Is additional principal taxable when an amended Georgia security deed secures more debt than the original recorded instrument?

Plain-English summary

The Georgia Department of Revenue denied a refund of intangible recording tax paid on increased debt secured by an amended security deed. The Department concluded that the additional principal was taxable under the specific rule for additional advances, O.C.G.A. § 48-6-65(a)(1).

The borrower and lender had a long-term note secured by a recorded deed, later increased the indebtedness through amendments, and paid additional IRT when the second amended note was recorded. The claimant argued that under O.C.G.A. § 44-14-60 the original security deed had already conveyed title to the lender, leaving nothing new to convey or encumber; on that theory, the amendment was not a new taxable security instrument.

The Department rejected that reasoning because § 48-6-65(a)(1) specifically says the tax is due on the part of an instrument representing an additional advance of indebtedness secured by a previously recorded instrument. In the Department's view, an increase in the secured indebtedness triggers additional IRT. It also quoted two Georgia Attorney General opinions for the propositions that debt beyond the remaining original balance is taxable and that IRT is imposed on the indebtedness, not on the security instrument or the value of the real estate.

What this means for you

Borrowers and property owners

Amending an existing secured loan to increase principal can create additional IRT even though the original deed to secure debt remains in place. The Department focused on the increase in indebtedness, not on whether the amendment conveyed the property title again.

Lenders and closing professionals

Model the tax consequences of each principal increase before recording an amended instrument. A prior payment of the $25,000 maximum on the original transaction did not persuade the Department that later additional indebtedness was tax-free in this claim.

Tax professionals

The key interpretive move is specific-over-general: the Department treated § 48-6-65(a)(1), which directly addresses modifications and additional advances, as controlling over the claimant's title-passage argument under § 44-14-60. The refund was denied on the merits even though the later IRT payment had been made under protest.

Common questions

Q: Is an increase in principal secured by an already recorded deed subject to Georgia IRT? A: Yes, under this document. The Department said § 48-6-65(a)(1) taxes the additional indebtedness secured by the previously recorded instrument.

Q: Does it matter that a Georgia deed to secure debt passes title to the lender? A: That did not change the result here. The claimant made that argument under § 44-14-60, but the Department held that the specific additional-advance statute still applied.

Q: Is the tax imposed on the land or the security deed itself? A: The Department quoted an Attorney General opinion stating that IRT is imposed on the indebtedness—the total amount of the note—not on the security instrument or the real estate's value.

Q: Why are there several pages with the same IRT 2022-04-22-01 ID? A: Georgia's official archive assigns that same displayed ID to multiple different April 22, 2022 PDFs. This page is the Additional Advance document; use the topic and original PDF URL to distinguish it.

Citations and references

• O.C.G.A. § 48-6-60(2) (security-instrument definition raised by the claimant)
• O.C.G.A. § 48-6-61 (IRT imposition provision raised by the claimant)
• O.C.G.A. § 48-6-65(a)(1) (additional advance secured by a previously recorded instrument)
• O.C.G.A. § 48-6-76 (payment under protest)
• O.C.G.A. § 44-14-60 (title passage under a deed to secure debt)
• Georgia Department of Revenue Determination Letter (April 30, 2013) (additional IRT on an amended security deed securing additional principal)
• 1963-65 Ga. Op. Att'y Gen. 654 (additional indebtedness beyond the remaining original balance)
• 1960-61 Ga. Op. Att'y Gen. 519 (tax on indebtedness, not the instrument or real-estate value)

Source

• IRT/RETT search page: https://dor.georgia.gov/search-irt-rett-letter-rulings
• Topic page: https://dor.georgia.gov/additional-advance
• Original PDF: https://dor.georgia.gov/document/document/georgia-letter-ruling-no-irt-2022-04-22-01-additional-advancepdf/download

Original ruling text

Frank M. O’Connell

Deputy State Revenue Commissioner

Robyn A. Crittenden

State Revenue Commissioner

Georgia Department of Revenue

Office of the General Counsel
1800 Century Boulevard, N.E., Suite 15107, Atlanta, Georgia 30345

April 22, 2022

VIA: First Class Mail

RE: Intangible Recording Tax Protest and Claim for Refund for Security Deed, recorded sranted to

(“Borrower”);

a

The Department of Revenue has carefully reviewed your Protest and Claim for Refund on the above-captioned instrument (hereinafter, “Second Amended Note”). As you acknowledge in your Claim for Refund, your position regarding the collection of intangible recording tax (“IRT”) on the Second Amended Note contradicts the conclusion set forth in a Department of Revenue Determination Letter issued on April 30, 2013. The interpretation articulated in the 2013 Determination Letter continues to apply. Accordingly, your Claim for Refund is denied. A copy of this letter is being mailed to —_— Clerk of Superior Court.

As you explain in your Claim for Refund, Borrower and Lender executed a long term note in the amount of cy on . ). The maximum IRT amount of $25,000 was paid at the time of recording. The original note was amended in with increased indebtedness of . IRT of was paid at the time of recording without protest.’ ). The Second Amended Note

increasing the loan amount to . fs

was recorded on

1 You do not mention the | | amendment in your present Claim for Refund.

Intangible Recording Tax Protest and Claim for Refund for Security Deed, recorded 7 iii April 22, 2022 Page 2

). At the time of recording, $m in IRT was paid on the increased indebtedness of
. The IRT was paid under protest in accordance with O.C.G.A. § 48-6-76.

In the attachment to your Claim for Refund, you state: “[T]he Commissioner has previously taken the incorrect position that an amendment to an existing deed to secure debt meets the definition of ‘security instrument’ as set forth in O.C.G.A. § 48-6-60(2).” You reference the 2013 Determination Letter in which the Department decided additional IRT was due on an amended security deed pursuant to which the lender advanced additional principal. The Department concluded:

The additional advance to the Borrower of long-term
principal totaling a results in what is considered to be
a brand new instrument that secures a new amount of original indebtedness totaling Accordingly, a total of

in intangible recording tax will be due and payable upon
recording of the First Amendment.

You contend the 2013 Determination Letter is incorrect because when Borrower executed the original security deed ing it gave “an outright conveyance of land by warranty deed to its lender... .” You reference O.C.G.A. § 44-14-60, which states:

Whenever any person in this state conveys any real property by deed to secure debt to any person loaning or advancing the grantor any money .. . the conveyance of real or personal property shall pass the title of the property to the grantee until the debt or debts which the conveyance was made to secure shall be fully paid.

Based on this provision you contend that when the Second Amended Note was recorded, Borrower “had nothing left to convey and could not create a new lien or encumbrance in favor if its lender; it only modified, with the agreement of its lender, what it had already conveyed.” On this basis you conclude “the amendment in 2021 was not an ‘instrument’ or ‘security instrument’ requiring the payment of intangible tax under O.C.G.A. § 48-6-61.”

Relying on O.C.G.A. § 44-14-60 to avoid the payment of IRT on the additional indebtedness incurred on the Second Amended Note would negate the specific statutory provision governing modification of security instruments. Section 48-6-65(a)(1) of the Official Code of Georgia states: “[T]he tax required by Code Section 48-6-61 shall be due on any portion of the instrument which is an additional advance of indebtedness secured by a previously recorded instrument.” (Emphasis added). The statutory language is clear — if the amount of indebtedness increases, additional IRT is due.

The Georgia Attorney General has likewise concluded that additional indebtedness incurs additional IRT. The Attorney General has stated: “Any long-term note secured by real estate

Intangible Recording Tax Protest and Claim for Refund for Security Deed, recorded 7 iii April 22, 2022 Page 3

evidencing indebtedness beyond the remaining balance of the original indebtedness is subject to the tax imposed by [the statute] on the amount of the new or additional indebtedness.” 1963-65 Ga. Op. Att’y Gen. 654; see also 1960-61 Ga. Op. Att’y Gen. 519 (“[IRT] is imposed upon the amount of the indebtedness, the total amount of the note. The tax is not upon the instrument securing the note, nor upon the value of the real estate security.”’).

Your position contradicts the specific statutory provision governing the payment of IRT upon the modification of security instruments. IRT in the amount of $i was due and payable on the Second Amended Note.

Sincerely,

Domenick Capetocte

Dominick Capotosto
Deputy General Counsel

cc: P| Clerk of Superior Court