Did Florida documentary stamp tax apply when church corporations gifted unencumbered real estate to affiliated nonprofits?

Subject

Gift Deeds Between Affiliated Church Corporations

Plain-English summary

No Florida documentary stamp tax was due on the two deeds because the church corporations transferred unencumbered real estate as genuine charitable gifts and received no consideration. No money, promissory note, stock, debt assumption, discharged obligation, mortgage, or other encumbrance was involved.

The restructuring moved two Florida properties from church corporations sole to newly formed affiliated nonprofit, non-stock, nonmembership corporations. The Department found the transfers donative: the grantors' net worth decreased, the grantees' net worth increased, and no economic value returned to a grantor or another person at its direction.

Section 201.02(1) imposed documentary stamp tax based on consideration, including money, discharged obligations, mortgages, and other encumbrances. Rule 12B-4.014(2)(a) provided that a gift of unencumbered real property was not taxable. With no consideration in these transactions, the deeds carried no tax.

What this means for you

The result was about the substance of the transfer, not simply the parties' church or nonprofit status. The Department examined whether anything of economic value moved back to the grantors and whether the properties carried debt or another encumbrance.

A deed labeled as a gift can produce a different result if the recipient assumes a mortgage, an obligation is discharged, stock or another ownership interest changes value, or some other consideration is exchanged.

Common questions

Q: Were the deeds exempt merely because the parties were church corporations? No. The Department's stated reason was that the transfers were donative, the properties were unencumbered, and no consideration was given.

Q: Did common control among the corporations create taxable value? Not on the stated facts. The affiliated corporations had no stock or analogous transferable membership interests whose value changed because of the conveyances.

Q: Would a mortgage matter? Yes. Section 201.02(1) treated a mortgage or other encumbrance as consideration whether or not the underlying debt was assumed. These properties had no mortgage or other encumbrance.

Q: What if the recipient issued a note or paid money? That would depart from the ruling's facts. Here, the recipients issued no money, promissory notes, stock, or other consideration.

Q: Can another nonprofit rely on this ruling? No. The advisement binds the Department only for the requester and the facts and circumstances described.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax on deeds measured by consideration
• Fla. Admin. Code r. 12B-4.014(2)(a) — conveyance of unencumbered real property as a gift
• Murray v. Hoey, 32 F. Supp. 1008 (S.D.N.Y. 1940) — charitable real-estate transfer cited by the petitioner
• Reid v. Barry, 93 Fla. 849, 112 So. 846 (1927); Willard v. Barry, 113 Fla. 402, 152 So. 411 (1933); Hurley v. Werly, 203 So. 2d 530 (Fla. 2d DCA 1967) — corporation-sole authorities cited in the ruling
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98B4-003

Original ruling text

Mar 20, 1998

Re: Technical Assistance Advisement No. 98(B)4-003
Documentary Stamp Tax: Deeds Gifting Real Property to
Church Corporations
Section 201.02(1), F.S., Rule 12B-4.014(2)(a), F.A.C.
XXX (Church)
XXX (Corporation 1)
XXX (Corporation 2)
XXX (Corporation 3)
XXX (Corporation 4)

Dear :

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

Issue

Whether documentary stamp tax is imposed by s. 201.02(1),
F.S., when deeds convey certain unencumbered real property,
pursuant to a restructuring plan, from church corporations sole
to affiliated nonprofit, non-stock, nonmembership corporations,
as charitable gifts?

Facts Presented by Petitioner

XXX [Church] is an unincorporated non-profit religious
association. Church is a XXX denomination that holds its United
States XXX real estate through a number of non-profit, nonstock, non-membership corporations, principally XXX [Corporation
1] and XXX [Corporation 2]. Corporation 1 and Corporation 2 are
corporations sole in State Y.

Corporations sole, which are recognized in Florida under
common law, are a special type of non-profit corporation,
commonly utilized to hold real property and conduct temporal
affairs of various religious denominations. Corporations sole do
not have directors or officers, but act through the

corporations' incumbents and authorized agents. The XXX of
Church is the incumbent of Corporation 1. The XXX of Church is
the incumbent of Corporation 2.

Church's governing body, which is composed of XXX, decided
to restructure Corporation 1 and Corporation 2. The
restructuring plan includes conveying certain real estate owned
by Corporation 1 and Corporation 2 to affiliated non-profit,
non-stock, non-membership corporations as charitable gifts,
without monetary or other consideration.

Two properties located in Florida are involved in the
restructuring: the XXX [Property 1], currently owned by
Corporation 2, and XXX [Property 2], currently owned by
Corporation 1. Corporation 2 will convey Property 1, which is
currently used for XXX, to a newly formed State Y non-profit,
non-stock, non-membership corporation, XXX (Corporation 3).
Corporation 1 will convey Property 2 to another newly formed
State Y non-profit, non-stock, non-membership corporation, XXX
(Corporation 4). Real property located in one or more states
other than Florida will also be conveyed to Corporation 3 and
Corporation 4.

Corporation 3 and Corporation 4 are each affiliated with
Church in that the board of directors (trustees) of each
corporation is appointed by and serves at the pleasure of XXX.
The chairman of the board of directors of Corporation 3 is XXX,
and the corporation's other XXX directors are XXX. The chairman
of the board of directors of Corporation 4 is a XXX, and the
corporation's other two directors are also XXX. Corporation 3
and Corporation 4 are exempt from federal income tax and each
qualifies as an "integrated auxiliary" of Church.

Corporation 1 and Corporation 2 will remain in existence
and have substantial assets and operations after the proposed
conveyancing. Accordingly, Corporations 1, 2, 3, and 4 will
constitute "sister corporations" under the common control of
Church.

Neither Property 1 or Property 2 is mortgaged or otherwise
encumbered. No stock, promissory notes or monetary or other

consideration is being issued by Corporations 3 and 4 in return
for the real estate being conveyed to them by Corporations 2 and
1, respectively. There will be no increase in the value of the
stock as a result of the conveyances.

Petitioner Analysis

Petitioner asserts that no documentary stamp tax is due in
connection with execution and delivery of the deeds that convey
the unencumbered real property located in Florida to
Corporations 3 and 4.

Petitioner refers to the language of s. 201.02, F.S.,
regulations, and case law, as support. Petitioner cites Murray
v. Hoey, 32 F. Supp. 1008 (S.D.N.Y. 1940), as a federal case
interpreting the federal predecessor to the Florida documentary
stamp tax. The case involved conveyances to a non-profit, nonstock foundation. In that case, a decedent left real property
in undivided interests to 14 charitable, religious and
educational corporations. Each of the 14 corporations was a
member of the new foundation and entitled to a proportionate
share of its income and assets on liquidation. Recognizing the
nature of a charitable transfer of the realty in question, the
court held that the conveyance was not "fairly within the
taxable purpose of the [documentary stamp] law," 32 F. Supp. at
1012, and therefore, "[s]ince the transaction under examination
was not... a sale of real estate... for consideration, the
stamps were not required." Id. (emphasis supplied).

Law and Analysis

Section 201.02(1), Florida Statutes, provides as follows.

"On deeds, instruments, or writings whereby any lands,
tenements, or other real property, or any interest therein,
shall be granted, assigned, transferred, or otherwise
conveyed to, or vested in, the purchaser or any other
person by his or her direction, on each $100 of the
consideration therefor the tax shall be 70 cents. When the
full amount of the consideration for the execution,
assignment, transfer, or conveyance is not shown in the

face of such deed, instrument, document, or writing, the
tax shall be at the rate of 70 cents for each $100 or
fractional part thereof of the consideration therefor. For
purposes of this section, consideration includes, but is
not limited to, the money paid or agreed to be paid; the
discharge of an obligation; and the amount of any mortgage,
purchase money mortgage lien, or other encumbrance, whether
or not the underlying indebtedness is assumed. If the
consideration paid or given in exchange for real property
or any interest therein includes property other than money,
it is presumed that the consideration is equal to the fair
market value of the real property or interest therein."

Rule 12B-4.014(2)(a), F.A.C., provides that a conveyance of
unencumbered real property as a gift is not taxable.

In this case, no money is given for the real property
conveyed by the deeds. The property was not subject to any
mortgages or other encumbrances, and there was neither
assumption of liability nor discharge of obligation.

Corporations sole are common law entities. Since the state
of Florida adopted the common law, they are recognized in
Florida. Reid v. Barry, 93 Fla. 849, 112 So. 846 (1927). The
common law institution of the corporation sole has not been
repealed by constitution or statute. Willard v. Barry, 113 Fla.
402, 152 so. 411 (1933).

The corporation sole consists of a single person, such as a
dean or bishop, who is made a body corporate to give him legal
capacities and advantages. The incumbent holds property to his
use only while he holds office. While corporations sole
continue to be recognized in Florida, Hurley v. Werly, 203 So.2d
530 (Fla. 2nd DCA 1967), only few points of corporation law
apply to them. For example, an interest in real property taken
by the incumbent, such as a bishop, of a church corporation sole
is limited: he takes the property only in his capacity as bishop
in the church office and only for so long as he holds that
office.

Thus, no stock is to be issued in connection with the real

property conveyances at issue, neither will there be any
increase in the value of stock.

There are no interests in these corporations analogous to
stock or a partnership interest that might be sold to a third
party purchaser for value. The corporations are governed for
the benefit of XXX, and there are no distinct membership
interests with discrete value that would change as a result of
these transactions.

These transfers are donative. Like a gift, the net worth of
the grantors is decreased by the conveyance, and the net worth
of the grantee is increased. No economic value inures to the
grantor in exchange for the conveyance (nor to any other person
at the direction of the grantor).

Department's Position

The purpose and effect of the conveyances of real property
effected by the deeds is donative. The real property is
transferred as a gift, and no consideration is given in exchange
therefor. Thus, no consideration is given in exchange for the
real property, and no tax is due on the deeds.

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,

Richard A. Robinson
Assistant General Counsel
Office of the General Counsel

RAR/mh