Which documents in a bank's open-end line-of-credit program were subject to Florida documentary stamp tax?

Subject

Open-End Credit Agreement

Plain-English summary

The bank's acceptance letter and waiver were not taxable, and the line agreement was not taxable while unrecorded because it did not state a fixed sum-certain obligation. The documents could not be combined by implication; section 201.08(6) required express incorporation before another writing could supply missing taxable terms.

The modification changed the maximum line amount and was expressly incorporated into the line agreement, but it still did not establish the actual amount outstanding. The Department concluded that the line agreement and modification became taxable if recorded in Florida, using the maximum loan amount as the tax base.

What this means for you

Florida documentary stamp tax turns on the face of the signed document and writings it expressly incorporates. Documents belonging to one credit arrangement are not automatically read together.

Common questions

Q: Was the bank's acceptance letter taxable? No; the borrower did not sign it.

Q: Was the waiver taxable? No; it contained no promise to pay.

Q: What happened if the line agreement or modification was recorded? It was taxable based on the maximum loan amount.

Citations and references

• Fla. Stat. § 201.08(1) and (6) — written obligations, recorded security instruments, and express incorporation
• Fla. Admin. Code r. 12B-4.052(6)(b)2. — express incorporation
• Fla. Admin. Code r. 12B-4.054(5) — promise not fixed and absolute at execution
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01B4-002

Original ruling text

SUMMARY

QUESTION: Are documents used by the Bank in its line of
credit program subject to imposition of the documentary
stamp tax?

ANSWER - BASED ON FACTS BELOW: A document must contain
three elements 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. When
there are multiple documents involving the same contract or
obligation, the document must expressly incorporate another
document in order to be taxable. The Line Agreement,
Acceptance Letter and the Waiver do not contain an
unconditional written obligation to pay a sum certain in
money, signed by the obligor, nor do any of these documents
expressly incorporate terms of the other documents. The
Line Agreement and the Modification are taxable if recorded
in Florida based on the maximum loan amount under the line
of credit.

Jan 09, 2001

Re: Technical Assistance Advisement No. 01B4-002
Documentary Stamp Tax/Open-End Credit Agreement
Section 201.08(1), (6), F.S.
Rules 12B-4.052(6)(b)2., 12B-4.054(5), F.A.C.
XXX (Bank)

Dear :

This is in answer to your request for a Technical
Assistance Advisement on the following question:

Are the enclosed documents used by the Bank in its line of
credit program subject to imposition of documentary stamp taxes?

Private Client Line Agreement (the "Line Agreement-

Individuals");

Private Client Line Agreement (the "Line AgreementTrusts");

Waiver of Conflict of Interests, Acknowledgment and
Amendment (the "Waiver");

Private Client Line Acceptance Letter (the "Acceptance
Letter"); and

Modification to Private Client Line Agreement (the
"Modification").

Facts Presented by Taxpayer

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. You believe that none of the above-referenced
documents are subject to Florida documentary stamp taxes.

Line Agreements: Section 3 of each Line Agreement contains
a promise to pay the aggregate of all loans made under the Line
Agreement, plus interest and other charges. No specific amount
(or "sum certain") is set forth in the Line Agreements. There
is a reference to a credit limit in Section 1, but the actual
dollar amount of the credit limit is not established with
certainty in the Line Agreements. No other document, except for
the Modification, that is executed by the Borrower expressly
incorporates the Line Agreements or vice versa.

Acceptance Letter: The Acceptance Letter is an
acknowledgment by the Bank of the approval of the credit
facility and is not executed by the Borrower. It does not
contain any of the three elements of taxability mentioned above.

Waiver: The Waiver is designed to amend a customer's
securities account agreement in order to acknowledge a
customer's waiver of any potential conflict of interest.

Modification: The Modification is used to increase or
decrease the maximum amount of an existing line of credit. It
does not contain a statement of any specific amount outstanding
under the line of credit. It is executed by the Bank and the
Borrower.

Discussion and Law

Section 201.08(1), 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.

Section 201.08(6), F.S., provides that taxability of a
document pursuant to this section shall be determined solely
from the face of the document and any separate document
expressly incorporated into the document. Taxability of a
document pursuant to this section shall not be determined by
reference to any separate document referenced, or forming part
of the same contract or obligation, unless the separate document
is expressly incorporated into the document.

Rule 12B-4.052(6)(b) 2., F.A.C., provides that a document
does not expressly incorporate another document by implication
or by mere reference and description of the other document.

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

Department's Position

The Line Agreement does not, by itself, constitute a
written obligation to pay a sum certain in money. It does
however, grant a security interest in specified collateral.
Provided it is not recorded, the Line Agreement is not taxable
itself.

The Acceptance Letter is not taxable itself. This document
is an acknowledgment by the Bank of the approval of the credit

facility and is not executed by the Borrower.

The Waiver does not contain a promise to pay and does not
expressly incorporate another document as part of the writing.

The Modification is used to change the maximum amount of an
existing line of credit. This document contains language
whereby it is expressly incorporated into the Line Agreement.
However, like the Line Agreement, the Modification does not
establish with certainty the actual dollar amount of the credit
line. This Modification is not taxable unless it is recorded in
Florida.

The Line Agreement, Acceptance Letter and the Waiver do not
contain an unconditional written obligation to pay a sum certain
in money, signed by the obligor, nor do any of these documents
expressly incorporate terms of the other documents. Therefore,
these three documents are not subject to the documentary stamp
tax under s. 201.08(1), F.S. The Line Agreement and the
Modification are taxable if recorded based on the maximum loan
amount under the line of credit.

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 advise 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,

Baldan E. Sulker
Senior Tax Specialist
Technical Assistance & Dispute Resolution
Office of General Counsel

BES/mh