Did an out-of-state merger trigger Florida documentary stamp or nonrecurring intangible tax when Florida property and debt passed to the survivor?

Plain-English summary

Florida made the tax result turn on whether the governing law of another state transferred the Florida property and debt to the surviving entity by operation of law. Florida found no blanket statutory exemption for a merger between non-Florida entities.

If the other state's merger law vested real property in the survivor without reversion or impairment, like the Florida merger provisions quoted in the ruling, documentary stamp tax under section 201.02 would not apply to the conveyance. If that law also made the survivor responsible for the merging entity's debts, documentary stamp and historical nonrecurring intangible tax would not apply to the assumption on that basis.

Other paths and limits

The ruling said no nonrecurring intangible tax would be due on an assumption if the original note had been properly taxed, remained outstanding, and no new money was advanced. An assumption executed, signed, and delivered outside Florida could also avoid the section 201.08 documentary stamp tax even without an operation-of-law rule.

But a mortgage or other lien filed or recorded in Florida remained taxable on the full secured obligation. The ruling also imposed continuity and prior-tax requirements on refinancings under section 201.09.

What this means for you

For an interstate merger involving Florida property, examine the governing merger statute, the instruments actually executed, where they are signed and delivered, what is recorded in Florida, whether the original taxes were paid, whether the old obligation survives, and whether new money is advanced.

Common questions

Q: Did Florida recognize a general merger exemption?
A: No. The ruling found no specific blanket exemption for these non-Florida entities.

Q: When could the property transfer avoid documentary stamp tax?
A: When applicable out-of-state law vested the property in the survivor by operation of law.

Q: Could an assumption still be taxed if no operation-of-law rule applied?
A: It could avoid section 201.08 tax if executed, signed, and delivered outside Florida; a Florida-recorded mortgage or lien had separate tax treatment.

Q: Did refinancing automatically qualify?
A: No. The same obligation had to continue, prior tax had to be paid, and the statutory renewal conditions had to be met.

Citations and references

• Fla. Stat. § 199.133 — historical nonrecurring intangible tax
• Fla. Stat. § 201.02 — documentary stamp tax on conveyances
• Fla. Stat. §§ 201.08 and 201.09 — notes, mortgages, assumptions, and renewals
• Fla. Stat. §§ 607.11101, 608.4383, and 620.204 — merger effects discussed in the ruling
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03M-001

Original ruling text

SUMMARY

QUESTION: Is Florida's documentary stamp tax as imposed
under s. 201.02(1), F.S., due on a document conveying
interest in Florida real property and given pursuant to a
merger of two non-Florida artificial entities? Is
Florida's documentary stamp tax as imposed under section
201.08, F.S., and nonrecurring intangible tax as imposed
under s. 199.133, F.S., due on a mortgage assumed by the
surviving entity pursuant to a merger of non-Florida
artificial entities?

ANSWER - Based on Facts Below: There is no specific
provision found in Florida statutes that exempts from
documentary stamp tax a document that conveys an interest
in Florida real property pursuant to a merger or the
assumption of a note pursuant to a merger where neither of
the artificial entities merging is a Florida entity. There
also is no provision found in the Florida statutes that
provides that either transaction, the conveyance of the
property or the assumption of the debt, where neither of
the artificial entities merging is a Florida entity, occurs
by operation of law.

However, the documentary stamp tax imposed under s.
201.02(1), F.S., would not be due on the conveyance of
interest in Florida real property to a surviving entity if
the conveyance is made by operation of applicable law of
another state. If another state's applicable law provides
for real property to become the property of the surviving
entity under a merger without reversion or impairment,
similar to the provisions found in Florida law regarding
mergers, then no documentary stamp tax would be due on the
conveyance.

The documentary stamp tax imposed under s. 201.8(1), F.S.,
and the nonrecurring intangible tax imposed under s.
199.133(1), F.S., would not be due on the assumption of a
debt by the surviving entity if the assumption is made by
operation of applicable law of another state. If another
state's applicable law provides for the debts of the

merging entity to become the debts of the surviving entity
under a merger, similar to the provisions found in Florida
law regarding mergers, then no documentary stamp tax or
nonrecurring intangible tax would be due on the assumption
of the debt.

Sep 02, 2003

Re: Technical Assistance Advisement No. 03M-001
Documentary Stamp Tax and Nonrecurring Intangible Tax
Merger of out-of-state artificial entities resulting in
conveyance of Florida real property and assumption of note.
Sections 199.133, 201.02(1), 201.08(1)(a) and (b),
607.11101, 608.4383, and 620.204, F.S.
XXX ("Corporation I")
XXX ("Titleholder")
XXX ("Shareholder")
XXX ("Financing")
XXX ("General Partner")
XXX ("Limited Partner")
XXX ("Corporation II")
XXX ("Corporation III")
XXX ("Beneficial Owner I")
XXX ("Beneficial Owner II")

Dear :

This is in response to your letter dated May 30, 2003,
requesting a Technical Assistance Advisement regarding
application of Florida's documentary stamp taxes and
nonrecurring intangible tax to documents resulting from the
merger of non-Florida artificial entities.

Facts as Presented by Petitioner

Corporation I, a Maryland corporation, owns manufactured
home communities through a variety of different structures,
which are mandated based upon tax, securities law and financing

considerations. As those considerations change over time, it is
necessary to revise the ownership structure. Set forth below is
a description of a transaction designed to update the legal
ownership of certain real property, while maintaining the same
beneficial ownership.

Titleholder, an Illinois corporation, holds title to
certain real property located in Florida (the "Property").
Shareholder is the sole shareholder of Titleholder. Pursuant to
a nominee agreement with Titleholder, Financing, an Illinois
limited partnership, is the beneficial owner of the Property.
The sole general partner of Financing is General Partner, an
Illinois corporation. The sole limited partner of Financing is
Limited Partner, an Illinois limited partnership. Corporation I
is the sole shareholder of General Partner and is the sole
general partner of Limited Partner. Titleholder and Financing
have entered into certain financing documents, pursuant to which
an indebtedness of $45,000,000 ("Existing Debt") is secured by
the Property.

Pursuant to a plan of merger, Limited Partner will form a
new limited liability company ("New LLC") and shall be its sole
member. Shareholder will transfer her shares of Titleholder to
Limited Partner, thereby causing Titleholder to be a wholly
owned subsidiary of Limited Partner. General Partner will then
transfer its general partnership interest in Financing to New
LLC, thereby causing Financing to be owned by New LLC and
Limited Partner. Limited Partner will cause Titleholder and
Financing to be merged into New LLC, which will be the surviving
entity. As a result, New LLC will be the sole legal and
beneficial owner of the Property, and the sole member of New LLC
will be Limited Partner. Corporation I will cause General
Partner to be dissolved. A copy of the pre-merger ownership
structure was enclosed with your letter as Exhibit "A". A copy
of the post-merger ownership structure was enclosed as Exhibit
"B".

The following entities hold legal title to real property
located in Florida:

1. Corporation II, an Illinois corporation; and

2. Corporation III, an Illinois corporation.

Pursuant to nominee agreements with the above entities, (I)
Beneficial Owner I, an Illinois limited partnership, is the
beneficial owner of the real property owned by Corporation II,
and (II) Beneficial Owner II, an Illinois limited Partnership,
is the beneficial owner of the real property owned by
Corporation III. Shareholder and Limited Partner have the same
role in each proposed merger. Each of the above entities will
be involved in the same type of transaction as Titleholder,
using the same steps as described above. Upon completion of the
transactions, the real property presently titled in the names of
Corporation II and Corporation III will be owned by new limited
liability companies, comparable to New LLC, each wholly-owned by
Limited Partner.

Request for Advisement

Corporation I hereby requests a Technical Assistance
Advisement stating that no documentary stamp taxes are due
pursuant to s. 201.02, F.S., in connection with the mergers
described herein and the resulting transfer of legal and
beneficial title to the subject properties. Further, the
execution of documents by New LLC refinancing or assuming the
Existing Debt shall constitute a renewal exempt from documentary
stamp taxes under s. 201.08, F.S., and intangible taxes under s.
199.133, F.S., assuming all other requirements of s. 201.09,
F.S., are met.

Law and Discussion

Documentary stamp tax, as imposed under s. 201.02(1), F.S.,
is due on any document, including a document that results from a
merger of two or more artificial entities, that conveys an
interest in Florida real property, unless the document is
specifically exempt by statute or the property is first conveyed
by operation of law. The tax is based on the consideration for
the conveyance. Consideration includes, but is not limited to,
the money paid or agreed to be paid; the discharge of an
obligation; and the amount of any mortgage, purchase money
mortgage lien, or other encumbrance on the property. The rate

of taxation is in all counties except Miami-Dade, is 70 cents
for each $100 or fractional part thereof of the consideration
for the conveyance.

Section 201.08(1)(a), F.S., imposes documentary stamp tax
at the rate of 35 cents per hundred dollars of obligation or any
portion thereof, on notes and other written obligations to pay
money, including renewals, which are executed, signed, or
delivered in Florida. Section 201.09(1), F.S., provides an
exemption from the documentary stamp tax on renewals that meet
certain requirements. Renewals that add or substitute an
obligor, such as would be the case under an assumption, are not
exempt from documentary stamp tax under s. 201.09(1), F.S.
Assumptions made pursuant to a merger of artificial entities
would be taxable unless there is a specific law that provides
for an exemption or if the assumption is by operation of law.
Section 201.08(1)(b), F.S., imposes documentary stamp tax on
mortgages or other liens filed or recorded in Florida at the
rate of 35 cents per hundred dollars of the obligation secured
thereby.

Florida's 2 mill nonrecurring intangible personal property
tax, as imposed under section 199.133(1), F.S., is due on the
just valuation of all notes and other obligations to the degree
secured by mortgage or other lien on Florida real property.

Section 608.4383, F.S., provides in pertinent part, as it
relates to the effect of a merger between a domestic limited
liability company and other business entity (which by definition
includes a corporation or a partnership):

(2) The title to all real estate and other property, or any
interest therein, owned by each domestic limited liability
company and other business entity that is a party to the
merger is vested in the surviving entity without reversion
or impairment. The surviving entity shall record a
certified copy of the articles of merger in any county in
which a merging entity holds an interest in real property.

(3) The surviving entity shall thereafter be responsible
and liable for all the liabilities and obligations of each

limited liability company 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.

Section 607.11101, F.S., provides in pertinent part, as it
relates to the effect of a merger between a domestic corporation
and other business entity (which includes by definition a
limited liability company):

(2) The title to all real estate and other property, or any
interest therein, owned by each domestic corporation and
other business entity that is a party to the merger is
vested in the surviving entity without reversion or
impairment. The surviving entity shall record a certified
copy of the articles of merger in any county in which a
merging entity holds an interest in real property.

(3) The surviving entity shall thereafter be responsible
and liable for all the liabilities and obligations of each
domestic corporation 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.

Section 620.204(1)(b), F.S., provides in pertinent part, as
it relates to the effect of a merger between a domestic limited
partnership and other business entity (which includes by
definition a limited liability company):

(1)(b) The title to all real estate and other property, or
any interest therein, owned by each domestic limited
partnership and other business entity that is a party to
the merger is vested in the surviving entity without
reversion or impairment. The surviving entity shall record
a certified copy of the articles of merger in any county in
which a merging entity holds an interest in real property.

(c) The surviving entity shall thereafter be responsible
and liable for all 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.

Documentary stamp taxes, as imposed under s. 201.02 or
201.08, F.S., and nonrecurring intangible tax, as imposed under
s. 199.133, F.S., are not due on documents purporting to convey
an interest in Florida real property nor to assume notes, that
occur as the result of a merger, where the conveyances of
properties and the assumptions of notes have already occurred by
operation of applicable law in the nature of those cited above.
The documentary stamp tax is also not due on assumptions of debt
that are not executed, signed or delivered in Florida. However,
the documentary stamp tax imposed under s. 201.08(1)(b), F.S.,
would be due on a mortgage or other lien that is given to secure
the assumed indebtedness if the mortgage or other lien is filed
or recorded in Florida.

Position of the Department

There is no specific provision found in the Florida
statutes that exempts from documentary stamp tax a document that
conveys an interest in Florida real property pursuant to a
merger or the assumption of a note pursuant to a merger where
neither of the artificial entities merging is a Florida entity.
There also is no provision found in the Florida statutes that
provides that either transaction, the conveyance of the property
or the assumption of the debt, where neither of the artificial
entities merging is a Florida entity, occurs by operation of
law.

The documentary stamp tax imposed under s. 201.02(1), F.S.,
would not be due on the conveyances of interests in Florida real
properties to each New LLC as proposed in your request, if the
conveyances are made by operation of applicable law of another
state. If another state's applicable law provides for real
property to become the property of the surviving entity under a
merger without reversion or impairment, similar to the
provisions of ss. 607.11101(2), 608.4383(2), and 620.204(1)(b),
F.S., then no documentary stamp taxes would be due on the
conveyances.

The documentary stamp tax imposed under s. 201.08(1)(a),
F.S., and the nonrecurring intangible tax imposed under s.
199.133(1), F.S., would not be due on the assumptions of the
debts by each New LLC as proposed in your request, if the
assumptions are made by operation of applicable law of another
state. If another state's applicable law provides for the debts
of the merging entity to become the debts of the surviving
entity under a merger, similar to the provisions of ss.
607.11101(3), 608.4383(3), and 620.204(1)(c), F.S., then no
documentary stamp taxes or nonrecurring intangible taxes would
be due on the assumptions of the debts.

No nonrecurring intangible taxes would be due on the
assumptions even if no provision exists that provides for the
assumptions by operation of law, so long as proper nonrecurring
intangible taxes were paid on the original notes and the notes
are not satisfied and no new monies are advanced.

The documentary stamp tax imposed under s. 201.08(1), F.S.,
would not be due on the assumptions, even if no provision exists
that provides for the assumptions by operation of law, if the
assumptions are executed, signed and delivered outside Florida.
If no provision exists for the assumptions by operation of law
and the assumptions are executed, signed or delivered in
Florida, the maximum tax due on any one assumption would be
$2,450. No cap on the tax due applies to mortgages or other
liens filed or recorded in Florida.

If another state's applicable law provides for the debts of
the merging entity to become the debts of the surviving entity
under a merger, similar to the provisions of ss. 607.11101(3),
608.4383(3), and 620.204(1)(c), F.S., then no documentary stamp
taxes would be due on the refinancing of any debts so long as
proper documentary stamp taxes were paid on the original
obligations, the provisions of s. 201.09(1), F.S., are met and
the obligations are not satisfied prior to or at the time of the
refinancing (the same obligation must continue to exist to avoid
taxation).

If another state's applicable law provides for the debts of

the merging entity to become the debts of the surviving entity
under a merger, similar to the provisions of ss. 607.11101(3),
608.4383(3), and 620.204(1)(c), F.S., then no nonrecurring
intangible taxes would be due on the refinancing of any debts so
long as proper nonrecurring intangible taxes were paid on the
original obligations and the obligations are not satisfied prior
to or at the time of the refinancing (the same obligation must
continue to exist to avoid taxation).

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