Were an open-end credit application, disclosures, consent, and line agreement stamp-taxable?

Subject

Open-end Credit Agreement

Plain-English summary

The application, disclosure, consent to advance, and line-of-credit agreement were not documentary-stamp taxable by themselves. The application, disclosure, and consent lacked a promise to pay, while the line agreement lacked a sum certain. None expressly incorporated the others.

A separate notice of approval or check could create a taxable obligation if it contained or expressly incorporated documents that together formed a signed obligation to pay a sum certain. The agreement's right-of-setoff language also created a security agreement that would be taxable if filed or recorded in Florida.

What this means for you

Florida examined the face of each document and anything expressly incorporated—not documents connected only by implication or description. Filing and recording could independently matter for security language.

Common questions

Q: Were the four reviewed documents taxable on their own? No.

Q: Could a notice or check change the result? Yes, if the combined expressly incorporated documents created a sum-certain obligation.

Q: Was the right of setoff always taxed? The ruling said it was taxable as a security agreement if filed or recorded in Florida.

Citations and references

• Fla. Stat. § 201.08(1) — written obligations and recorded security instruments
• Fla. Admin. Code r. 12B-4.052(6) — express incorporation of documents
• Fla. Admin. Code r. 12B-4.054(5) — promise not fixed and absolute
• Maas Brothers v. Dickinson, 195 So. 2d 193 (Fla. 1967)
• Lee v. Kenan, 78 F.2d 425 (5th Cir. 1935)
• Plymouth Citrus Growers Association v. Lee, 27 So. 2d 415 (Fla. 1946)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00B4-014

Original ruling text

SUMMARY

QUESTION: Does documentary stamp tax, as imposed under s.
201.08(1), F.S., apply to The Application, State Law
Disclosure Document, Consent to Advance, and Line of Credit
Agreement documents used in connection with a certain line
of credit program?

ANSWER - BASED ON THE FACTS BELOW: The Application, State
Law Disclosure Document, Consent to Advance, and Line of
Credit Agreement documents provided for review are not
taxable in and of themselves since each does not contain a
written obligation to pay a sum certain in money and there
is not language present that expressly incorporates any of
the documents.

Nov 03, 2000

Re: Technical Assistance Advisement No. 00B4-014
Documentary Stamp Tax - Open-end Credit Agreement
Section 201.08(1), F.S.
Rule 12B-4.052(6), F.A.C.
XXX (hereinafter Taxpayer)

Dear:

This is in response to your August 7, 2000, request for a
Technical Assistance Advisement regarding application of
Florida's documentary stamp tax as imposed under s. 201.08(1),
F.S., upon certain documents as attached to your letter.

Facts as Presented by Petitioner

The Application, the State Law Disclosure Document, the Tax
Line of Credit Agreement, and the Consent to Advance, are used
in connection with a certain line of credit program. These
documents may be made, executed, and/or delivered in Florida,
where Taxpayer is the lender.

The Application. The application contains no promise to pay
a sum certain. Furthermore, the Application does not contain
any provision incorporating by reference any document that
contains a promise to pay any amount.

State Disclosure Document. This document provides certain
disclosures that may be required under the laws of various
states. It does not contain any of the three elements of
taxability.

Line of Credit Agreement. The second paragraph of the Line
of Credit Agreement contains a promise to pay the total of all
credit advances and finance charges, together with all costs and
expenses under the Agreement. No specific amount (or "sum
certain") is set forth in the Line of Credit Agreement. Rather,
there is a provision that says the credit limit is shown in the
Notice of Approval, which is not incorporated by reference into
the Line of Credit Agreement. The Notice of Approval is not
executed by the borrower and does not incorporate by reference
the Line of Credit Agreement. In addition, the Line of Credit
Agreement will not be filed or recorded in Florida.

Request for Advisement

You have requested an advisement concerning the taxability
of these documents assuming that they are made, executed, and/or
delivered in Florida.

Your letter states that there are three elements that a
document must contain in order to be subject to Florida
documentary stamp tax: (1) a written promise to pay; (2) a sum
certain and (3) the signature of the borrower, (See Maas
Brothers v. Dickinson, 195 So.2d 193 (Fla. 1967); Lee v. Kenan,
78 F. 2d 425 (5th Cir. 1935); and Plymouth Citrus Growers
Association v. Lee 27 So.2d 415 (Fla. 1946).) Furthermore,
taxability of a document must be determined only from the face
of the document in question and any document that is expressly
incorporated.

Law and Discussion

Section 201.08(1), F.S., imposes documentary stamp tax on
written obligations to pay money that are made, executed, and/or
delivered in this state. To constitute a taxable written
obligation to pay money, the document must contain an
unconditional written obligation to pay a sum certain in money
and be signed by the obligor.

Rule 12B-4.054(5), F.A.C., provides that "[a] written
promise to pay money which is not fixed and absolute at the time
of execution is not subject to tax".

Rule 12B-4.052(6)(b), F.A.C., states in pertinent part:

1. Whether a document is taxable is determined by
   reference to that document and any other document or
   documents expressly incorporated therein.

2. A document does not expressly incorporate another
   document by implication or by mere reference and
   description of the other document.

3. Express incorporation occurs when words in a document
   under examination provide that another document or
   documents are incorporated into the document under
   examination....

Section 201.08(1), F.S., further imposes documentary stamp
tax on "mortgages, trust deeds, security agreements, or other
evidences of indebtedness filed or recorded in this state"....

Position of the Department

The Application, State Law Disclosure Document, and Consent
to Advance documents do not contain a promise to pay; and the
Line of Credit Agreement, though containing a promise to pay
does not contain a sum certain in money. Based on the foregoing
authorities and facts presented, it is the position of the
Department that the Application, State Law Disclosure Document,
Tax Line of Credit Agreement, and Consent to Advance, as
presented for review, are not taxable in and of themselves since

each does not contain a written obligation to pay a sum certain
in money and there is no language present that expressly
incorporates any of the documents. However, a taxable
obligation exists if there is a document, such as the Notice of
Approval form or the check referred to in the Tax Line of Credit
Agreement (which were not submitted with the documents submitted
for review) that contain a written obligation to pay a sum
certain in money. The Notice of Approval form or the check
referred to in the Tax Line of Credit Agreement would be taxable
if they contain language that expressly incorporates any of the
documents reviewed and, when considered together, those
documents contain a written obligation to pay a sum certain in
money.

It is also determined that the language under "Right of
Setoff" (page 4, Line of Credit Agreement and Disclosure)
creates a security agreement and is therefore subject to tax if
filed or recorded 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, your request
and related backup documents 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,

Charles T. Phillips
Senior Tax Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel

CTP/mh