee property and $XX for the BBB County fee
property), which was less than the calculated Florida intangible
tax base on the AAA County Fee Mortgage ($XX) and less than the
calculated Florida intangible tax base on the BBB County Fee
Mortgage ($XX), under the statutory provisions of s. 199.133,
F.S., only $XX in intangible taxes should have been paid on the
Mortgages. This represents an overpayment in the amount of $XX.

No documentary stamp taxes or nonrecurring intangible
personal property taxes were paid on the New Financing

Statements.

Discussion of Applicable Law as Described by the Company

Section 201.08, F.S., imposes a tax on promissory notes and
written obligations to pay money made or executed in Florida and
on mortgages filed or recorded in Florida. The tax is $0.35 for
each $100.00 or portion thereof of the indebtedness or
obligation evidenced thereby. If the note or written obligation
to pay money is executed and delivered outside Florida, the loan
is considered an out-of-state loan for Florida documentary stamp
tax purposes and no tax is due. However, if a mortgage is
recorded in Florida as security for an out-of-state loan,
Florida documentary stamp tax is due based on a ratio contained
in the rules promulgated under s. 201.08, F S. Rule
12B-4.053(32), F.A.C., provides the method for determining the
taxable base for Florida mortgages securing out-of-state loans.

The taxable base for a mortgage recorded in Florida that
encumbers only the Florida portion of collateral made up of both
Florida and non-Florida collateral is calculated according to
Rule 12B-4.053(32)(c), F.A.C. This rule provides as follows:

Where a mortgage describing and pledging only the Florida
property is recorded in Florida which only partially
secures an out-of-state loan and the loan is also secured
by mortgages on out-of-state property, only a prorata
portion of the indebtedness secured by the Florida mortgage
is taxable. The tax will be based upon the percentage of
indebtedness which the value of the mortgaged property
located in Florida bears to the total value of all
mortgaged property, unless the value of the Florida
property exceeds this amount. Then the tax will be based
upon the value of the Florida property....

Thus, if the loan is an out-of-state loan but the mortgage
securing it encumbers only the Florida property and not all the
property pledged, the documentary stamp tax due on the Florida
mortgage is the greater of (i) the tax determined to be due
under the ratio method described in the Rule; or (ii) an amount
equal to the tax rate multiplied by the value of the Florida

property encumbered by the Florida mortgage.

If the Florida mortgage limits the lender's recovery to
less than the amount of the indebtedness secured, under Rule
12B-4.053(32)(c), F.A.C., the documentary stamp taxes are
calculated only on the amount to which recovery is limited.
Rule 12B-4.053(32)(c), F.A.C., was amended in 1994 to
incorporate the provisions of original paragraph (c) and
paragraph (e) of the previous Rule 12B-4.053(32), F.A.C. Prior
to 1994, the requirement that taxes be paid on the value of the
Florida property if that value exceeded the taxable base was
expressed in paragraph (e), which applied specifically to
paragraph (c).

By paying Florida documentary stamp taxes in accordance
with the provisions of Section XX of the Mortgages, proper
Florida documentary stamp taxes were paid at the time of
recording the Mortgages.

Furthermore, by paying Florida documentary stamp taxes in
accordance with the provisions of Section XX of the New
Mortgage, proper Florida documentary stamp taxes were paid on
the New Mortgage.

With respect to non-recurring intangible personal property
taxes, s. 199.133(2), F.S., states as follows:

Where a note, bond, or obligation is secured by personal
property or by real property situated outside this state,
as well as by mortgage, deed of trust, or other lien upon
real property situated in this state, then the nonrecurring tax shall apply to that portion of the note,
bond, or other obligation which bears the same ratio to the
entire principal balance of the note, bond, or other
obligation as the value of the real property situated in
this state bears to the value of all of the security;
however, if the security is solely made up of personal
property and real property situated in this state, the
taxpayer may elect to apportion the taxes based upon the
value of the collateral, if any, to which the taxpayer by
law or contract must look first for collection. In no

event shall the portion of the note, bond, or other
obligation which is subject to the non-recurring tax exceed
in value the value of the real property situated in this
state which is the security....

Evaluating these statutory requirements using the same
ratio approach as that applied in the above-referenced
calculations for documentary stamp taxes, but considering the
figures contained in Section XX of the AAA County Fee Mortgage,
and the detailed calculations, it becomes clear that the Florida
tax base exceeds the value of the real property serving as
security for the Original Notes, the First Restatement Notes and
the Second Restatement Notes under the Credit Agreement.
Therefore, in connection with the recordation of the New
Mortgage, nonrecurring intangible personal property taxes should
be calculated based on the value of the real property ($XX).
Applying the statutory two mill tax rate to this value, the
resulting tax would be in the amount of $XX, which would have
been payable upon recordation of the New Mortgage.

However, as described above, intangible personal property
taxes were overpaid on the Mortgages in an amount which exceeds
the amount of intangible taxes due on the New Mortgage.
Therefore, no additional intangible personal property taxes were
due and payable on the New Mortgage.

Company asserts that, since the intangible taxes on the
Mortgages were overpaid in the amount of $XX, subtracting the
amount of intangible taxes which would have been due on the New
Mortgage, the Company should be entitled to a refund of $XX.

Determination Requested

For the reasons stated, the Company requests a
determination that (i) the Company has paid the correct Florida
documentary stamp taxes and intangible personal property taxes
on the Mortgages and on the New Mortgage; that (ii) in computing
its documentary stamp and intangible tax liabilities on the New
Mortgage, the Company was entitled to take a credit for the
documentary stamp tax and nonrecurring intangible tax payments
it made at the time of recording the Mortgages; (iii) that the

Company is entitled to a refund for a portion of the
nonrecurring intangible taxes which the Company paid when it
recorded the AAA County Fee Mortgage; and (iv) that no further
documentary stamp taxes or nonrecurring intangible personal
property taxes were due on the filing and recording of the New
Financing Statements.

Recognizing that $XX of this overpayment has now been
applied as a credit against the intangible taxes due on the New
Mortgage, the Company is inquiring whether it is entitled to a
refund of the remaining $XX which had been overpaid because of
the apparent failure in 1994 to adhere strictly to the
requirements of s. 199.133, F.S., contemplating that in
circumstances like these the intangible tax obligations should
be based on the value of the Florida mortgaged real property
rather than on the ratio-calculated Florida tax base.

Conclusion

By following the regulations set forth in Rule 12B4.053(32)(c), F.A.C., and by calculating the documentary stamp
taxes as set forth in Section XX of the Mortgages and the New
Mortgage, deducting (in the case of the New Mortgage) for
documentary stamp taxes previously paid on the Mortgages, proper
documentary stamp taxes were paid upon the recordation of the
Mortgages and the New Mortgage.

By calculating non-recurring intangible personal property
taxes in accordance with s. 199.133(2), F.S., and by deducting
the overpayment made by the Company on recordation of the
Mortgages, proper nonrecurring intangible personal property
taxes were calculated and no additional non-recurring intangible
personal property taxes were due on the recordation of the New
Mortgage.

This Technical Assistance Advisement does not address the
refund issue for non-recurring intangible tax. I have enclosed
an application for refund, DR-26, that the Company may use to
file for a refund. The refund application must be properly
completed and timely filed with all required documentation
attached. The application will be reviewed and a determination

made whether a refund is due.

Because all required documentary stamp taxes were paid at
the time the related mortgages were recorded, and because no
non-recurring intangible taxes are required to be paid in
connection with the filing or recording of UCC financing
statements, the Company was not obligated to pay any further
documentary stamp taxes or non-recurring intangible personal
property taxes because of the filing and recording of the New
Financing Statements.

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

JES/mh

Enclosure: Application for Refund DR-26