Because Florida does not impose a state income tax on individuals, the imposition of documentary stamp and non-recurring intangible personal property taxes on Florida real estate loan transactions is one way that the State provides for additional revenue. Some real estate loan transactions, however, can be structured in a way that results in a reduced or no payment of documentary stamp and intangible taxes.
Loans secured by Florida real estate are generally taxable. Documentary stamp taxes on notes or other promises to pay are payable at the rate of $.35 for every $100 (or fraction) of indebtedness secured by a mortgage on Florida real property. Non-recurring intangible personal property taxes are payable at the rate of $.002 times the amount of the indebtedness secured by a mortgage on Florida real property.
Sometimes a refinancing lender will agree to structure a transaction so that its borrower does not incur additional documentary stamp and intangible taxes that otherwise would be payable on a “new” note and mortgage (e.g., where the prior note was “paid in full” and the prior mortgage satisfied of record). It may do that by agreeing to take an assignment of the existing note and mortgage (there being no taxes payable on an assignment by one lender to another). An advantage to the lender in taking an assignment is that it preserves the priority of the lien (from the date the mortgage was filed), assuming there is no novation (which may result from an extinguishment of the existing mortgage). The lender and borrower can then amend and restate the note and mortgage, and, as long as the amended and restated note qualifies as an exempt renewal note (e.g., the note is executed only by the original maker, and the note changes the interest rate, maturity date, or payment schedule without enlargement of the existing principal balance), no additional taxes will be payable. If the renewal note increases the existing balance of a note secured by Florida real property, then additional documentary stamp and intangible taxes may be payable only on the increased amount of the renewal note above the original face amount of the existing note (in the case of a revolving loan) or the outstanding balance of the existing loan (in the case of a term loan).
A note made or delivered in Florida and secured by a leasehold mortgage will be subject to documentary stamp taxes but is not subject to the non-recurring intangible tax. The leasehold interest is considered personal property, and, until the elimination of the annual recurring intangible tax, was subject to that tax. However, if the borrower owns and mortgages the improvements on the leasehold property (which are considered part of the real property), non-recurring intangible taxes will be payable on the proportion that the value of the improvements bears to the combined value of the leasehold interest and the improvements, unless the mortgage provides that the lender must look first to the leasehold to satisfy the debt before enforcing its lien on the improvements. If the latter case, the mortgage would not be subject to the non-recurring intangible tax.
There are many nuances, exceptions and limitations when it comes to calculating documentary stamp and non-recurring intangible taxes and it is best to consult with your attorney when entering into or modifying loans secured by Florida real property.