Did Florida documentary stamp and nonrecurring intangible taxes apply to the revised warehouse-loan securitization and its collateral assignments?

Plain-English summary

The revised ruling found no additional Florida documentary stamp or nonrecurring intangible tax on the described securitization steps.

The taxpayer's bonds and wholesale warehouse loan agreement were to be made, executed, and delivered outside Florida, so Florida did not tax those written payment obligations. Transfers of the loan obligations from the originating affiliate to a parent, then to a Florida affiliate, and finally to the taxpayer were ownership transfers of receivables rather than real-property conveyances or collateral security for new loans.

For Florida loan obligations, the applicable documentary stamp and nonrecurring intangible taxes had already been paid. Non-Florida obligations were not secured by liens on Florida real property. Those facts prevented additional nonrecurring tax on the ownership transfers.

The Florida collateral-assignment documents pledged only Florida collateral for which all documentary stamp tax had been paid. Although recording a collateral assignment in Florida ordinarily could be taxable, the Department applied the wholesale warehouse mortgage exemption. No additional nonrecurring intangible tax was due because the underlying Florida obligation documents had already been taxed.

What this means for you

The result depended on the exact transaction chain: where the principal obligations were made and delivered, whether a transfer changed ownership or secured a new loan, whether collateral involved Florida property, whether earlier tax was fully paid, and whether the recorded assignments satisfied the warehouse-mortgage exemption.

Common questions

Q: Why were the bonds and warehouse agreement not taxed?
A: They were made, executed, and delivered outside Florida.

Q: Why were the affiliate transfers of loan obligations not taxed?
A: They transferred receivables and did not convey real property or pledge collateral for a new loan; prior tax had been paid on the Florida obligations.

Q: Could recording a Florida collateral assignment normally create documentary stamp tax?
A: Yes. The Department applied a specific warehouse-mortgage exemption because the stated Florida collateral obligations had already borne all required documentary stamp tax.

Q: Was additional nonrecurring intangible tax due on the Florida assignments?
A: No. The nonrecurring tax had previously been paid on the Florida collateral-obligation documents.

Citations and references

• Fla. Stat. §§ 201.01, 201.08 — written obligations and security documents made, delivered, filed, or recorded in Florida
• Fla. Stat. § 201.21 — wholesale warehouse mortgage exemption
• Fla. Stat. §§ 199.133, 199.145(2) — nonrecurring intangible tax and previously taxed assignments
• Fla. Admin. Code rr. 12B-4.053(28), (34), 12B-4.054(4), (6) — out-of-state notes and mortgage assignments
• State v. Sweat, 152 So. 432 (1934) — mortgage assignments
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98M-004R

Original ruling text

SUMMARY

An out-of-state limited liability company has entered into
a wholesale warehouse mortgage loan agreement with an out-
of-state corporation. The out-of-state limited liability
company made Florida and non-Florida loans to third parties
which are either secured by mortgage(s) securing real and
personal property, by a perfected security interest in
personal property, or secured by leases of personal
property. The loans were pledged to the out-of-state
corporation under the terms of the warehouse mortgage loan
agreement. A Florida corporation affiliated with the out-
of-state corporation made certain Florida and non-Florida
loans to third parties secured in the same manner as the
out-of-state limited liability company's loans. For
purposes of a securitization transaction, the out-of-state
limited liability company will transfer and assign its
loans to a new affiliate ("Parent"), formed for the
purposes of the securitization transaction. Parent will
then transfer and assign the loans to the Florida
corporation, who will in turn transfer and assign the loans
to the taxpayer in exchange for a limited partnership
interest in the taxpayer.

As part of the securitization transaction, the taxpayer
will enter into an Indenture and wholesale warehouse
mortgage loan agreement with a bank. Certain bonds will be
issued by the taxpayer to an out-of-state grantor trust and
will grant to the bank a security interest in the
collateral obligations held by the taxpayer to secure the
taxpayer's obligation to repay the bonds. The bonds and
wholesale warehouse mortgage loan agreement will be made,
executed and delivered outside of Florida.

The only mortgages securing the Florida mortgage warehouse
agreements are Florida mortgages where all documentary
stamp tax and intangible tax has been paid. The bonds and
warehouse loan agreement are not subject to documentary
stamp tax and intangible tax as they are made, executed and
delivered outside of Florida. No tax is due on any of the
transfers and assignments of collateral obligations made by

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the parent to the Florida corporation, nor is any tax due
on the transfer and assignment of loans from the Florida
corporation to the taxpayer. No tax is due upon the
execution, delivery, filing or recordation in Florida of
the Florida Collateral Assignment documents, which pledge
Florida collateral obligations to the bank as security for
the taxpayer's obligation under the bonds and warehouse
loan agreement.

Revises TAA 98M-004

            Sep 23, 1998

Re: Technical Assistance Advisement No. 98(M)-004 Revised
Warehouse Mortgage Exemption; Florida Documentary Stamp
Tax; Florida Nonrecurring Intangible Tax;
ss. 199.133, 199.145, 201.01, 201.08, 201.21, 201.23, F.S;
XXX (The Taxpayer)
XXX (Corporation)
XXX (FI)
XXX (FIII)
XXX (FI & FIII)

Dear :

This is in response to your letter dated May 30, 1997,
requesting a Technical Assistance Advisement regarding the
applicability of Documentary Stamp Tax and Intangible tax, under
the facts and documents set forth herein.

     Statement of Facts Presented by Taxpayer

FIII, an out-of-state limited liability company, has
negotiated and entered into a wholesale warehouse mortgage loan
agreement (the "FIII Warehouse Loan Agreement") with
Corporation, also located outside of Florida. The FIII
Warehouse Loan Agreement was the subject of TAA 97(M)-004.

Pursuant to the terms of the FIII Warehouse Loan Agreement,

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FIII has made certain Florida and non-Florida loans to third
parties (the "FIII Loans"). These loans are either (i) secured
by a recorded mortgage encumbering a fee simple interest in real
estate, (ii) secured by a recorded mortgage encumbering a
leasehold interest in real estate, (iii) secured by a perfected
security interest in personal property, or (iv) secured by
leases of personal property which, for Florida documentary stamp
tax purposes, are treated as personal property financing
transactions. Such loans were pledged to Corporation under the
terms of the FIII Warehouse Loan Agreement. Additionally, FIII
used the FIII Warehouse Loan Agreement proceeds to purchase
Florida and non-Florida real property which it then leased to
third parties ("True Lease Transactions").

FI, a Florida corporation which is an affiliate of FIII,
also made certain Florida and non-Florida loans to third parties
(the "FI loans") that are secured in the same manner as the FIII
Loans and are pledged to another lender under the terms of a
separate warehouse loan agreement. Additionally, FI used its
warehouse loan agreement proceeds to enter into True Lease
Transactions.

As part of a proposed securitization transaction (the
"Securitization Transaction"), FIII will transfer and assign the
FIII Loans to a new affiliate, Parent, which will be formed for
purposes of the Securitization Transaction and which will own
and hold all of the issued and outstanding capital stock and
equity member interests of FI and FIII. The transfer of the
FIII Loans by FIII to Parent will be a distribution to Parent in
its capacity as the sole equity member of FIII. Upon receipt of
title to the FIII loans, Parent will transfer and assign the
FIII Loans to FI as a contribution to the capital of FI. FI
then will immediately transfer and assign the FI Loans and FIII
Loans to Taxpayer as a capital contribution in exchange for a
limited partnership interest in Taxpayer. This transfer is
necessary because, under the terms of the FIII Warehouse Loan
Agreement, FIII may not own a limited partnership interest in
Taxpayer.

The FI Loans and the FIII Loans will hereinafter be
referred to individually and collectively as the "Collateral

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Obligations."

As part of the Securitization Transaction, Taxpayer is
negotiating and will enter into an Indenture and Wholesale
Warehouse Mortgage Agreement (the "Warehouse Loan Agreement")
with a to-be-determined national bank (the "Indenture Trustee")
Under the terms of the Warehouse Loan Agreement, Taxpayer will
issue certain bonds (the "Bonds") to an out-of-state grantor
trust (the "Grantor Trust") and will grant to the Indenture
Trustee a security interest in the Collateral Obligations held
by Taxpayer to secure Taxpayer's obligation to repay the Bonds
in accordance with the terms thereof and the terms of the
Warehouse Loan Agreement. The Grantor Trust then will sell
interests in the Bonds to investors in the form of Grantor Trust
certificates. The Bonds and the Warehouse Loan Agreement will
be made, executed, and delivered outside of Florida.

As of this date, the Bonds and Warehouse Loan Agreement
have not been executed and nothing has been filed or recorded in
Florida with regard to the Warehouse Loan Agreement or any
collateral to be provided by Taxpayer to secure its payment
obligations thereunder (as described below). The Indenture
Trustee will hold the Warehouse Loan Agreement outside of
Florida.

For purposes of analyzing the Florida taxation issues in
connection with the Securitization Transaction, the Collateral
Obligations (as summarized above) generally may be categorized
as follows: (1) Florida Collateral Obligations, (2) non-Florida
Collateral Obligations, and (3) non-Collateral Obligations
(i.e., True Lease Transactions).

Florida Collateral Obligations arise from FI and FIII
making loans to third parties which are secured by mortgages or
pledges of Florida assets (i.e., real and personal property
located in Florida). Notes, mortgages and security agreements
creating the Florida Collateral Obligations generally were made,
executed and delivered in Florida. When notes or other written
obligations to pay money were made, executed or delivered in
Florida, or when mortgage or security agreements relating to
Florida Collateral Obligations were filed or recorded in

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Florida, documentary stamp taxes were paid on the principal
amount of the Collateral Obligations as required by s. 201.08,
F.S., as well as appropriate nonrecurring intangible taxes due
under Chapter 199, F.S.

Non-Florida Collateral Obligations involve FI and FIII
making loans to third parties which are secured by mortgages or
pledges of real and personal property outside of Florida. All
notes or other written obligations to pay money, mortgages and
security agreements creating and securing the non-Florida
Collateral Obligations were made, executed and delivered outside
of Florida. Some documents, such as commitment letters, closing
statements, UCC financing statements, side letters, construction
loan agreements, draw requests and escrow agreements, may have
been made, executed or delivered in Florida. In no event are
documents evidencing or securing the non-Florida Collateral
Obligations recorded or filed in Florida, and none of the non-
Florida Collateral Obligations made, executed or delivered in
Florida contain a written promise to pay; define, amend, modify
or enlarge any existing promise to pay; or acknowledge receipt
of funds.

True Lease Transactions involve FI and FIII using FI and
FIII Warehouse Loan Agreement proceeds to purchase (and in some
cases construct improvements on) Florida and non-Florida real
property, and then leasing the property to third party lessees
pursuant to the terms of a typical arm's length (nonfinancing)
lease agreement. Such transactions may also involve FI and FIII
entering into a ground lease of undeveloped Florida or non-
Florida real property and then constructing improvements thereon
for eventual lease to third parties under a typical lease
agreement. The documentary stamp taxes on deeds under s.
201.02, F.S., were paid on FI and FIII's purchase of any Florida
real property, as well as the documentary stamp tax and
nonrecurring intangible tax imposed under Chapters 201 and 199,
F.S., in respect of any recorded collateral assignments of
leases or mortgages on Florida property granted by FI and FIII
to the warehouse lenders.

The Warehouse Loan Agreement requires Taxpayer to grant a
security interest in the Collateral Obligations to or in favor

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of the Indenture Trustee (the "Collateral Assignments") to
secure Taxpayer's repayment of the indebtedness represented by
the Bonds. The Collateral Assignments will either be a
collateral assignment of mortgage or an assignment of security
agreement. Similarly, the Warehouse Loan Agreement requires
Taxpayer to grant a security interest in favor of the Indenture
Trustee in its rights relating to the True Lease Transactions,
either by a collateral assignment of the landlord's interest in
a lease or by a recorded mortgage. The documents pledging
Taxpayer's interest in the Collateral Obligations and True Lease
Transactions in favor of the Indenture Trustee are hereinafter
referred to collectively as the "Collateral Assignment
Documents."

The only documents which will be filed and recorded in
Florida as collateral security for the Warehouse Loan Agreement
will be the Florida Collateral Assignment Documents, each of
which documents will pledge or mortgage as collateral security
for the payment of the Warehouse Loan Agreement only Florida
property (i.e., the taxpayer's interest in Florida Collateral
Obligations and Florida True Lease Transactions) on or with
respect to which all applicable Florida taxes previously have
been paid. The Taxpayer's interest in the non-Florida
Collateral Obligations and non-Florida True Lease Transactions
will not be pledged as collateral for the repayment of the
Warehouse Loan Agreement pursuant to any Collateral Assignment
documents filed or recorded in Florida.

The Collateral Assignments and the Collateral Assignment
Documents will not incorporate by reference the Warehouse Loan
Agreement, but will state that they are given as security for
Taxpayer's obligations under the Warehouse Loan Agreement. The
Collateral Assignment Documents assigning Taxpayer's interest in
Florida Collateral Obligations and True Lease Transactions (the
"Florida Collateral Assignment Documents") to or in favor of the
Lender may be made, executed and delivered, and will be recorded
or filed in Florida. The Collateral Assignment Documents
transferring Taxpayer's interest in non-Florida Collateral
Obligations and True Lease Transactions to or in favor of the
Indenture Trustee may be made, executed and delivered in
Florida, but will be recorded outside of Florida.

Page 7

         Requested Advisement

A) The Bonds and Warehouse Loan Agreement will not be
subject to Florida documentary stamp tax because they
will not be made, executed or delivered in Florida.
B) No documentary stamp tax or nonrecurring intangible
tax will be due on the transfer and assignment by FIII
to Parent of Florida and non-Florida Collateral
Obligations, which Collateral Obligations represent
loans previously originated by FIII.
C) No documentary stamp tax or nonrecurring intangible
tax will be due on the transfer and assignment by
Parent to FI of Florida and non-Florida Collateral
Obligations, which Collateral Obligations represent
loans previously originated by FIII.
D) No documentary stamp tax or nonrecurring intangible
tax will be due on the transfer and assignment by FI
to Taxpayer of Florida and non-Florida Collateral
Obligations, which Collateral Obligations represent
loans previously originated by FI and FIII.
E) Documentary stamp tax and nonrecurring intangible tax
will not be due upon the execution, delivery, filing
or recordation in Florida of the Florida Collateral
Assignment Documents, which documents pledge Florida
Collateral Obligations to the Indenture Trustee as
security for Taxpayer's obligations under the Bonds
and Warehouse Loan Agreement.

          Provisions of Law

Section 201.08, F.S., imposes documentary stamp tax on
promissory notes and other written obligations to pay money
which are made, executed or delivered in Florida, and upon
mortgages, trust deeds, security agreements and other evidences
of indebtedness which are filed or recorded in Florida.

A promissory note which is made, executed and delivered
outside of Florida is, generally, not a taxable document for
documentary stamp tax purposes within the purview of ss. 201.01
and 201.08, F.S. 1980 Op. Att'y. Gen. Fla. 080-79 (Sept. 24,

Page 8

1980); See also Rule 12B-4.053(34), F.A.C.

An assignment of a mortgage by a lender to a new lender who
has purchased the note and mortgage and becomes the holder of
the note and mortgage is not subject to documentary stamp tax.
(State v. Sweat, 152 So. 432 (1934)) However, where the
assignment of a mortgage is given as collateral security for a
new loan, the assignment is a taxable mortgage when recorded in
Florida. See Rules 12B-4.054(6) and 12B-4.053(28), F.A.C.

Section 201.21, F.S., exempts from all excise taxes imposed
by Chapter 201, F.S., principal obligations when the maker
thereof pledges or deposits 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 excise taxes imposed under Chapter 201, F.S., upon
or in respect to such collateral obligation or obligations shall
have been paid. The term "collateral obligation" means any
note, bond, or other written obligation to pay money secured by
mortgage, deed of trust, or other lien upon real or personal
property. A collateral assignment of a collateral obligation
made pursuant to a wholesale warehouse mortgage agreement does
not invalidate the exemption from documentary stamp taxation
under this provision. See Rule 12B-4.054(4), F.A.C.

Section 199.133(1), F.S., imposes a one-time nonrecurring
tax on every promissory note and other obligation for payment of
money if, and to the extent, such note or obligation is secured
by a mortgage, deed of trust, or other lien upon Florida real
property.

Under the provisions of s. 199.133(2), F.S., the
nonrecurring tax applies 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
situated in Florida.

Per s. 199.145(2), F.S., no additional nonrecurring
intangible tax is due upon the assignment by the obligee of a
note, bond, or other obligation for the payment of money upon

Page 9

which the nonrecurring tax has previously been paid.

            Determination

The responses to your questions are as follows:

A) The Bonds and Warehouse Loan Agreement will not be
subject to Florida documentary stamp tax because they
will not be made, executed or delivered in Florida.

The Taxpayer's written obligation to pay off the Bonds will
be set forth exclusively in the Bonds and Warehouse Loan
Agreement. Both the Bonds and the Warehouse Loan Agreement
will be made and executed by the Taxpayer outside Florida
and delivered to the Indenture Trustee or Grantor Trust
outside Florida. Since the Florida documentary stamp tax
is not imposed upon obligations to pay money which are
made, executed and delivered outside Florida, the Bonds and
Warehouse Loan Agreement are not subject to the documentary
stamp tax.

B) No documentary stamp tax or nonrecurring intangible
tax will be due on the transfer and assignment by FIII
to Parent of Florida and non-Florida Collateral
Obligations, which Collateral Obligations represent
loans previously originated by FIII.

  Documentary Stamp Tax

Since the distribution of Collateral Obligations by FIII to
Parent is in the nature of a transfer for consideration of
receivables, which is not a transfer of real property under
s. 201.02, F.S., and is not a transfer of collateral
security for a new loan, the transfer will be exempt from
documentary stamp tax.

  Nonrecurring Intangible Tax

No additional nonrecurring intangible tax will be due on
the transfer and assignment by FIII to Parent of the

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Florida Collateral Obligations, since the tax has
previously been paid on the Florida Collateral Obligations.
No nonrecurring intangible tax be due on the transfer and
assignment by FIII to Parent of the non-Florida Collateral
Obligations, because the obligations will not be secured by
a mortgage, deed of trust, or other lien on Florida real
property.

C) No documentary stamp tax or nonrecurring intangible
tax will be due on the transfer and assignment by
Parent to FI of Florida and non-Florida Collateral
Obligations, which Collateral Obligations represent
loans previously originated by FIII.

Documentary Stamp Tax

An assignment of a mortgage by a lender to a new lender who
has purchased the note and mortgage and becomes the holder
of the note and mortgage is not taxable; provided, however,
that where the assignment of a mortgage is given as
collateral security for a new loan, it is a taxable
mortgage when recorded in Florida. Since the contribution
of Collateral Obligations by Parent to FI is in the nature
of a transfer for consideration of receivables, which is
not a transfer of real property under s. 201.02, F.S., and
is not a transfer of collateral security for a new loan,
the transfer will be exempt from documentary stamp tax.

Nonrecurring Intangible Tax

No additional nonrecurring intangible tax will be due upon
the transfer and assignment by Parent to FI of the Florida
Collateral Obligations, because a nonrecurring tax
previously has been paid. No nonrecurring intangible tax
will be due upon the transfer and assignment of the non-
Florida Collateral Obligations, because such obligations
will not be secured by a mortgage, deed of trust, or other
lien upon Florida real property.

D) No documentary stamp tax or nonrecurring intangible
tax will be due on the transfer and assignment by FI

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to Taxpayer of Florida and non-Florida Collateral
Obligations, which Collateral Obligations represent
loans previously originated by FI and FIII.

Documentary Stamp Tax

Since the contribution of Collateral Obligations by FI to
Taxpayer is in the nature of a transfer for consideration
of receivables, which is not a transfer of real property
under s. 201.02, F.S., and is not a transfer of collateral
security for a new loan, the transfer will be exempt from
documentary stamp tax.

Nonrecurring Intangible Tax

No additional nonrecurring intangible tax will be due on
the transfer and assignment by FI to Taxpayer of the
Florida Collateral Obligations, since the tax has
previously been paid on the Florida Collateral Obligations.
No nonrecurring intangible tax will be due on the transfer
and assignment by FI to Taxpayer of the non-Florida
Collateral Obligations, because the obligations will not be
secured by a mortgage, deed of trust, or other lien on
Florida real property.

E) Documentary stamp tax and nonrecurring intangible tax
will not be due upon the execution, delivery, filing
or recordation in Florida of the Florida Collateral
Assignment Documents, which documents pledge Florida
and non-Florida Collateral Obligations to the
Indenture Trustee as security for the Taxpayer's
obligations under the Bonds and the Warehouse Loan
Agreement.
Documentary Stamp Tax

The documentary stamp tax, absent an exemption, taxes
collateral assignments of mortgages or security agreements
which are filed or recorded in Florida. However, the
wholesale warehouse mortgage exemption provided in Section
201.21, F.S., exempts from the documentary stamp tax
promissory notes and other obligations to pay money

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("principal obligations") where, pursuant to a wholesale
warehouse mortgage agreement, the maker of the principal
obligation pledges to or deposits with the obligee, as
collateral security for the payment of the principal
obligation, any note or other written obligation to pay
money which is secured by a mortgage, deed of trust,
security agreement, or other lien upon real or personal
property with respect to which all documentary stamp taxes
imposed thereon have been paid. The pledging of a specific
collateral obligation to secure a specific principal
obligation, if required under the terms of the wholesale
warehouse mortgage agreement, does not invalidate the
applicability of the wholesale warehouse mortgage
exemption.

In the present case, the mere execution and delivery of
Collateral Assignment Documents in Florida will not subject
such documents to documentary stamp tax, because such
documents will not contain a promise to pay. The filing or
recording in Florida of Collateral Assignment Documents
assigning the Taxpayer's interests in Florida Collateral
Obligations in favor of the Lender, absent a specific
exemption, would be subject to Florida documentary stamp
tax. However, pursuant to the terms of the Warehouse Loan
Agreement, the Taxpayer is required to pledge or
collaterally assign to or in favor of the Indenture Trustee
the Florida Collateral Obligations as collateral security
for the payment of the Taxpayer's obligation to pay money
under the Bonds and the Warehouse Loan Agreement.
Accordingly, since all Florida documentary stamp taxes due
upon or with respect to all Florida Collateral Obligations
have been paid, the Collateral Assignment Documents
assigning the Taxpayer's interests in Florida Collateral
Obligations (which pledge or mortgage only Florida
property), to or in favor of the Indenture Trustee under
the Florida Wholesale Warehouse Agreement, will not be
subject to Florida documentary stamp tax.

Nonrecurring Intangible Tax

No additional nonrecurring intangible tax will be due upon

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the recordation or filing in Florida of the Florida
Collateral Assignment Documents, because a nonrecurring tax
previously has been paid upon the recordation or filing of
the Florida Collateral Obligation documents.

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,

Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel

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