What tax base applied when $29 million of out-of-state notes were secured by a Florida mortgage that capped recovery at $6.125 million?

Plain-English summary

Two loans totaled $29 million and were documented, closed, and retained outside Florida. A Florida parcel also secured the debt, but the recorded mortgage expressly limited the lender's recovery from that property to $6.125 million, its stipulated appraised value.

Florida ruled that documentary stamp tax and nonrecurring intangible tax were each due only once on the $6.125 million recovery cap. The governing multistate-mortgage rule used the limited-recovery amount when a mortgage secured a larger debt but expressly restricted enforcement.

No additional documentary stamp tax was due on the promissory notes because they were executed, delivered, and kept outside Florida.

What this means for you

The mortgage's enforceable recovery language can determine the Florida tax base. Confirm that the limitation is explicit, review where the notes are executed and delivered, and distinguish the tax on the recorded Florida security instrument from tax on the underlying notes.

Common questions

Was tax based on the full $29 million? No, it was based on $6.125 million.

Was the tax payable repeatedly for the same debt? No. The ruling applied it once to the limited secured amount.

Why was no additional note tax due? The notes were executed, delivered, and retained outside Florida.

Citations and references

• Fla. Stat. §§ 199.133 and 201.08, as applied in the advisement
• Fla. Admin. Code r. 12B-4.053(31)(b) (multistate mortgages and limited recovery)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 08M-001

Original ruling text

SUMMARY
QUESTION: Are documentary stamp tax and nonrecurring intangible tax due only one time on
the amount of an out-of-state note secured by a mortgage recorded in Florida that limits recovery
under the note, which is substantially less than the total debt?
ANSWER: Yes, since the mortgage specifically limits recovery to less than the amount of the
indebtedness secured, the documentary stamp tax and nonrecurring intangible tax is due based on
the limited recovery amount specified in the Mortgage.
May 6, 2008
Re:

Technical Assistance Advisement No. 08M-001
Documentary Stamp Tax and Nonrecurring Intangible Tax –
Out-of-State Notes Secured by Florida Property
Sections 199.133, 201.08, F.S., Rule 12B-4.053, F.A.C.
XXX (“Lenders")
XXX (“Borrower”)
XXX (“Mortgagor”)

Dear:
This is in response to the request for a Technical Assistance Advisement dated February
21, 2008, asking for a determination as to the taxability of two loans evidenced by promissory
notes for documentary stamp tax and nonrecurring intangible tax.
Facts Presented by the Petitioner
There will be two loans from the Lenders to the Borrower. The first loan will be
evidenced by promissory notes in the aggregate principal amount of $4,000,000 (collectively the
“Mortgage Note”); the second loan will be evidenced by term promissory notes in the aggregate
principal amount of $25,000,000 (collectively the “Term Note”), for a total indebtedness of
$29,000,000 (the “Loan”).
The Mortgagor is granting a mortgage to the Lenders of a parcel of Florida real property
as collateral security for the Loan (the “Mortgage”). The Loan is also secured by other collateral
outside Florida. The Mortgage states that the enforcement thereof is limited to $6,125,000 at any
one time, which is the appraised value of the mortgaged real estate.

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The Loan is between Delaware and New York entities. The Loan will be closed outside
Florida, and all Loan documents will be executed and delivered to the Lenders outside Florida
and retained by Lenders outside Florida.
The Mortgage provides, in pertinent part:
. . .The security of the Mortgage shall not be satisfied until the last
and final amounts owing under both the Mortgage Note and Term
Note have been received by Mortgagee. The security of the
Mortgage shall not be reduced by any intervening payments on
either the Mortgage Note or the Term Note until such time as the
aggregate principal sums evidenced by the Mortgage Note and
Term Note are less than $6,125,000. So long as the aggregate
principal sum owing under the Mortgage Note and the Term Note
exceeds $6,125,000, any payments on either the Mortgage Note or
Term Note shall not be deemed to be applied against, or to reduce,
the amount secured by this Mortgage. Notwithstanding anything to
the contrary contained herein, Mortgagee’s recovery hereunder
shall be limited to the principal amount of $6,125,000, which is the
stipulated value of the Premises.
Requested Ruling
Your letter requests confirmation that documentary stamp tax and nonrecurring intangible
tax should be calculated on the amount of debt secured by the Mortgage of $6,125,000, which is
substantially less than the total debt, and only payable one time.
Law and Discussion
Section 201.08(1), F.S., provides that for a written obligation to pay money that is made,
executed, delivered, sold, transferred, or assigned in the State, and for each renewal of the same,
the documentary stamp tax shall be $.35 cents on each $100 or fraction thereof of the
indebtedness or obligation evidenced thereby.
Section 201.08(7), F.S., relating to a mortgage, trust deed, or security instrument filed or
recorded in this state given by a taxpayer other than the taxpayer obligated on the primary note,
states in part:
. . . [To] the extent that tax is paid one time on any document
securing the primary note ,. . . such tax shall be paid once,
notwithstanding that more than one mortgage, deed of trust, or
security agreement is recorded with respect to such note . . . .

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Rule 4.053(31)(b), F.S., pertaining to Out-of-State Notes-Secured by Florida Mortgage
recorded in this state encumbering Florida real or personal property, provides in part:
(31) Out-of-State Notes-Secured by Florida Mortgage: A mortgage
recorded in this state encumbering Florida real or personal
property, which is security for an out-of-state note is subject to tax
as follows:
(b) Secured by Multi-State Mortgage: When a note is made in
another state and is secured by a multi-state mortgage recorded in
Florida which describes and pledges the Florida property and the
out-of-state property, tax is due on the mortgage when filed or
recorded in Florida based upon the percentage of indebtedness
which the value of the mortgaged property located in Florida bears
to the total value of all the mortgaged property. However, when the
mortgage limits recovery to less than the amount of the
indebtedness secured, the tax is due on the amount to which
recovery is limited. . . . When the documentary stamp tax due is
based upon the amount to which recovery is limited on a mortgage,
then the mortgage is not required to state the value of the property
in Florida and the other state(s) . . . . (e.s.)
Section 199.133(1), F.S, imposes the nonrecurring tax on notes or other obligations
secured by Florida real property.
Section 199.133(2), F.S., states in pertinent part:
. . . In no event shall the portion of the note . . . which is subject to
the nonrecurring intangible tax exceed in value the value of the real
property situated in this state which is the security.
Department's Position
Based on the statutes and rules, the Department affirms that documentary stamp tax and
nonrecurring intangible tax are due based on the amount of recovery under the Mortgage, which
is limited to $6,125,000, and is payable only one time on this amount. Since the notes will be
executed, delivered, and retained outside Florida, no additional documentary stamp tax will be
due on such notes.
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

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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,

Joy. B. Eldred, CPA
Tax Law Specialist
Technical Assistance and Dispute Resolution
JBE/mh
Record ID: 42261