Did adding a general partner make renewed partnership notes and mortgages subject to new Florida stamp or intangible tax?

Plain-English summary

Adding the new general partner did not create a new obligor if the partnership continued as the same entity. On that condition, renewed notes and mortgages owed no new documentary stamp tax under section 201.09 and no additional intangible tax if section 199.145's requirements were met.

Common questions

Q: Did the partner addition itself trigger tax? No, if the partnership remained the identical entity.

Q: Was the draft amendment enough? The conclusion required the fully executed amendment to contain the same continuity provisions.

Citations and references

• Fla. Stat. § 201.09 — renewal notes
• Fla. Stat. § 199.145(4) — intangible-tax renewal treatment
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99M-003

Original ruling text

SUMMARY

The unsigned copy of the partnership agreement submitted
with this request allows for the addition of a partner

without disrupting the continuation of the partnership as

the same entity. Provided the fully executed amendment to
the partnership agreement contains the same provisions, the
partnership will be considered the identical entity after

the addition of the new general partner. Accordingly, the
addition of the new general partner will not constitute a
change in the obligor. Provided the partnership is the
original obligor and provided all other requirements of s.
201.09, F.S., are met, documentary stamp tax will not be
due on the renewal of the note and mortgage. Furthermore ,
the renewal notes and mortgages will not be subject to
additional intangible tax if the requirements of s.

199.145, F.S., are met.

Jul 23, 1999

Re: Technical Assistance Advisement No. 99(M)-003
Documentary Stamp Tax and Intangible Tax - Renewal Notes
and Mortgages
ss. 199.145(4), and 201.09, F.S.

XXX (hereinafter Partnership)
XXX (hereinafter Partner #1)
XXX (hereinafter Partner #2)
XXX (hereinafter Subsidiary)

Dear :

This is in response to your letter dated April 7, 1999,
requesting a Technical Assistance Advisement regarding the
application of documentary stamp tax under the facts and

documents set forth herein.

Facts as Presented by Petitioner

A Partnership was formed, with Partner #1 and Partner #2
each holding a 50 percent interest in the capital and profits of
the partnership. In 1998, the Partnership refinanced two
promissory notes. Each note is secured by a mortgage on real
property located in Florida. Proper tax was paid on the

original notes.

Partner #2 intends to assign one-tenth of one percent of
its 50 percent general partnership interest in the Partnership
to a newly formed wholly-owned Florida subsidiary. After the
assignment, the Subsidiary will become the third general
partner. Partner #1 will hold a 50 percent interest in the
partnership, Partner #2 will hold a 49.9 percent interest, and
the Subsidiary will hold a 0.1 percent interest in the

partnership.

In connection with the assignment, there will be a Sixth
Amendment to the Restated Partnership Agreement, which will
reaffirm that the assignment of the 0.1 percent partnership
interest to the additional partner will not cause a dissolution
of the Partnership. After the addition of the new general

partner, the notes and mortgages will be renewed.

Request for Advisement

You request a Technical Assistance Advisement confirming
that the change in the general partners will not subject the
renewal notes and mortgages to additional documentary stamp or

intangible taxes.

Provisions of Law

Section 201.09(1), F.S., provides that a renewal of any
existing note, which only extends or continues the identical
contractual obligation of the original note, without enlargement
in any way of the note, will not be subject to tax. The renewal
note shall have attached to it a copy of the original note
showing taxes were paid. In order to be exempt, a renewal term
note must not be executed by any person other than the original
obligor and must renew or extend only the unpaid balance of the

original contract and obligation. The renewal of a revolving

note shall not be executed by any person other than the original
obligor and must renew and extend no more than the face of the

note.

Section 199.145(4), F.S., provides that the refinancing of
a note, bond or other obligation with the original obligee or
its assignee is not subject to nonrecurring tax when the tax was
previously paid. To meet the requirements for exemption as a
renewal or refinanced note and mortgage, the principal
obligation of the renewal or refinanced note must be equal to or
less than the unpaid balance of the original note, and the
original obligor must also be liable under the new or renewal

note.

Chapter 620, F.S., the law governing partnerships in
Florida, allows a new partner to be admitted into an existing
partnership. However, whether the partnership may add or change
partners without dissolving or liquidating the business is
determined by the provisions of the partnership agreement. The
Sixth Amendment to the Amended and Restated Partnership

Agreement provides:

6. Continuance of Partnership Agreement. Except as

amended by this Sixth Amendment, the Partnership

Agreement shall remain in full force and effect.

7. Continuance of Partnership and Partnership Business.

Nothing contained in this Sixth Amendment shall be
deemed to cause a dissolution of the Partnership and,

the Managing Partners agree to continue the
Partnership's business operations as conducted
immediately prior to the execution of this Sixth
Amendment as the same entity which existed immediately

prior to the admission of [Subsidiary].

Position of the Department

The unsigned copy of the partnership agreement submitted
with this request allows for the addition of a partner without
disrupting the continuation of the partnership as the same

entity. Provided the fully executed amendment to the partnership

agreement contains the same provisions, the partnership will be
considered the identical entity after the addition of the new
general partner. Accordingly, the addition of the new general
partner will not constitute a change in the obligor. Provided

the partnership is the original obligor and provided all other
requirements of s. 201.09, F.S., are met, documentary stamp tax
will not be due on the renewal of the note and mortgage.
Furthermore, the renewal notes and mortgages will not be subject
to additional intangible tax if the requirements of s. 199.145,

F.S., are met.

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,

Celestine Grantham
Senior Tax Specialist
Technical Assistance and Dispute Resolution

Office of General Counsel

CG/mh