The State of Florida has preserved a unique, arguably antiquated stream of revenue since 1931. The Florida Documentary Stamp Tax (Stamp Tax) is an excise tax levied upon a variety of documents in Florida. Despite its long history, the Documentary Stamp Tax has continued to receive updates and shows no signs of being repealed in the future. The nuances of the legislation have raised considerable questions and been the subject of much discussion. Despite the breadth of the law and uncertainty as to its applicability in some areas, helpful general guidelines exist regarding:
- the 2017 Florida Statutes;
- documents that "transfer an interest" in Florida real property;
- notes, mortgages, and all other written obligations to pay money; and
- documents generally exempt from the Tax.
The 2017 Florida Statutes
The version of the Documentary Stamp Tax adopted in 2017 imposes taxes on certain types of documents executed, delivered or recorded within the Florida state limits, including:
- documents transferring an interest in Florida real property;
- mortgages and other documents of indebtedness; and
- promissory notes and other written obligations to pay money.
The 2017 Florida Statutes Chapter 201.02(a) provides the applicable tax rates for most instruments related to real property or interests in real property, and Chapters 201.17-201.20 set forth the penalties for failing to pay the required tax, illegally using stamps, and illegally avoiding taxes. The taxes are either paid to the Florida Department of Revenue, or, upon recording, to the County Comptroller or Clerk of the Circuit Court. Additionally, if a party to the transaction is exempt from the tax, the entire burden of payment falls to the non-exempt party.
Documents That "Transfer an Interest" In Florida Real Property
The Stamp Tax is broad and could apply to nearly any transfer of an interest in property. The statutes include under their purview "deeds, instruments, or writings whereby and lands, tenements, or other real property, or any interest therein, shall be granted, assigned, transferred, or otherwise conveyed to or vested." Florida looks to the amount of consideration for the transfer when calculating taxes.
At first glance it appears one might avoid taxes by simply transferring an interest for non-monetary consideration. However, Florida has an expansive definition of consideration so as to prevent loopholes to avoid payment of taxes. Consideration under the Documentary Stamp Tax includes, but is not limited to:
- money paid or agreed to be paid;
- discharge of an obligation;
- personal or real property exchange; and
- a mortgage, purchase money mortgage lien, or other encumbrance with or without assuming underlying debt.
Florida's Department of Revenue has recognized the statutory vagueness and offers questions to pose which may help in determining whether consideration was present during a transfer of interest even in situations where no money changes hands. However, despite the generally inclusive nature of the Stamp Tax, Florida takes the position that conveyances of unencumbered realty as a gift have no consideration and are therefore not taxable.
Notes, Mortgages, and Other Written Obligations to Pay Money
The Documentary Stamp Tax owed on promissory notes, written obligations to pay money, mortgages, nonnegotiable notes, assignments of compensation, and indebtedness evidence is calculated at a rate reduced from the statutory standard for other documents. Florida bases the taxes due on the amount of indebtedness incurred in the instrument and the Stamp Tax applies on both the initial execution, transfer, assignation, or recording and each renewal. If a mortgage secures a note previously subject to the Stamp Tax and the amount due on the previous note was paid, only indebtedness exceeding the aggregate amount upon which tax was previously paid will be subject to taxation.
Chapter 201.08 of the 2017 Florida Statutes also limits the amount of tax that can be collected on a note or written obligation to pay money no matter the amount of indebtedness or obligation evidenced in the document, but does not set a similar cap for mortgages or liens. The tax obligation is due at the time of recordation for documents evidencing indebtedness or obligation.
Documents Generally Exempt from the Stamp Tax
A number of exceptions to the Documentary Stamp Tax are carved out by the 2017 Florida Statutes and the Florida Administrative Code, including:
- transfer of property under threat of eminent domain or condemnation;
- transfer or disposition of real property from a nonprofit organization to state agencies or local government;
- transfer of a deed from an agent to a principal conveying funds purchased for and with funds of the principal;
- reconveyance of realty conveyed to secure a debt upon payment of the debt; and
- transfer of property pursuant to a divorce.
Despite the numerous exemptions to the Stamp Tax, neither the 2017 Florida Statutes nor the Florida Administrative Code codify any exceptions regarding documents transferring real property in Florida for estate planning purposes.
The Divorce Exception
The divorce exception to the Stamp Tax is particularly detailed and sets forth several requirements the parties must satisfy to benefit from the reprieve. To qualify, the deed, transfer, or conveyance must be:
- between spouses or former spouses;
- pursuant to a marriage dissolution;
- occurring after the divorce; and
- be of property that was their marital home or an interest therein at the time of divorce.
Taxes previously paid on a deed, transfer or conveyance will be refunded when the deed was given one year before marriage dissolution. The exemption is only valid for the marital home; other real property requires taxes due based on consideration - including any mortgages on the property.
The Florida Documentary Stamp Tax, despite being an excise tax by name, has embodied more of a transactional nature in regards to its application within Florida. Due to its breadth the Stamp Tax has a powerful economic impact on the State's revenue stream and is an important area of regulation for the Department of Revenue. Though compliance may be cumbersome and require research, the penalties involved for failure to pay or intentional avoidance of the Documentary Stamp Tax suggest diligence is the best approach when dealing with documents in Florida.