How did Florida tax later advances under a multistate revolving credit line partly secured by Florida real estate?

Plain-English summary

Later loan advances required no additional documentary stamp tax while the Florida collateral stayed unchanged, but nonrecurring intangible tax applied to draws allocated to the Florida portion. Florida found the taxes already paid under the multistate mortgage and revolving credit agreement were proper.

The documentary stamp calculation apportioned the maximum multistate debt by the relative value of Florida collateral. The intangible tax, by contrast, applied to each revolving draw allocated to Florida under the agreement, up to the proportional Florida amount.

What this means for you

The two taxes followed different mechanics. A properly apportioned multistate mortgage could cover later advances without more stamp tax, while each new draw could still trigger nonrecurring intangible tax to the extent assigned to Florida real property.

Common questions

Q: Did every later advance create more documentary stamp tax? No, provided the Florida collateral remained the same.

Q: When did nonrecurring intangible tax apply? On subsequent draws up to the proportionate amount attributable to the unchanged Florida real property.

Q: Did the Department decide foreclosure procedure? No. It said bankruptcy and foreclosure procedure was governed by statutes outside the Department's administration.

Citations and references

• Fla. Stat. § 201.08(1) — mortgage documentary stamp tax
• Fla. Stat. § 199.133(1) — nonrecurring intangible tax
• Fla. Admin. Code r. 12B-4.053(32) — multistate-note apportionment
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99M-004

Original ruling text

SUMMARY

QUESTION: Were the proper amount of documentary stamp tax
and non-recurring intangible taxes paid in connection with
a multi-state mortgage which partially secures Florida
collateral and also secure out-of-state collateral, and
would any non-recurring intangible tax be due upon
subsequent draws up to the proportionate amount of the
Florida real property?

ANSWER - Based on Facts Below: From the facts presented,
all taxes have been properly paid. Any additional advance
under the underlying loan would not be subject to further
documentary stamp tax, provided the Florida collateral
remains the same. The non-recurring intangible tax would
only be due upon subsequent draws up to the proportionate
amount of the Florida real property, provided that the
amount of the Florida real property remains the same.

Jul 30, 1999

RE: Technical Assistance Advisement No. 99(M)-004
Documentary Stamp Tax and Non-Recurring Intangible Tax;
Revolving Credit Promissory Notes Secured by Realty
ss. 201.08 and 199.133, F.S.; Rule 12B-4.053(3), F.A.C.
XXX (Trust)
XXX (Bank)

Dear :

This is in response to your letter dated May 27, 1999,
requesting a technical assistance advisement which acknowledges
that both proper documentary stamp tax and intangibles tax have
been paid in connection with the described transaction. Your
letter also asks for confirmation that the lender has retained
all legal rights available to recover against the Florida
property in the event of a default of the loan.

FACTS AS PRESENTED BY PETITIONER

Trust, a real estate investment trust formed under the
laws of another state, has entered into a Credit Agreement dated
as of XX (the "Credit Agreement") with the Bank. Initially, the
Bank was the only lender under the Credit Agreement, but
following the closing of the transaction, the Bank assigned
portions of its rights and obligations under the Credit
Agreement to additional lenders (the "Lenders"). The Bank acts
as representative ("Agent") for the Lenders to simplify
administration of the Credit Agreement.

The Credit Agreement provides for extensions of credit to
the Trust in the following forms: (a) revolving loans which the
Trust may borrow, repay, and reborrow subject to the conditions
of the Credit Agreement; and (b) letters of credit. The
revolving loans are either made by the Lenders on a pro rata
basis, or in the case of some loans (called "swingline loans"),
made by the Bank with the other Lenders taking participating
interests. The Credit Agreement provides that the total amount
of outstanding credit, whether in the form of revolving loans,
swingline loans, or letters of credit, cannot exceed a fixed
dollar limit. As of the XXX closing, the fixed dollar limit was
$XX. The Credit Agreement also establishes a fixed $XX sublimit
on the aggregate outstanding amount of swingline loans and a
fixed $XX sublimit on letters of credit. In addition to these
various fixed dollar-amount limitations discussed above, the
Credit Agreement provides that the total amount of outstanding
credit cannot exceed certain percentages of the values of
specified parcels of real property which secure the obligations
of the Trust.

All obligations owing by the Trust are payable in full on
XXX. However, the Lenders may, at their discretion, extend this
maturity date. Under certain circumstances, on the maturity
date the Trust may elect to convert the outstanding principal
balance of revolving loans and swingline loans into term loans
which are to be repaid over a two-year period.

All of the Trust's obligations owing to the Agent and the
Lenders under the Credit Agreement are secured by mortgages on

real property and certain other related assets of the Trust or
its subsidiaries (the "Collateral"). Initially, all of the
Collateral was located outside of Florida except for one parcel
of real property located in the state (the "Florida
Collateral"). Based on recent appraisals of the Collateral, the
parties determined that the Florida Collateral had a value of
$XX, while the value of the Collateral located outside of the
state (the "Non-Florida Collateral") was $XX.

The Credit Agreement was closed on XXX. The initial
advance made on XXX, was $XX.

On XXX, the fixed dollar limit on the Credit Agreement was
increased from $XX to $XX. In addition, $XX of collateral, all
located outside of Florida, was added to secure the Trust's
obligations. These modifications were reflected in an amendment
to the original Florida mortgage.

On XXX, a property located outside of the Florida was
released from the collateral. It was unnecessary to make or
file an amendment to the Florida mortgage.

REQUESTED ADVISEMENT

Your letter requests a determination whether the proper
amount of documentary stamp taxes and non-recurring intangible
taxes were paid based on the transactions described in the
following paragraphs. Confirmation is also requested that the
Bank has retained all of its rights and remedies as to the
Florida Collateral because all documentary stamp taxes have been
paid, and that no Florida tax provision will operate to impede
or diminish the rights and remedies of the Agent and the Lenders
in connection with the non-recurring intangible tax paid in
order to recover the full amount of the loan outstanding under
the Credit Agreement.

The amount of Florida documentary stamp tax paid upon the
recording of the initial mortgage encumbering the Florida
Collateral was determined by multiplying the aggregate maximum
principal amount of indebtedness that could be outstanding under
the Credit Agreement of $XX by a fraction equal to the relative

proportion of the value of the Florida Collateral to the value
of all of the Collateral [$XX/($XX + $XX), or XX%]. The
resulting product (rounded to $XX) was multiplied by the tax
rate of XX, to arrive at $XX, paid upon recordation of the
mortgage encumbering the Florida collateral.

No additional documentary stamp tax was paid when the
mortgage amendment was recorded, since the apportionment formula
resulted in a percentage of XX%. [$XX/$XX + $XX]. Multiplying
this percentage by the $XX aggregate maximum amount of principal
indebtedness which could be outstanding under the Credit
Agreement equals $XX. Thus, it is your opinion no additional
tax was required to be paid.

For intangible tax purposes, the Credit Agreement includes
a provision by which the parties agree to allocate the aggregate
amount of outstanding extensions of credit first to the Florida
Collateral up to a stated dollar amount and thereafter to all of
the Non-Florida Collateral. In this same provision, the parties
similarly allocate repayments of extensions of credit first to
the Non-Florida Collateral down to the stated amount and
thereafter to the Florida Collateral. The provision states: (a)
the principal amount of any Loan disbursed and the stated amount
of any Letter of Credit issued, to the extent (when taken
together with the aggregate outstanding principal amount of all
other Loans and other Letter of Credit Obligations) not in
excess of $XX (the "Florida Amount"), shall be deemed allocated
to all Florida projects; (b) the principal amount of any Loan
disbursed and the stated amount of any Letter of Credit issued
at any time when the aggregate outstanding principal amount of
all other Loans and other Letter of Credit Obligations exceed
the Florida amount, shall be deemed allocated to all projects
outside of Florida; (c) any payment or repayment of principal of
any Loan and any payment in respect of a Letter of Credit
Obligation to the extent not reducing the aggregate outstanding
principal amount of all Loans and Letter of Credit Obligations
to an amount less than the Florida Amount, shall be deemed to be
payments or repayments of Obligations allocated to Projects
located outside of Florida; and (d) any payment or repayment of
principal of any Loan and any payment in respect of a Letter of
Credit Obligation at any time when the aggregate outstanding

principal amount of all Loans and Letter of Credit Obligations
is less than the Florida Amount, or to the extent reducing the
aggregate outstanding principal amount of all Loans and all
Letter of Credit Obligations to an amount less than the Florida
Amount, shall be deemed to be payments or repayments of
Obligations allocated to Projects located in Florida.

Based on this allocation stated in the Credit Agreement,
non-recurring intangible tax will be paid on each extension of
credit to the extent allocated to the Florida Collateral.
Notwithstanding this allocation for intangible tax purposes, the
parties agreed that such allocation would not create a
limitation on the amount of credit secured by the mortgage
encumbering the Florida property.

The amount of non-recurring intangible tax paid upon
recordation of the mortgage was $XX (the amount of the initial
draw of $XX times the tax rate of XX). Since XXX, and at the
time of the amendment, the Trust has made additional draws and
you feel the proper nonrecurring intangible tax has been paid on
such draws totaling $XX.

Your letter requests confirmation that the Bank has
retained all of its legal rights and remedies as to the Florida
Collateral because all proper documentary stamp taxes and
intangible taxes have been paid. You feel no documentary stamp
tax needs to be paid in connection with any additional advance
of the underlying loan, and that any additional non-recurring
intangibles tax will be due only upon subsequent draws up to the
proportionate amount of the Florida real property.

LAW AND ANALYSIS

Section 201.08(1), F.S., subjects Florida mortgages to the
documentary stamp tax at the rate of $.35 per $100 or fraction
thereof. When a Florida mortgage secures a portion of a note
that is also secured by property located outside of the state,
the tax can be apportioned if the mortgage states that it
secures a multistate note and only a portion of the Florida
debt. (See Rule 12B-4.053(32), F.A.C.)

Section 199.133(1), F.S., imposes a non-recurring tax of 2
mills on each dollar of the just valuation of all notes, bonds,
and other obligations for the payment of money which are secured
by a lien on property located in Florida. In connection with a
revolving line of credit secured by a Florida mortgage, tax is
due on each draw made under the line of credit.

DETERMINATION

In response, from the facts presented, all taxes have been
paid properly. Any additional advance under the underlying loan
of $XX would not be subject to further documentary stamp tax,
provided the Florida Collateral remains the same. The nonrecurring intangible tax would only be due upon subsequent draws
up to the proportionate amount of the Florida real property,
provided that the amount of the Florida real property remains
unchanged.

The procedure for bankruptcy or foreclosure, in the event
of default, is established by Florida statutes that are not
administered by the Department of Revenue. The mortgage is
enforceable with respect to the fact that no tax is due.

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. 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 from that
which is expressed in this response.

You are further advised that this response, your request
and related backup are public records under Chapter 119, F.S.,
and are subject to disclosure to the public under the conditions
of s. 213.22, F.S. Confidential information must be deleted
before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,

the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter

Sincerely,

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

JBE/mh