Did a surviving Florida limited partnership become a new obligor for documentary stamp tax when it renewed a note and mortgage after merger?

Plain-English summary

The surviving Florida limited partnership was not treated as a new obligor, so the qualifying note and mortgage renewal remained exempt from documentary stamp tax. Under the merger statute, the predecessor's obligations became the survivor's obligations by operation of law.

The ordinary renewal conditions still applied. The original note showing proper tax payment had to be attached, only the unpaid balance could be renewed, and no obligor other than the merger survivor could be added. The recorded mortgage modification also had to identify the merger basis for the change.

What this means for you

A statutory merger did not itself break renewal treatment. But the exemption depended on preserving the existing debt rather than creating a new obligation, adding debtors, or increasing the renewed principal.

Common questions

Q: Was the survivor a new obligor? No.

Q: Was the renewal automatically exempt? No. All other section 201.09(1) requirements still had to be met.

Q: Could a new third-party obligor sign? No, not under the ruling's exemption analysis.

Citations and references

• Fla. Stat. §§ 201.08(1) and 201.09(1) — tax on notes and renewal exemption
• Fla. Stat. §§ 620.201(2) and 620.204(1)(c) — limited-partnership merger and surviving obligations
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02B4-001

Original ruling text

SUMMARY

QUESTION: Is documentary stamp tax, as imposed by s.
201.08(1), F.S., due on the renewal of a promissory note
and mortgage by a Florida limited partnership that survived
a merger where the merging entity and original obligor and

mortgagor was a Delaware limited partnership?

ANSWER - Based on Facts Below: No. Florida's documentary

stamp tax, as imposed under s. 201.08(1), F.S., applies to
the renewal of written obligations to pay money executed in
Florida. Section 201.09(1), F.S., exempts from documentary
stamp tax, renewals of written obligations to pay money
executed in Florida if there are no new obligors and all

other requirements of s. 201.09(1), F.S., are met. It is

the Department's position that, pursuant to s.

620.204(1)(c), F.S., obligations of an entity merging under
s. 620.201, F.S., become by operation of law the

obligations of the surviving entity. Therefore, the

renewal of a note and the modification of a mortgage
securing that note, by the surviving entity under such
merger, are not deemed to be changing obligors and are not
subject to documentary stamp tax as imposed under s.
201.08(1), F.S., so long as all other requirements of s.

201.09(1), F.S. are met.

Jan 03, 2002

Re: Technical Assistance Advisement No. 02B4-001
Documentary Stamp Tax - Renewal of a Promissory Note and
Mortgage pursuant to a merger of a XXX limited partnership
into a Florida limited partnership
Sections 201.08(1), 201.09(1), 620.201(2), and
620.204(1)(c), F.S.

XXX ("Taxpayer")

Dear:

This is in response to your letter dated October 12, 2001,
requesting a Technical Assistance Advisement regarding
application of Florida's documentary stamp tax as imposed under
s. 201.08(1), F.S., upon a proposed renewal of a promissory note
and mortgage by a Florida limited partnership that survived a
merger. The merging entity, a XXX limited partnership, would be

the original obligor and mortgagor.

Facts as Presented by Petitioner

Taxpayer is a limited partnership existing under the laws
of the state of XXX. Taxpayer was formed for the purpose of
owning and operating a XXX. Taxpayer presently owns
approximately XXX acres of real estate, all located in XX,
Florida. Taxpayer has executed a promissory note and mortgage
encumbering the real estate and other property. Taxpayer paid
documentary stamp taxes in full at the time the mortgage was

recorded.

Taxpayer intends to become a Florida limited partnership by
virtue of merging into a newly formed Florida limited

partnership. Taxpayer intends to take the following steps:

A. The general partner and limited partner of Taxpayer (the
"Partners") shall form a limited partnership in Florida
(hereinafter "FLA LP") and the ownership interests and
percentages of the partners shall be the same in the Florida

limited partnership as they are in the XXX limited partnership.

B. Pursuant to a plan of merger under s. 620.201, F.S., which
will be approved by all the Partners of Taxpayer and FLA LP, as
provided under s. 620.202, F.S., and XXX law, FLA LP shall
deliver to the Department of State, Articles of Merger executed
by the general partner of Taxpayer and FLA LP (i.e., the same

general partner).

C. After the merger, the current Partners of Taxpayer will be

the same general partner and limited partner of FLA LP.

D. Taxpayer, as FLA LP, after the merger, may renew its existing

promissory note and mortgage in a renewal which would otherwise

comply with the exemption under s. 201.09(1), F.S.

Request for Advisement

You request that the Department rule whether documentary
stamp tax, as imposed under s. 201.08(1), F.S., would be due on
step D. of the above stated facts, if FLA LP were to renew the
promissory note and mortgage encumbering the real estate and

other property following the merger of Taxpayer.

Law and Discussion

Section 201.08(1), F.S., provides in pertinent part:

On promissory notes, nonnegotiable notes, written
obligations to pay money, or assignments of salaries,
wages, or other compensation made, executed, delivered,
sold, transferred, or assigned in the state, and for each
renewal of the same, the tax shall be 35 cents on each $100
or fraction thereof of the indebtedness or obligation

evidenced thereby...

Section 201.09(1), F.S., provides in pertinent part:

When any promissory note is given in renewal of any
existing promissory note, which renewal note only extends
or continues the identical contractual obligations of the
original promissory note and evidences part or all of the
original indebtedness evidenced thereby, not including any
accumulated interest thereon and without enlargement in any
way of the original contract and obligation, such renewal
note shall not be subject to taxation under this chapter if
such renewal note has attached to it the original
promissory note with the proper notation thereon as
required by s. 201.133. In order to be exempt from
taxation under this section, a renewal note evidencing a
term obligation shall not be executed by any person other
that the original obligor and must renew and extend only
the unpaid balance of the original contract and

obligation....

Florida's documentary stamp tax, as imposed under s.
201.08(1), F.S., applies to all notes or other written
obligations to pay money, and all renewals of obligations to pay
money, that are made, executed, and/or delivered in this state
and on mortgages, trust deeds, security agreements, or other
evidences of indebtedness filed or recorded in this state.
Pursuant to s. 201.09(1), a renewal note is not subject to
documentary stamp tax if tax was paid on the original note and
the original note is attached to the renewal, there are no new
obligors, and only the unpaid balance is renewed (for a term

note).

Section 620.201(2), F.S., allows for a domestic partnership
to merge with or into one or more other business entities, which
by definition includes limited partnerships, formed or organized

in any other state.

Section 620.204(1)(c), F.S., provides that when a merger
under s. 620.201, F.S., becomes effective the "surviving entity
shall thereafter be responsible and liable for all the
liabilities and obligations of each domestic limited partnership
and other business entity that is a party to the merger,
including liabilities arising out of the rights of dissenters

with respect to such merger under applicable law."

Position of the Department

It is the Department's position that obligations of an
entity merging under s. 620.201, F.S., become by operation of
law the obligations of the surviving entity. Therefore, the
renewal of a note and the modification of a mortgage securing
that note, by the surviving entity under such merger, are not
deemed to be a change of obligors and are not subject to
documentary stamp tax as imposed under s. 201.08(1), F.S., so

long as all other requirements of s. 201.09(1), F.S., are met.

Based upon the above cited statutes, it is the Department's
position that the renewal note resulting from the merger
provided in your facts, and the recorded mortgage securing the
renewal note, do not require documentary stamp tax so long as

all other requirements of s. 201.09(1), F.S., are met (i.e., the

original note evidencing proper tax paid is attached to the
renewal, and only the unpaid balance is renewed). This assumes
that no obligors that did not execute the original documents
(other than the surviving entity) execute the renewal documents.
The recorded mortgage modification should note that the
modification is the result of a merger under s. 620.201, F.S.,

and that documentary stamp tax, as imposed under s. 201.08(1),

F.S., is not due pursuant to s. 620.204(1)(c), F.S.

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
Tax Law Specialist
Technical Assistance and Dispute Resolution

Office of General Counsel

CTP/mh