Did a timeshare developer's receivables loan, secured by previously taxed consumer notes and mortgages, owe Florida documentary stamp or nonrecurring intangible tax?

Plain-English summary

Florida treated the timeshare developer's receivables financing as a qualifying wholesale warehouse mortgage agreement. Consumer purchasers had given the developer notes secured by recorded mortgages, and all required documentary stamp and intangible taxes had already been paid on those consumer instruments.

The developer then pledged those notes and mortgages to a corporate lender as collateral for a separate receivables loan. Because the pledged consumer notes were mortgage-secured collateral obligations with their taxes already paid, section 201.21 exempted the receivables loan agreement and note from documentary stamp tax.

The financing also did not create a new mortgage or other lien on Florida real property, so the Department found no nonrecurring intangible tax on the receivables loan. It cautioned, however, that the lender could potentially owe the annual intangible tax on the January 1 outstanding principal balance if the loans had a taxable situs in Florida.

What this means for you

The exemption depended on previously taxed mortgage notes serving as collateral and on the warehouse financing creating no new Florida real-property lien. The TAA did not exempt an ordinary new mortgage loan.

Common questions

Why were the consumer notes qualifying collateral obligations? Each note was secured by a mortgage.

Why was the warehouse loan exempt from documentary stamp tax? The developer pledged those previously taxed collateral obligations under a qualifying wholesale warehouse mortgage agreement.

Why was no nonrecurring intangible tax due? The receivables loan created no new or additional lien on Florida real property.

Did the ruling eliminate every intangible tax issue? No. It identified potential annual intangible tax if the loans had a Florida taxable situs.

Citations and references

• Fla. Stat. §§ 201.21 and 201.08
• Fla. Stat. §§ 199.133, 199.145(2), and 199.032
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99M-001

Original ruling text

SUMMARY

For purposes of s. 201.21, F.S., collateral obligations are
notes, bonds, or other written obligations to pay money
which are secured by a mortgage. In this case, the
consumer Notes are secured by a mortgage; thus, the Notes
qualify as collateral obligations pursuant to s. 201.21,
F.S. The Notes are pledged to the Corporation under the
Receivables Loan Agreement as security for the payment of
the Limited Partnership's payment obligations under the
Receivables Loan Agreement and the Receivables Note to the
Corporation.

All documentary stamp taxes and intangible taxes have been
paid with respect to all consumer Notes and Mortgages when
each such Mortgage is presented for recording to the Clerk
of the Circuit Court of County. As such, the loan
evidenced by the Receivables Loan Agreement and the
Receivables Note qualifies as a wholesale warehouse
mortgage agreement under s. 201.21, F.S., and is not
subject to the Florida documentary stamp tax.

The Receivables Loan Agreement and the transaction
evidenced thereby does not create a new or additional
mortgage on any real property. Instead, the primary
collateral for the repayment of all amounts due to the
Corporation pursuant to the Receivables Loan Agreement and
the Receivables Note are the Note and Mortgages not secured
by any new mortgage. Therefore, the Receivables Loan
Agreement, the Receivables Note, and the transactions
contemplated therein are not subject to the nonrecurring
intangible tax under s. 199.133, F.S., because they are not
secured by a lien on Florida real property. However, there
is a potential that the Corporation may be subject to the
annual intangible tax imposed by s. 199.032, F.S., on the
outstanding principal balance each January 1, if the loans
have a taxable situs in Florida.

Jan 28, 1999

Re: Technical Assistance Advisement No. 99(M)-001
Documentary Stamp Tax and Intangible Tax; Wholesale
Warehouse Mortgage Agreement
Sections 201.21 and 199.145(2), F.S.
XXX (Limited Partnership)
XXX (Corporation)

Dear :

This is in response to your recent request for a Technical
Assistance Advisement regarding the documentary stamp tax and
intangible tax implications in connection with a wholesale
warehouse mortgage agreement.

FACTS PRESENTED BY TAXPAYER

The issues presented concern the Limited Partnership's loan
transaction dated Month XX, 19XX, with the Corporation, as
evidenced in the documents attached to your request. The
Limited Partnership is located in Florida, and the Corporation
is a Delaware corporation with its principal place of business
located in XXX.

The Limited Partnership is the developer of a time share
condominium project (the "Resort") in XXX County, Florida (the
"County"). The Limited Partnership sells fee simple time share
intervals in the Resort to consumer purchasers. Each sale is
evidenced by a purchase money note ("Note") secured by a
purchase money mortgage ("Mortgage") in favor of the Limited
Partnership from each consumer who chooses to finance his or her
purchase of a time share interval. Each Note and Mortgage is
recorded with the Clerk of the Circuit Court of County. At the
time each consumer Note and Mortgage is recorded, all required
Florida documentary stamp taxes and intangible taxes are paid
with respect to such Note and Mortgage.

To finance the Notes and Mortgages received by the Limited
Partnership from the consumer purchasers on which all required
Florida documentary stamp taxes and intangible taxes have been

paid, the Corporation and the Limited Partnership have entered
into a Loan and Security Agreement providing for advances from
the Corporation to the Florida Limited Partnership from time to
time (the "Receivables Loan Agreement"), evidenced by a
Receivables Promissory Note in the maximum principal amount of
$XX (the "Receivables Note").

Payment of the Receivables Note is secured by, among other
miscellaneous collateral, the pledge and collateral assignment
of the Notes and Mortgages by the Limited Partnership to the
Corporation. Upon completion of each interval sale in which the
Limited Partnership receives a Note and Mortgage, the Limited
Partnership records a collateral assignment of the Note and
Mortgage to the Corporation in the County public records. The
Limited Partnership deposits the original Note and Mortgage with
a custodian (which is initially the Corporation) that holds all
of the pledged Notes and Mortgages for the benefit of the
Corporation.

A third party servicing agent (which is initially an
affiliate of the Limited Partnership) collects all payments made
by the consumers under the Note and Mortgages pursuant to a
Servicing Agreement among the Limited Partnership, the
Corporation, and the servicer. Subject to other lending
limitations under the Receivables Loan Agreement, the Limited
Partnership may borrow from the Corporation advances of an
agreed upon percentage of the principal amount outstanding under
each Note. However, the amount advanced cannot exceed XX% of
the aggregate principal amount of the eligible Notes securing
such borrowed amounts. In the event such percentage is, at any
time, exceeded, or in the event eligible consumer Note and
Mortgage collateral becomes ineligible for any reason, the
Limited Partnership is required to either pay down the excess
loan balance, or provide additional eligible consumer Note and
Mortgage collateral.

The servicer deposits the proceeds of all payments received
pursuant to the consumer purchaser Notes and Mortgages into a
lockbox account in XXX maintained for the benefit of the
Corporation with an independent third party financial
institution.

REQUESTED ADVICE

Your request poses the following questions:

1. Whether the loan evidenced by the attached documents
   constitutes a Wholesale Warehouse Mortgage Agreement
   exempt from Florida's documentary stamp tax under s.
   201.21, F.S.
2. Whether the assignment of the underlying collateral
   obligations and the loan transaction as evidenced by
   the attached documents is exempt from Florida's
   intangible tax under s. 199.145(2), F.S.

LAW AND ANALYSIS

Section 201.21, F.S., provides that there shall be exempt
from all excise taxes imposed by Section 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 Chapters 199 and 201, F.S., have
been paid upon or in respect to such collateral obligation or
obligations.

Section 199.133, F.S., provides that an intangible tax
shall apply to a note, bond, or other obligation for the payment
of money only to the extent it is secured by a mortgage, deed of
trust, or other lien upon real property located in this state.
However, s. 199.145(2), F.S., provides that no additional
intangible tax shall be due upon the assignment of a note and
mortgage on which the intangible tax has previously been paid.

DETERMINATION

For purposes of s. 201.21, F.S., collateral obligations are
notes, bonds, or other written obligations to pay money which
are secured by a mortgage. In this case, the consumer Notes are

secured by a mortgage; thus, the Notes qualify as collateral
obligations pursuant to s. 201.21, F.S. The Notes are pledged
to the Corporation under the Receivables Loan Agreement as
security for the payment of the Limited Partnership's payment
obligations under the Receivables Loan Agreement and the
Receivables Note to the Corporation.

Per your correspondence, all documentary stamp taxes and
intangible taxes have been paid with respect to all consumer
Notes and Mortgages when each such Mortgage is presented for
recording to the Clerk of the Circuit Court of County. As such,
the loan evidenced by the Receivables Loan Agreement and the
Receivables Note qualifies as a wholesale warehouse mortgage
agreement under s. 201.21, F.S., and is not subject to the
Florida documentary stamp tax.

The Receivables Loan Agreement and the transaction
evidenced thereby does not create a new or additional mortgage
on any real property. Instead, the primary collateral for the
repayment of all amounts due to the Corporation pursuant to the
Receivables Loan Agreement and the Receivables Note are the Note
and Mortgages not secured by any new mortgage. Therefore, the
Receivables Loan Agreement, the Receivables Note, and the
transactions contemplated therein are not subject to the
nonrecurring intangible tax under s. 199.133, F.S., because they
are not secured by a lien on Florida real property. However,
there is a potential that the Corporation may be subject to the
annual intangible tax imposed by s. 199.032, F.S., on the
outstanding principal balance each January 1, if the loans have
a taxable situs in Florida.

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. 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 the General Counsel

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