Current Landscape of the Florida Documentary Stamp Tax

  • Real estate
  • 9/5/2023

The Florida documentary stamp tax is an excise tax levied on certain property transfers. The documentary stamp tax triggers whenever there is a conveyance of an inte...

The Florida documentary stamp tax is an excise tax levied on certain property transfers. The documentary stamp tax triggers whenever there is a conveyance of an interest in real property to a purchaser for consideration. After a real property conveyance occurs, Florida assesses the documentary stamp tax on the document that memorialized the transfer (i.e., the deed, mortgage, easement contract), and the amount of the stamp tax is based on the consideration paid. Consideration is not just the money paid for the sale; rather, it includes any amounts relating to discharged obligations such as mortgages, liens, or any other encumbrance.

Most commonly, documents conveying real property are taxed at a rate of $0.70 per every $100 of consideration; however, Miami-Dade imposes an incremental tax of $0.60 per every $100 of consideration. When no monetary consideration is paid, Florida utilizes the value of the property transferred as consideration.

As an example, ABC Partnership, which owns real property in Alachua County with a fair market value of $5,000,000, transfers the property to its subsidiary, XYZ Partnership. At the time of transfer, the property is encumbered by a mortgage note payable in the amount of $3,000,000 and the property secures a line of credit with an outstanding balance of $700,000. Since there was no monetary consideration for the transfer, the documentary stamp tax is calculated with a base of $3,700,000 (the mortgage note payable of $3,000,000 plus the line of credit balance of $700,000). Therefore, the documentary stamp tax due in this example would be $3,700,000 / 100 x $0.70 = $25,900.

There are several statutory and judicially developed exceptions to the documentary stamp tax. From a statutory perspective, taxes do not apply when (1) the property transfer is between spouses or former spouses as part of a divorce settlement or property settlement agreement, or (2) the transfer is a proper conveyance of homestead property between spouses. From a judicial perspective, the exceptions are much broader.

First, in Kuro, Inc. vs. the Florida Department of Revenue, a father and son jointly owned an unencumbered parcel of property and transferred the property to a corporation that was owned by the same father and son. No additional stock was issued in exchange for the property transferred, but the Florida contended that documentary stamp taxes were due based on the fair market value of the property because the corporation issued new shares prior to the transfer. In ruling that no documentary stamp tax was due, the Florida Court of Appeals ruled that because there was no consideration given at the time of the exchange and the equitable ownership remained the same (between the father and the son), only a nominal amount of documentary stamp tax should be applied. Seven years after this decision, Florida expanded its policy to charge a nominal documentary stamp tax amount when the transfer is from individuals to a limited liability company.

Second, in Crescent Miami Center, LLC vs. the Florida Department of Revenue, a parent company transferred a tract of real property to its wholly owned subsidiary in order to separate the property from the parent company’s other assets and in order to secure financing. According to the deed, the subsidiary paid $10 and other good and valuable consideration for the property. Although Florida initially imposed, and the taxpayer paid, a documentary stamp tax in the amount of $1,212,750, the Florida Supreme Court issued a unanimous decision that a transfer of real estate to its wholly owned transferee, absent any exchange of value, is not subject to the documentary stamp tax. Therefore, the taxpayer was entitled to a refund of the entire amount of tax previously paid.

Thanks to Brian Zingaretti for writing this blog post! State and local tax professionals like Brian understand the tax laws associated with property conveyances and can work with owners to minimize tax liabilities and/or evaluate potential refunds of documentary transfer taxes previously paid.

This blog contains general information and does not constitute the rendering of legal, accounting, investment, tax, or other professional services. Consult with your advisors regarding the applicability of this content to your specific circumstances.

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