A lender that either: (i) finances a loan in the state of Florida, whether or not the loan is secured by Florida real property; or (ii) secures an out-of-state loan with Florida real property collateral should be careful to calculate and collect at closing the amount of documentary stamp tax and intangible tax (if applicable) due and payable to the State of Florida Department of Revenue. Failure to collect the necessary funds at closing could place the lender in the difficult position of having to pay any unpaid tax when the instruments are recorded.
There are two types of tax that the lender should be aware of:
- The “documentary stamp tax” is an excise tax imposed on obligations to pay money. §201.08, Fla. Stat. Documentary stamp tax is collected in an amount equal to 35 cents per $100.00 of the amount financed. The tax applies to all promissory notes, non-negotiable notes and written obligations to pay money, which are “made, executed, delivered, sold, transferred or assigned” in Florida, and for each renewal of the same.
- The “intangible tax” is a nonrecurring tax on intangible personal property levied on obligations for payment of money which are secured by a mortgage or other liens upon real property located in the state of Florida. §199.133, Fla. Stat. Intangible tax is calculated at the rate of 2 mills on each dollar of the just valuation of the note or other obligation for the payment of money which are secured by a mortgage upon real property situated in the state of Florida.
Loan executed in Florida – secured by Florida real property:
- Both documentary stamp tax and intangible tax are due in this scenario. These taxes are due and payable upon recording of the Florida mortgage. There is no ceiling or cap on the amount of tax due.
Loan executed in Florida – not secured by Florida real property
- Only documentary stamp tax will be due since there is no Florida real property collateral. As described above, the documentary stamp tax will be an amount equal to 35 cents per $100.00 of the amount financed unless the loan amount is $700,000.00 or more, in which instance the maximum amount of tax payable is capped at $2,450.00.
Loan executed outside of Florida – secured by Florida real property
- On occasion, a lender will close a loan where the promissory note is made, executed and physically delivered to the Lender outside of Florida but includes Florida real property as secured collateral in addition to other out-of-state collateral. In this situation, both documentary stamp tax and intangible tax will be due upon recording of the mortgage in Florida securing the indebtedness and the amount of the tax due and payable will be determined by a ratio obtained by comparing the value of the Florida real property collateral to the value of all of the collateral of the loan.
- If the mortgage limits recoverability to an amount less than the face amount of the note, then documentary stamp tax is due on the limitation of the mortgage (or the cap of $2,450.00 if the loan amount is $700,000.00 or more and the mortgage is limited to less than that amount). Again, intangible tax will be due at the at the rate of 2 mills on each dollar of the just valuation of the note or other obligation for the payment of money which are secured by a mortgage upon real property situated in the state of Florida. However, in no event shall the portion of the note or other obligation which is subject to the nonrecurring tax exceed in value the value of the real property situated in the state of Florida which is collateral for the loan.
Loan executed out of Florida – not secured by Florida real property (Note: This applies only to Florida lenders.)
- The State of Florida Department of Revenue presumes a note was executed in Florida if the note is made payable to a Florida lender and held in the Florida lender’s files. However, a loan which is not secured by a mortgage recorded in Florida is not subject to documentary stamp tax (or intangible tax) provided the Florida lender can establish that the note, loan agreement, and other documents are made and executed by the borrower outside the state of Florida and physically delivered to the lender outside the state of Florida. The promissory note and other loan documents then may be brought into the State of Florida for safekeeping.
- Proof sufficient to establish that a note is not subject to tax includes: (1) a sworn affidavit made before an out-of-state notary public at the time of signing of the note by the borrower and delivery of the note to the lender attesting that the signing and delivery occurred in the presence of the out-of-state notary; or (2) any other proof that the borrower made, executed, and delivered the note in another state to a Florida lender.
For more information on Florida documentary stamp tax or intangible tax, please contact the attorneys at Starfield & Smith at (407) 667-8811 or (215) 542-7070.