Findings Of Fact Stipulated Facts Findings contained in paragraphs 1-28, were stipulated to by the parties. Gary D. Miller and Katherine A. Miller made a note to Southeast Bank (Southeast) dated March 27, 1990, in the stated amount of $80,000 (the Note). Gary D. Miller and Katherine A. Miller (the Millers) executed a Future Advance Note, Modification and Cross-Collateralization Agreement (the Mortgage) in favor of Southeast dated March 27, 1990, and recorded in Volume 4178, page 2981, of the official records of Orange County, Florida. Southeast was doing business and in good standing on March 27, 1990. The Note was consolidated with a promissory note made by the Millers dated June 7, 1988 in the stated amount of $350,000 and replaced by a Consolidated Replacement Note dated April 9, 1991, in the stated amount of $371,250 (the Consolidated Note). The Consolidated Note was defined and secured in a Mortgage Modification Agreement between Southeast and the Millers dated April 9, 1991 and recorded at volume 4278, page 0065 of the official records of Orange County, Florida. Southeast was doing business and in good standing on April 9, 1991. First Union National Bank of Florida (First Union) is the owner and holder of the Note, the Consolidated Note and the Mortgage identified in paragraphs 1,2, and 4 above. The Department timely assessed documentary stamp taxes on the Note. The assessment covers the Consolidated Note. There is no evidence that documentary stamps are attached or affixed to the Note, the Consolidated Note or the Mortgage. No documentary stamp tax were paid on the Note, the Consolidated Note or the Mortgage. The Office of the Comptroller of the currency declared Southeast insolvent and appointed the FDIC as receiver for Southeast on September 19, 1991. The FDIC, as receiver, became the owner and holder of all of the promissory notes and mortgages formerly held by Southeast. The FDIC (as Receiver of Southeast, and corporately) and First Union entered into an Assistance Agreement dated September 19, 1991, under which the FDIC, as Receiver, sold and assigned to First Union the Consolidated Note and the Mortgage. The FDIC, as Receiver, executed an Assignment of Mortgage, subsequently filed in volume 588, page 589, of the official records of Orange County, Florida. First Union is not the same entity as Southeast (by name or otherwise). First Union purchased no portion of the stock ownership of Southeast, rather First Union purchased only those assets and liabilities of Southeast detailed in the Assistance Agreement. Under terms of the Assistance Agreement, First Union expressly assumed only certain specified liabilities. First Union did not expressly assume any liabilities of Southeast relating to payment of taxes under Chapter 201, Florida Statutes. Under the terms of the Assistance Agreement, the FDIC and First Union contractually agreed that the FDIC would indemnify First Union for "costs, losses, liabilities, expenses, judgments, fines and amounts paid in settlement reasonably incurred in connection with claims against" First Union based upon a liability of Southeast that was not expressly assumed by First Union. A claim entitling First Union to indemnification from the FDIC under the terms of the Assistance Agreement is a claim for a liability for "taxes" of Southeast. The definition of "taxes" in the Assistance Agreement includes stamp taxes imposed by states, including interest and penalty. By a Notice dated January 5, 1995, Respondent issued an Official Request for Information to "Southeast Bank, National Association, First Union Bank/Barbara H. Smith." On March 1, 1995, Respondent issued to "Southeast Bank, NA, First Union Bank, N.A." a Notice of Intent to Make Documentary Stamp Tax and Discretionary Surtax Audit (the Notice of Audit). The Notice of Audit was received by First Union on March 22, 1995. First Union timely responded to the Notice of Audit by letter dated May 31, 1995, stating that "any transaction prior to September 19, 1991, which might precipitate liability becomes the responsibility of the FDIC." Respondent treated the May 31, 1995 letter of First Union as a protest of the audit. On June 20, 1995, Respondent issued to "Southeast Bank, N.A.-First Union Bank, N.A." a Notice of Proposed Assessment of $150.00 representing tax and interest on the original $80,000 note of March 27, 1990, or an assessment of tax and interest on the Consolidated Note. Southeast Bank remains under the receivership of the FDIC. Additional Facts FDIC's sale of the Note and Consolidated Note to First Union under terms of the September 19, 1991 Assistance Agreement imbued First Union with ownership rights inclusive of the right to receive payments of principal and interest on the Note and Consolidated Note, as well as the right to foreclose on the makers of the Note and Consolidated Note for nonpayment. Neither the Note or Consolidated Note qualify for exemption from documentary stamp taxes levied pursuant to provisions of Chapter 201, Florida Statutes. Documentary stamp taxes constitute an excise tax on documents, as opposed to a tax on the underlying transaction.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered upholding Respondent's full assessment of tax and penalty against Petitioner. DONE and ENTERED in Tallahassee, Florida, this 25th day of June, 1996. DON W. DAVIS, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of June, 1996. APPENDIX In accordance with provisions of Section 120.59, Florida Statutes, the following rulings are made on the proposed findings of fact submitted on behalf of the parties. Petitioner's Proposed Findings Petitioner's proposed findings (other than the 28 paragraphs of stipulated findings of fact) consisted of seven paragraphs denominated by letters A-G. No citation to the record was included in these proposed findings. Accordingly, the proposed findings, while reviewed and addressed to the extent possible by the foregoing findings of fact, are rejected. Respondent's Proposed Findings 1.-28. Stipulated facts adopted. 29.-32. Adopted, although not verbatim. COPIES FURNISHED: William W. Gallogly, Esquire First Union Corporation Legal Division 225 Water Street Jacksonville, Florida 32202 Scott M. Covell, Esquire Dept. of Legal Affairs The Capitol - Tax Section Tallahassee, Florida 32314-6668 Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue in this proceeding is whether the Petitioners are entitled to refund of documentary stamp taxes paid pursuant to Sections 201.01 and 201.08 Florida Statutes.
Findings Of Fact Both Petitioners are limited partnerships validly existing and in good standing under the laws of the State of Florida. (Petitioner's exhibits No. 1 and No. 5.) Sugar Creek Business Center Phase I, Ltd. ("Sugar Creek") As to this Petitioner, the parties have further stipulated: On or about March 27, 1986, Petitioner and First Union National Bank, a national banking association, with its principal office located in Charlotte, North Carolina (the "Lender"), entered into a certain Construction Loan Agreement (the "Loan Agreement"). Pursuant to the Loan Agreement, Lender agreed to make and Petitioner agreed to accept a loan in the amount of $6,300,000.00 (the "Loan") to be used solely for the purpose of paying for the cost of developing and constructing a commercial building in Charlotte, Mecklenberg County, North Carolina. The Lender retained the law firm of Fowler, White, Gillen, Boggs, Villareal & Banker, P. A., Post Office Box 1438, 501 E Kennedy Boulevard, Suite 1700, Tampa, Florida 33602, as its Florida counsel in connection with closing the Loan. Petitioner retained the law firm of Peirsol, Boroughs, Grimm, Bennett & Griffin, Professional Association, Post Office Box 3309, Orlando, Florida 32802, as its counsel in connection with closing the Loan. On or about March 27, 1986, the General Partners of Petitioner executed a promissory note in the amount of $6,300,000.00 payable to Lender (the "Note"), a Deed of Trust and Security Agreement securing the Note in favor of Gibson L. Smith, Jr. Trustee, and First Union National Bank, Beneficiary (the "Mortgage"), and all other loan closing documents pursuant to the Loan Agreement. The Mortgage encumbers only land and the improvements thereon located in Charlotte, Mecklenberg County, North Carolina and was filed in the Public Records of Mecklenburg County, North Carolina on March 27, 1986, subsequent to closing upon the Loan Agreement. The proceeds of the Loan evidenced by the Note and secured by the Mortgage were used solely to develop and construct a commercial building upon the land encumbered by the Mortgage in Charlotte, Mecklenburg County, North Carolina. Florida documentary stamps were purchased from the area office of the Department of Revenue located in Tampa, Florida on May 1, 1986 and affixed to the Note to evidence payment of Florida documentary stamp tax with respect to the Note in the amount of $9,450.00 pursuant to Sections 201.00 and 201.08, Florida Statutes. (Petitioner's Exhibit No. 1) John Simpson, Jr., Esquire of Peirsol, Boroughs, Grimm, Bennett and Griffin, P. A. represented Sugar Creek in the purchase of property and the acquisition and closing of construction financing for improvements. The loan documents were mailed to him. He gave them to his client in Orlando, who signed and delivered them back to him in escrow. Simpson took the documents to Charlotte, North Carolina, for the closing on or around March 27, 1986. The purchase of property and loan closed simultaneously and the funds were disbursed in Charlotte. (Testimony of John Simpson, Jr., Esquire) One Dezavala Center, Ltd. As to this Petitioner, the parties have stipulated: On or about July 30, 1985, Petitioner and the First National Bank of Chicago, a national banking association, with its principal office located in Chicago, Illinois (the "Lender"), entered into a certain Construction Loan Agreement (the "Loan Agreement"). Pursuant to the Loan Agreement, Lender agreed to make and Petitioner agreed to accept a loan in the amount of $6,600,000.00 (the "Loan") to be used solely for the purpose of paying for the cost of developing and constructing four commercial buildings located in San Antonio, Bexar County, Texas. The Lender retained the law firm of Holland & Knight, 1200 Brickel Avenue, Post Office Box 015441, Miami, Florida 33101, as its Florida counsel in connection with closing the Loan. Petitioner retained the law firm of Peirsol, Boroughs, Grimm, Bennett & Griffin, Professional Association, Post Office Box 3309, Orlando, Florida 32802, as its counsel in connection with closing the Loan. On or about July 30, 1985, the General Partners of Petitioner executed a promissory note in the amount of $6,600,000.00 payable to Lender (the "Note"), a Deed of Trust, Mortgage, and Security Agreement securing the Note in favor of Harry M. Roberts, Jr., Esquire, Trustee (the "Mortgage"), and all other loan closing documents as required under the Loan Agreement. The Mortgage encumbers only land and the improvements thereon located in San Antonio, Bexar County, Texas and was filed in the Public Records of Bexar County, Texas on August 1, 1985, subsequent to closing upon the Loan Agreement. The proceeds of the Loan evidenced by the Note and secured by the Mortgage were used solely to develop and construct four commercial buildings on the land encumbered by the Mortgage in San Antonio, Bexar County, Texas. Florida documentary stamps were purchased from the area office of the Department of Revenue located in Miami, Florida on August 5, 1985, and affixed to the Note to evidence payment of Florida documentary stamp with respect to the Note in the amount of $9,900.00 pursuant to Sections 201.00 and 201.08 Florida Statutes. John Simpson, Jr., Esquire, also represented One Dezavala in the closing for the acquisition of the property and the loan. The note and other loan documents were signed in Orlando by Petitioner's General Partners. The documents were given to the lender's Florida Counsel in escrow, who sent the documents to the lender's Texas counsel. Closing on the acquisition of property and the loan took place simultaneously in San Antonio, Texas and the funds were disbursed in San Antonio. (Testimony of John Simpson, Jr., Esquire) Photocopies of the notes and stamps were admitted as Exhibits No. 3 and No. 7. The parties, by oral stipulation at the final hearing, agreed that before the Comptroller could be compelled to issue a Final Order authorizing the refund of such money as may properly be found owing Petitioners, Petitioners would make available to the Comptroller or his representatives, for inspection, cancellation and/or obliteration, the original documentary stamps forming the basis for the request for refund.
Findings Of Fact The facts in this case are undisputed. On April l6, 1976, petitioner Arthur J. Coyle and his wife Katie Coyle, became the sole shareholders of Sara- Wolf, Inc., a Florida Corporation, whose assets consisted of an apartment building in Miami Beach, Florida. Thereafter, the Coyles decided to transfer the corporate assets to themselves as individuals. They were advised by their attorney that, in view of the 1975 decision of the First District Court of Appeal in Florida Department of Revenue v. DeMaria, 321 So 2d 101 (Fla. 1st DCA 1975) in a similar factual situation, no state documentary stamp tax would be due on the transaction. Therefore, relying upon that judicial decision, petitioner and his wife proceeded to execute a quit claim deed of the corporate real estate to themselves on May 13, 1976, and file the same in the public records of Dade County, Florida, on May 18, 1976, with payment of only nominal documentary stamp tax. The decision of the District Court of Appeal had been stayed by the Supreme Court on December 8, 1975. Subsequent to the decision of the Supreme Court in the DeMaria case on October 14, 1976, which quashed the lower court's decision, respondent issued a notice of proposed assessment of documentary stamp tax in the amount of $526.50 based on a taxable consideration of $175,500, less 30 cents tax paid, for a total tax due of $526.20 plus a like amount as a penalty, and $42.00 in interest, for a total asserted liability of $1,094.40. (Testimony of petitioner, Exhibits 1-3)
Recommendation That the proposed assessment of $1,094.40 against petitioner Arthur J. Coyle and Katie Coyle is valid and should be enforced. DONE and ENTERED this 31st day of May, 1977 in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Robert A. Glassman, Esquire 903 Biscayne Building 19 West Flagler Street Miami, Florida 33130 Edwin J. Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304
Findings Of Fact Charles Schwartz, an unlicensed building contractor built several houses in St. Lucie County including the house now owned by Salvatore and Cecelia Patti. In early 1976, Schwartz was in serious financial trouble and after commencing construction of the house here involve and placing a mortgage in the amount of $29,600 on the property on February 20, 1976, found himself unable to make the mortgage payments. This mortgage provided for interest payments only until June 20, 1976 when both principal and interest payments would start. Patti had done work as a subcontractor for Schwartz and was aware Schwartz was anxious to dispose of the property subject to the above mortgage. In April, 1976, before the house was completely finished, Patti purchased the house from Schwartz but didn't obtain a deed or assignment of mortgage until a later date. Patti agreed to assume the mortgage and complete the unfinished work as consideration for transfer of the property. Schwartz advised Patti that he, Schwartz, would record the warranty deed and have it sent to Patti. This deed was recorded on June 1, 1976 and documentary stamp taxes in the amount of $0.30 and surtax stamps in the amount of $0.55 were placed on the deed. When Patti received a copy of the recorded deed he paid no attention to the documentary stamps that had been placed on this instrument. After recording the warranty deed upon the representation to the clerk that the property consisted of unimproved land, Schwartz left town and numerous creditors "holding the bag". Schwartz had also advised Patti that the ad valorem taxes for 1976 had been paid on the property. Patti learned in late 1976 that these taxes had not been paid and to remove the lien thereby created against the property in January, 1977 he redeemed the tax certificates sold for these taxes. Patti's first information that proper documentary stamp taxes had not been placed upon his deed was contained in NOTICE OF PROPOSED ASSESSMENT dated November 19, 1976 (Exhibit 1) which showed an assessment for documentary stamps in the amount of $86.70, penalty $86.70 and interest in the amount of $4.48 for a total of $177.88. Since Petitioner acknowledged the accuracy of the assessment of $86,70 this amount is found to be the proper assessment.
Findings Of Fact The facts in this case are derived from the exhibits submitted into evidence at the hearing and the testimony of petitioner H.R. Thornton, Jr. The pertinent documents show that a portion of a lot located in the toxin of St. Cloud, Florida, owned by Garold D. Doak, Sr. and Susan E. Doak, his wife, was mortgaged by the Doaks to Peachtree Mortgage Corporation on December 28, 1972, in the amount of $16,850.00. On January 4, 1973, Peachtree Mortgage Corporation assigned the Mortgage to the Hamilton Federal Savings and Loan association of Brooklyn, New York. On February 6, 1976, a lis pendens was filed against the property by the assignee of the mortgage in the Circuit Court of the Ninth Judicial Circuit of Osceola County, Florida, incident to an action to foreclose the mortgage. On March 15, 1976, the Doaks executed quitclaim deeds on the property to Stephene J. Houseman. On April 6, 1976, a final judgement of foreclosure was entered in the Circuit Court of the Ninth Judicial Circuit in favor of Hamilton Federal Savings and Loan Association of Brooklyn, New York. (Exhibit 1-6) On April 27, 1976, Houseman executed a quitclaim deed on the property to petitioners. On April 30, 1976, the Thorntons conveyed their interest in the property by warranty deed to Jaiies Francis Wiczorek and Shirley Lillian Wiczorek, his wife. The deed recited that it was subject to the outstanding mortgage to Hamilton Federal Savings and Loan Association with a principal balance of sec. 16,224.52 which the grantees agreed to assume and pay. The deed further recited a consideration of $4,000.00 and documentary stamp tax in an appropriate amount was paid based on a consideration which included the cash payment and the mortgage amount. On July 30, 1976, the mortgage in question was satisfied. (Exhibits 8-10) Only minimal documentary stamp tax of thirty cents was paid on the quitclaim deed from Houseman to petitioners. Respondent issued a notice of proposed assessment of additional documentary stamp tax in the amount of $48.60, surtax in the amount of $17.60, penalties in like amounts, and interest thereon, for a total of $158.51, on March 21, 1977. The proposed assessment was based on consideration stated to be the existing mortgage on the property in the amount of $16,224.52. On April 29, 1977, petitioners filed their petition for an administrative hearing, challenging the proposed assessment on the grounds that there was no evidence to show the taxable consideration as found by respondent. By an amended and revised notice of proposed assessment, dated April 29, 1977, the amount for documentary surtax, penalty and interest thereon was deleted leaving only the sums relating to documentary stamp tax, penalty, and interest in the amount of $102.30. (Exhibit 8) Petitioner H.R. Thornton, Jr. took the quitclaim deed in question to cancel a $100.00 debt owed him by Houseman. He had no intent to make the mortgage payments or payments or pay any other consideration for the transfer. (Testimony of Thornton)
Recommendation That petitioners be held liable for payment of documentary stamp tax, penalty and interest under Chapter 201, Florida Statutes, as modified herein with respect to the penalty. Done and Entered this 29th day of August, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Daniel C. Brown, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 H. R. Thornton, Jr., Esquire Post Office Box 345 St. Cloud, Florida 32769
Findings Of Fact On May 8, 1986, Petitioner filed with the Department of Revenue, as agent for the Comptroller, an application for documentary stamp tax refund in the amount of $16,125.00. Subsequently, the Department of Revenue recommended that the application be denied and on November 24, 1986, the Comptroller issued an Order denying the application. Thereafter Petitioner duly requested an Administrative Hearing pursuant to the provisions of Chapter 120, Florida Statutes, and such hearing was duly conducted by William J. Kendrick, Hearing Officer for the Division of Administrative Hearings, on April 13, 1987, in Tallahassee, Florida. On June 10, 1987, Hearing Officer Kendrick issued his Recommended Order in which he separately stated Findings of Fact and Conclusions of Law and recommended that the application be approved. Copies of that Recommended Order have been furnished to all parties. Petitioner has filed no exceptions to the Recommended Order as of the date hereof, however, the Assistant Attorney General, representing the Comptroller in this matter, has filed exceptions to paragraph 5 of the hearing officer's Conclusions of Law which reads as follows. The tax imposed by Section 201.08, Florida Statutes, is levied on a written obligation to pay money, not on a security interest. Under the provisions of Section 201.09(2), a security interest (mortgage) is not subject to taxation if the written obliga- tion to pay money (promissory note) is exempt from the tax. Therefore, whether the transac- tion is exempt is dependent upon whether there was any material change in the promissory note and the renewal note, and not whether there as any material change in the mortgage. Since, in the instant case, there was no material change between the original promissory note and the renewal note, it follows that the subject transaction is exempt from the tax levied by Section 201.08, Florida Statutes. The Findings of Fact as determined by the Hearing Officer were by stipulated agreement of the parties filed with the hearing officer on June 8, 1987. Those findings are adopted as the Findings of Fact for this Order and were as follows: On February 2, 1981, a Mortgage and Security Agreement was signed by the proper corporate officers of SNW Corp. ("SNW"), PNW Corp ("PNW"), and KNW Corp. ("KNW"), all Florida Corporations securing a Note in the amount of $22,000,000.00 upon which documen- tary and intangible taxes were paid. On October 1, 1983, an Amendment to the Mortgage was signed by the appropriate corporate officers of SNW, PNW AND KNW. No documentary stamps were affixed to this document. On March 13, 1986, a Second Amend- ment to Mortgage and Security Agreement (the "Second Amendment") was signed by the appro- priate corporate officers of SNW, PNW, KNW, and Kenneth Wolofsky, Individually and as Trustee. The Second Amendment refers to the Mortgage and was intended to "secure that certain Renewal Note" from SNW, PNW AND KNW in the amount of $10,000,000.00. The Renewal Note was executed by Kenneth Wolofsky solely in his corporate capacity on behalf of KNW not individually or as trustee. Petitioner, Chicago Title Company, was acting in its capacity as agent for the borrowers and was responsible for having the Second Amendment to Mortgage and Security Agreement dated March 13, 1986, recorded. Documentary stamps were paid under protest upon recordation of the Second Amend- ment in the amount of $16,125.00. Petitioner filed an Application for Refund from the State of Florida for the documentary stamps paid on the Second Amend- ment which was denied by the Comptroller of the State of Florida. Thereafter, the Peti- tioner sought an administrative hearing.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Petitioner's request for refund in the sum of $16,125.00 be GRANTED. DONE AND ORDERED this 10th day of June, 1987, in Tallahassee, Florida. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The Oakland Building 2900 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of June, 1987. APPENDIX Petitioner's proposed findings of fact 1-6 are addressed in paragraphs 1-6, respectively. Respondent's proposed findings of fact 1-6 are addressed in paragraphs 1-6, respectively. COPIES FURNISHED: Warren R. Tranzenfeld, Esquire Kirkpatrick & Lockhart 1428 Brickell Avenue Forth Floor Miami, Florida 33131 Alan Burns, Esquire Department of Legal Affairs Tax Section, Capitol Building Tallahassee, Florida 32399-1050 Honorable Gerald Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0305 =================================================================
Findings Of Fact This case comes on for consideration based upon the request of the Petitioner, Fanpac Corporation, for a formal administrative hearing on the question of the propriety of the December 8, 1976 assessment, A-54, of the Respondent, State of Florida, Department of Revenue. The claimed assessment pertains to an assignment of lease, recorded at Book 4182, Page 562, Public Records, Duval County, Florida. The assessment states that documentary stamp tax is owed in the amount of $5,404.50, together with accrued interest and a penalty in the amount of the claimed documentary stamp tax. The assessment also states that documentary surtax is owed in the amount of $370.15, together with accrued interest and a penalty in the amount of the claimed documentary surtax. In furtherance of the consideration of the case, the parties have submitted a factual stipulation to be examined by the undersigned in arriving at the terms of the recommended order. Quoting from the stipulation it states:
Recommendation It is recommended that the compromise agreement entered into by the parties, that the Petitioner pay documentary stamp tax and documentary surtax and interest on those amounts in the aggregate of $6,519.06 be accepted. It is further recommended that penalties in the amount of 25 percent of $5,404.50, documentary stamp tax, together with a penalty in the amount of 25 percent of $370.15 documentary surtax, be imposed. DONE AND ENTERED this 7th day of November, 1977, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Paul M. Harden, Esquire Smith, Davenport, Peek and Bloom 2601 Gulf Life Tower Jacksonville, Florida 32207 Daniel C. Brown, Esquire Assistant Attorney General Department of Revenue The Capitol Tallahassee, Florida 32304 John D. Moriarty, Esquire Department of Revenue Room 104, Carlton Building Tallahassee, Florida 32304 ================================================================= AGENCY FINAL ORDER =================================================================
The Issue By this petition, American Foam Rubber Distributors, Inc. (AFRD) and Edward Rothbard seek to have the Department of Revenue's assessment for documentary stamp tax and penalties on a transfer of real property by quit claim deed from Edward Rothbard to AFRD set aside. Petitioners contend that the transfer was without consideration and therefore nontaxable under sec. 201.02, F.S. , while Respondent contends that consideration flowed to the grantor by virtue of the grantee making the mortgage payments; and therefore, documentary tax stamps were due on the deed of conveyance computed on the amount of the mortgage at the time of transfer. One witness testified in behalf of Petitioners and four exhibits were admitted into evidence. From the pleadings, interrogatories and evidence presented at the hearing, the facts are largely undisputed and are as follows:
Findings Of Fact Edward Rothbard owns 100 percent of the outstanding stock of AFRD and he has been the sole shareholder and chief executive officer of the company since the company s inception in 1962. On March 9, 1973 the Seaboard Coastline Railroad (SCL) entered into an agreement with AFRD to sell a tract of land in Miami to the latter at an agreed price of $116,978.00 with certain conditions. The principal condition was that the grantee erect a warehouse on the property within one year from the date of the transfer. By deed dated August 23, 1973 the property was conveyed by SCL to Edward Rothbard rather than as per the contract. This deed was apparently delivered in late October, 1973 and the proper documentary stamp tax was paid on this transaction. Mr. Rothbard's testimony that the sole reason for taking the property in his name was to expedite the transaction was not rebutted. In exhibits 1 and 2 copies of letters from SCL dated September 21 and 26, 1973, SCL referred to Rothbard as nominee of AFRD to be grantee of the property. Exhibit 4, the title page of an interim title insurance binder, indicates that the title insurance policy on the property purchased from SCL was intended to be in the name of AFRD. In August, 1974 the building erected on the site for the use and benefit of AFRD was completed and Edward Rothbard mortgaged the property to secure a note in the amount of $550,000.00. His wife also executed the note and mortgage. AFRD occupied the building in September, 1975 and made all mortgage payments to the mortgagee including the first payment. By quitclaim deed executed February 26, 1975 Edward Rothbard conveyed the property here involved to AFRD subject to the mortgage. Minimum documentary tax stamps were placed on this deed. On February 26, 1975 the outstanding balance due on the mortgage was $543,969.59.
The Issue Whether Documentary Stamp Taxes pursuant to Section 201.08(1), Florida Statutes, are due on that part of a written obligation to pay money which purports to renew, extend, restate, modify and consolidate the borrower's pre- existing debt to the same lender, where another part of the written obligation to pay money makes a new or additional loan to the borrower.
Findings Of Fact On October 1, 1981, a "Consolidated and Restated Revolving Loan Agreement" ("Agreement") was executed by Flagship National Bank of Miami ("Bank" or the "lender"), Petitioner (or the borrower), and Alberto Vadia and Rosario Vadia (the guarantors). The Documentary Stamp Tax consequences of this Agreement (and the obligation to pay money which it evidences) are what is at issue here. By this Agreement, the Bank extended a loan, which Petitioner promised to repay, in the principal amount of $1,900,000.00, of which $818,624.69 remained outstanding under previous loans which the Bank had extended to Petitioner under 1971, 1975, and 1978 loan agreements. The balance of the loan -$1,081,375.31 - was a new or additional loan. The Agreement, in pertinent part, provides: Bank, Borrower and Guarantors desire to enter into this Consolidated and Restated Revolving Loan Agreement and the various documents and instruments incorporated herein by reference to increase the maximum principal amount of the loan to One Million Nine Hundred Thousand Dollars ($1,900,000) and extend the term thereof, secured and guaranteed in the same manner as the prior loans and to consolidate into one document the 1971 Agreement, the 1975 Agreement and the 1978 Agreement. This Consolidated and Restated Revolving Loan Agreement and the documents and instruments incorporated herein by reference constitute a complete restatement, modification, amendment and consolidation of the prior agreements to reflect the parties present intentions and agreements regarding such existing debt and the readvance of a previously amortized portion thereof back to Borrower, and not a novation or substitution of a new debt or obligation for an existing debt or obligation. * * * Such advances as Bank shall elect to make pursuant to the credit facility herein agreed to (and all unpaid sums remaining from the 1971, 1975 and 1978 Agreements which indebtedness shall be represented and renewed by such Note) shall be evidenced by a Consolidated Master Revolving Credit Note in the form attached hereto as Exhibit "C," pursuant to which Borrower promises to pay Bank the sums set forth therein together with interest thereon in accordance with the repayment schedule set forth therein, all as more fully set forth therein, the provisions of which Note are incorporated herein by reference. (e.s.) Documentary Stamp Tax in the amount of $1,622.10 has been paid on that portion of the Agreement representing a new loan or advance. (This represents tax at a rate of $.15 per hundred dollars on $1,081,375.31.) Documentary Stamp Tax has not been paid on that portion of the Agreement which restated, renewed, modified, and consolidated the existing debt or outstanding loan balance of $818,624.69 from the previous 1971, 1975 and 1978 loan agreements. The Department claims Petitioner is obligated to pay Documentary Stamp Taxes in the amount of $1,227.90 (at the rate of $.15 per $100 of amount loaned), plus penalty and interest, on the amount of the outstanding loan balance of $818,624.69 from the 1971, 1975 and 1978 agreements. Petitioner claims that the Documentary Stamp Tax does not apply to the outstanding loan balances carried forward from the three prior agreements or notes. (Petitioner, however, no longer maintains that it is entitled to a refund of Documentary Stamp and Intangible Tax previously paid, as alleged in its initial request for hearing.)
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department enter a final order assessing Documentary Stamp Tax in the amount of $1,227.90, plus penalties and interest authorized by statute. DONE and ENTERED this 14th day of March, 1986, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of March, 1986. COPIES FURNISHED: Francis Marion Pohlig, Esquire 2121 Ponce de Leon Boulevard Suite 240 Coral Gables, Florida 33134 Linda S. P. Lettera, Esquire Department of Legal Affairs Tax Section, Capitol Building Tallahassee, Florida 32301 =================================================================
The Issue The issue in this unadopted-rule challenge is whether Respondent, in connection with the administration of the stamp tax, has formulated a statement of general applicability for allocating undifferentiated, lump-sum payments made in purchase- and-sale transactions involving joint real estate/personal property transfers; which meets the statutory definition of a rule but has not been adopted pursuant to the rulemaking procedure; and, as used by Respondent, has the effect of creating an entitlement to collect tax on 100% of the undifferentiated consideration.
Findings Of Fact On February 23, 2015, Petitioner 1701 Collins (Miami) Owner, LLC ("Taxpayer"), a Delaware limited liability company, entered into a Purchase and Sale Agreement ("Agreement") to sell a going concern, namely a hotel and conference center doing business in Miami Beach, Florida, as the SLS Hotel South Beach (the "Hotel Business"), to 1701 Miami (Owner), LLC, a Florida limited liability company ("Purchaser"). Purchaser paid Taxpayer $125 million for the Hotel Business. The Hotel Business comprised two categories of property, i.e., real estate ("RE") and personal property ("PP"). The PP, in turn, consisted of two subcategories of property, tangible personal property ("TPP") and intangible personal property ("ITPP"). It is undisputed that the property transferred pursuant to the Agreement included RE, TPP, and ITPP. The sale closed on June 5, 2015, and a special warranty deed was recorded on June 8, 2015, which showed nominal consideration of $10. Pursuant to the Agreement, Taxpayer was responsible for remitting the documentary stamp tax and the discretionary surtax (collectively, "stamp tax"). Stamp tax is due on instruments transferring RE; the amount of the tax, payable per instrument recorded, is based upon the consideration paid for RE. Stamp tax is not assessed on consideration given in exchange for PP. The Agreement contains a provision obligating the parties to agree, before closing, upon a reasonable allocation of the lump-sum purchase price between the three types of property comprising the Hotel Business. For reasons unknown, this allocation, which was to be made "for federal, state and local tax purposes," never occurred. The failure of the parties to agree upon an allocation, if indeed they even attempted to negotiate this point, did not prevent the sale from occurring. Neither party declared the other to be in breach of the Agreement as a result of their nonallocation of the consideration. The upshot is that, as between Taxpayer and the Purchaser, the $125 million purchase price was treated as undifferentiated consideration for the whole enterprise. Taxpayer paid stamp tax in the amount of approximately $1.3 million based on the full $125 million of undifferentiated consideration. Taxpayer paid the correct amount of stamp tax if the entire consideration were given in exchange for the RE transferred to Purchaser pursuant the Agreement——if, in other words, the Purchaser paid nothing for the elements of the Hotel Business consisting of PP. On February 6, 2018, Taxpayer timely filed an Application for Refund with Respondent Department of Revenue (the "Department"), which is the agency responsible for the administration of the state's tax laws. Relying on a report dated February 1, 2018 (the "Deal Pricing Analysis" or "DPA"), which had been prepared for Taxpayer by Bernice T. Dowell of Cynsur, LLC, Taxpayer sought a refund in the amount of $495,013.05. As grounds therefor, Taxpayer stated that it had "paid Documentary Stamp Tax on personal property in addition to real property." Taxpayer's position, at the time of the refund application and throughout this proceeding, is that its stamp tax liability should be based, not on the total undifferentiated consideration of $125 million given in the exchange for the Hotel Business, but on $77.8 million, which, according to the DPA, is the "implied value" of——i.e., the pro-rata share of the lump-sum purchase price that may be fairly allocated exclusively to——the RE transferred pursuant to the Agreement. Taxpayer claims that, to the extent it paid stamp tax on the "implied values" (as determined in the DPA) of the TPP ($7 million) and ITPP ($40.2 million) included in the transfer of the Hotel Business, it mistakenly overpaid the tax.1/ On February 23, 2018, the Department issued a Notice of Intent to Make Refund Claim Changes, which informed Taxpayer that the Department planned to "change" the refund amount requested, from roughly $500 thousand, to $0——to deny the refund, in other words. In explanation for this proposed decision, the Department wrote: "[The DPA] was produced 3 years after the [special warranty deed] was recorded. Please provide supporting information regarding allocation of purchase price on or around the time of the sale." This was followed, on April 2, 2018, by the Department's issuance of a Notice of Proposed Refund Denial, whose title tells its purpose. The grounds were the same as before: "[The DPA] was produced 3 years after the document was recorded." Taxpayer timely filed a protest to challenge the proposed refund denial, on May 31, 2018. Taxpayer argued that the $125 million consideration, which Purchaser paid for the Hotel Business operation, necessarily bought the RE, TPP, and ITPP constituting the going concern; and, therefore, because stamp tax is due only on the consideration exchanged for RE, and because there is no requirement under Florida law that the undifferentiated consideration exchanged for a going concern be allocated, at any specific time, to the categories or subcategories of property transferred in the sale, Taxpayer, having paid stamp tax on consideration given for TPP and ITPP, is owed a refund. The Department's tax conferee determined that the proposed denial of Taxpayer's refund request should be upheld because, as he explained in a memorandum prepared on or around December 27, 2018, "[t]he taxpayer [had failed to] establish that an allocation of consideration between Florida real property, tangible personal property, and intangible property was made prior to the transfer of the property such that tax would be based only on the consideration allocated to the real property." The Department issued its Notice of Decision of Refund Denial on January 9, 2019. In the "Law & Discussion" section of the decision, the Department wrote: When real and personal property are sold together, and there is no itemization of the personal property, then the sales price is deemed to be the consideration paid for the real property. [2] Likewise, when the personal property is itemized, then only the amount of the sales price allocated for the real property is consideration for the real property and subject to the documentary stamp tax. The first of these propositions will be referred to as the "Default Allocation Presumption." The second will be called "Consensual-Allocation Deference." The Department cited no law in support of either principle. In its intended decision, the Department found, as a matter of fact, that Taxpayer and Purchaser had not "established an allocation between all properties prior to the transfer" of the Hotel Business. Thus, the Department concluded that Taxpayer was not entitled to Consensual-Allocation Deference, but rather was subject to the Default Allocation Presumption, pursuant to which the full undifferentiated consideration of $125 million would be "deemed to be the consideration paid for the" RE. Taxpayer timely requested an administrative hearing to determine its substantial interests with regard to the refund request that the Department proposes to deny. Taxpayer also filed a Petition to Determine Invalidity of Agency Statement, which was docketed under DOAH Case No. 19-3639RU (the "Rule Challenge"). In its section 120.56(4) petition, Taxpayer alleges that the Department has taken a position of disputed scope or effect ("PDSE"), which meets the definition of a "rule" under section 120.52(16) and has not been adopted pursuant to the rulemaking procedure prescribed in section 120.54. The Department's alleged PDSE, as described in Taxpayer's petition, is as follows: In the administration of documentary stamp tax and surtax, tax is due on the total consideration paid for real property, tangible property and intangible property, unless an allocation of consideration paid for each type of property sold has been made by the taxpayer on or before the date the transfer of the property or recording of the deed. If the alleged PDSE is an unadopted rule, as Taxpayer further alleges, then the Department is in violation of section 120.54(1)(a). The questions of whether the alleged agency PDSE exists, and, if so, whether the PDSE is an unadopted rule, are common to Taxpayer's separate actions under sections 120.57(1) and 120.56(4), respectively, because neither the Department nor the undersigned may "base agency action that determines the substantial interests of a party on an unadopted rule." § 120.57(1)(e)1., Fla. Stat. Accordingly, the Rule Challenge was consolidated with Taxpayer's refund claim for hearing. It is determined that the Department, in fact, has taken a PDSE, which is substantially the same as Taxpayer described it. The undersigned rephrases and refines the Department's PDSE, to conform to the evidence presented at hearing, as follows: In determining the amount stamp tax due on an instrument arising from the lump-sum purchase of assets comprising both RE and PP, then, absent an agreement by the contracting parties to apportion the consideration between the categories or subcategories of property conveyed, made not later than the date of recordation (the "Deadline"), it is conclusively presumed that 100% of the undifferentiated consideration paid for the RE and PP combined is attributable to the RE alone. According to the PDSE, the parties to a lump-sum purchase of different classes of property (a "Lump—Sum Mixed Sale" or "LSMS") possess the power to control the amount of stamp tax by agreeing upon a distribution of the consideration between RE and PP, or not, before the Deadline.2/ If they timely make such an agreement, then, in accordance with Consensual-Allocation Deference, which is absolute, the stamp tax will be based upon whatever amount the parties attribute to the RE. If they do not, then, under the Default Allocation Presumption, which is irrebuttable, the stamp tax will be based upon the undifferentiated consideration. The Department has not published a notice of rulemaking under section 120.54(3)(a) relating to the PDSE. Nor has the Department presented evidence or argument on the feasibility or practicability of adopting the PDSE as a de jure rule. It is determined as a matter of ultimate fact that the PDSE has the effect of law because the Department, if unchecked, intends consistently to follow, and to enforce compliance with, the PDSE. Because, in the Department's hands, the PDSE creates an entitlement to collect stamp taxes while adversely affecting taxpayers, it is an unadopted rule.
