How were Florida nonrecurring intangible and documentary stamp taxes calculated on a loan secured by real and personal property?

Plain-English summary

The closing attorney correctly calculated both taxes, but they used different bases. The loan was secured by Florida real property worth less than the full note and by tangible personal property.

Nonrecurring intangible tax applied only to the part of the obligation secured by the Florida real property, and the taxable portion could not exceed that property's fair market value. Documentary stamp tax applied to the full amount of the note made or executed in Florida, with the tax paid when the mortgage was recorded.

The Department also said Chapter 199 did not create or limit the parties' mortgage lien merely because intangible tax was paid on the lower real-property value. Nor did that chapter decide whether the lender could sue on the full note; it addressed mortgage-lien enforcement when required tax had not been paid.

What this means for you

A mixed-collateral loan can have a smaller nonrecurring-intangible-tax base than its documentary-stamp-tax base. That tax allocation does not, by itself, define the lender's substantive lien or collection rights.

Common questions

Q: What limited the intangible-tax base? The portion secured by Florida real property, capped by that property's fair market value.

Q: What amount received documentary stamp tax? The full indebtedness evidenced by the in-state note.

Q: Did paying intangible tax only on the real-property value cap the mortgage lien? Not under Chapter 199; the Department said other law governed that question.

Citations and references

• Fla. Stat. §§ 199.133 and 199.135 — nonrecurring intangible tax and enforceability
• Fla. Stat. § 199.262 — tax lien
• Fla. Stat. § 201.08(1) — documentary stamp tax on notes and mortgages
• Fla. Admin. Code r. 12C-2.004(2) — obligation exceeding Florida real-property value
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02M-004

Original ruling text

SUMMARY

QUESTION 1: Did the closing attorney properly account for
the nonrecurring intangible tax and documentary stamp tax
as set forth on the documents provided?

ANSWER 1 - Based on Facts Below: Based upon the information
given the calculation of the nonrecurring intangible tax
and amount paid at the time of recording the mortgage is
correct. As to the application of the documentary excise
tax the correct amount was paid at the time of recording
the mortgage.

QUESTION 2: By paying intangible tax for only the value of
the real property, does the statute limit the lien of the
mortgage to the value of the real property?

ANSWER 2 - Based on Facts Below: The provisions of Ch. 199,
F.S., do not establish mortgage liens. Such liens are
established under other provisions of Florida Statues not
administered by the Florida Department of Revenue. The
only lien established in Ch. 199, F.S., is a lien for an
outstanding tax liability. (See s. 199.262, F.S.)

QUESTION 3: May the note be properly sued upon for the full
amount of the outstanding principal at this time, if like
the mortgage, the outstanding principal amount is in excess
of the value of the real property?

ANSWER 3 - Based on Facts Below: The propriety of bring an
action in court for the collection of a sum of money is not
determined by the Intangible Personal Property Tax Act, Ch.
199, F.S. Chapter 199, F.S., only prohibits enforcement of
the mortgage lien in cases were the tax was not properly
paid on the amount of the obligation secured by lien on
Florida real property.

May 21, 2002

Re: Technical Assistance Advisement No. 02M-004
Intangible Personal Property Tax and Documentary Stamp Tax
Mortgages - Date Tax is Due - Calculation of Tax
ss. 199.133, 199.135 and 201.08, F.S.
XXX (Lender)
XXX (Borrower)
XXX (2nd Mortgage Lender)

Dear :

This letter is in response to your request for a Technical
Assistance Advisement with regard to the application of the
nonrecurring intangible personal property tax to a mortgage
secured by real property and personal property.

Taxpayer's Statement of Facts

Lender agreed to loan money to Borrower, a Florida
Corporation. The basis for the loan was a mortgage on personal
property and real property to be purchased by Borrower. The
attorney who handled the closing stated on the face of the
mortgage that the real estate which served as collateral had a
value less than the amount of the loan. The basis for this
statement was that Borrower was purchasing the property for the
stated amount. Under the Small Business Administration program,
Lender loaned the full amount of the note to Borrower and took
as collateral, in addition to the real estate, a security
interest in tangible property located in Florida. Borrower
executed a promissory note in the full amount of the loan.

When it came time to record the mortgage, the closing
attorney represented to the clerk of court that the mortgage was
for the security of the full loan amount and, therefore, paid
documentary excise tax on the full amount of the loan. As to
the nonrecurring intangible personal property tax, tax was paid
to the clerk of the court based upon an amount equal to the
portion of the loan amount secured by the real property value.
The closing attorney handled the transaction per s. 199.133,
F.S.

Requested Ruling

Based upon the information you have supplied, rulings on
the following questions have been requested.

1. Did the closing attorney properly account for the
   nonrecurring intangible tax and documentary stamp tax
   as set forth on the documents provided?

2. By paying intangible tax for only the value of the
   real property, does the statute limit the lien of the
   mortgage to the value of the real property?

3. May the note be properly sued upon for the full amount
   of the outstanding principal at this time if, like the
   mortgage, the outstanding principal amount is in
   excess of the value of the real property?

Provisions of Florida Statutes and Administrative Code

Section 199.133, F.S., states:

(1) A one-time nonrecurring tax of 2 mills is hereby
imposed on each dollar of the just valuation of all
notes, bonds, and other obligations for payment of
money which are secured by mortgage, deed of trust, or
other lien upon real property situated in this state.
This tax shall be assessed and collected as provided
by this chapter.

(2) The nonrecurring tax shall apply to a note, bond, or
other obligation for payment of money only to the
extent it is secured by mortgage, deed of trust, or
other lien upon real property situated in this state.
Where a note, bond, or other obligation is secured by
personal property or by real property situated outside
this state, as well as by mortgage, deed of trust, or
other lien upon real property situated in this state,
then the nonrecurring tax shall apply to that portion
of the note, bond, or other obligation which bears the
same ratio to the entire principal balance of the
note, bond, or other obligation as the value of the

real property situated in this state bears to the
value of all of the security; however, if the security
is solely made up of personal property and real
property situated in this state, the taxpayer may
elect to apportion the taxes based upon the value of
the collateral, if any, to which the taxpayer by law
or contract must look first for collection. In no
event shall the portion of the note, bond, or other
obligation which is subject to the nonrecurring tax
exceed in value the value of the real property
situated in this state which is the security. The
portion of a note, bond, or other obligation which is
not subject to the nonrecurring tax shall be subject
to the annual tax unless otherwise exempt.

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

(1) 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. On
mortgages, trust deeds, security agreements, or other
evidences of indebtedness filed or recorded in this
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.
Mortgages, including, but not limited to, mortgages
executed without the state and recorded in the state,
which incorporate the certificate of indebtedness, not
otherwise shown in separate instruments, are subject
to the same tax at the same rate. When there is both a
mortgage, trust deed, or security agreement and a
note, certificate of indebtedness, or obligation, the
tax shall be paid on the mortgage, trust deed, or
security agreement at the time of recordation. A
notation shall be made on the note, certificate of
indebtedness, or obligation that the tax has been paid
on the mortgage, trust deed, or security agreement....

The mortgage, trust deed, or other instrument shall
not be enforceable in any court of this state as to
any such advance unless and until the tax due thereon
upon each advance that may have been made thereunder
has been paid.

Department's Response to Requested Rulings

Requested Ruling 1. Based upon the information given, it is
determined that the calculation of the nonrecurring intangible
tax and amount paid at the time of recording the mortgage is
correct. The provisions of s. 199.133(2), F.S., limit the amount
of value subject to nonrecurring intangible tax to the portion
of the obligation secured by the real property. However, in no
case can the amount of the obligation secured by the mortgage
exceed the fair market value of the real property. In Rule 12C2.004 (2), F.A.C., several examples are given to demonstrate
this application of the nonrecurring intangible tax to an
obligation secured by a mortgage on Florida real estate that has
a fair market value less than the amount of the obligation
secured by the mortgage.

As to the application of the documentary excise tax, the
correct amount was paid at the time of recording the mortgage.
Documentary excise taxes are paid on the full amount of the
indebtedness evidenced by a note that is made or executed in
this state. Where both a note and mortgage are recorded in the
public records the full amount of tax is paid to the clerk of
court, and a notation is made on the note that tax was paid on
the mortgage.

Requested Ruling 2. The provisions of Ch. 199, F.S., do not
establish or limit mortgage liens. Such liens are established
under other provisions of Florida Statues not administered by
the Florida Department of Revenue. The only lien established in
Ch. 199, F.S., is a lien for an outstanding tax liability. (See
s. 199.262, F.S.)

Requested Ruling 3. The propriety of bringing an action in
court for the collection of a sum of money is not determined by
the Intangible Personal Property Tax Act, Ch. 199, F.S. Chapter

199, F.S., only prohibits enforcement of the mortgage lien in
cases where the tax was not properly paid on the amount of the
obligation secured by lien on Florida real property.

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,

J.V. Parramore, Jr.
Revenue Program Administrator
Technical Assistance and Dispute Resolution
Office Of General Counsel

JVP/mh