Confused By Documentary Stamp Tax and Intangibles Tax? Everyone Else Is, Too!

DocstampLast week I attended a Continuing Legal Education (CLE) seminar on Florida’s documentary stamp tax and non-recurring intangibles tax and I left feeling as though I knew less about about them than when I walked in. Now, of course, that’s not entirely true – a lot of good information was conveyed and I did learn things I didn’t know before. However, it did leave me keenly aware that Florida’s documentary stamp tax and intangibles tax are confusing even to the experts who study them closely.

I don’t really know why they’re so confused. The general rules are pretty simple: (1) any instrument that conveys any interest in real property for consideration is subject to Florida’s documentary stamp tax; and (2) any obligation to pay money that is secured by Florida real property is subject to Florida’s non-recurring intangibles tax.

With regard to documentary stamp tax, deeds, easements and options are just a few of the instruments that convey real property interests that are subject to the doc stamp tax so the list of instruments subject to tax is probably broader than most people realize. But, other than figuring out if a conveyance of a real property interest is occurring it’s all pretty simple.

Well, except that some conveyances are made for no consideration, such as gifts of property, transfers between spouses for estate planning purposes, transfers due to divorce, and so on. And sometimes even if you don’t think there’s any consideration the State has defined certain situations where consideration is “deemed” to have been given even if no money changes hands, so the definition of “consideration” can be confusing. But, really, other than figuring out if a conveyance of a real property interest is occurring and whether consideration is being given or is deemed to have been given, it’s all pretty simple.

Well, except that there’s also a long list of specific exemptions – situations where you would think tax would be due but the State says it’s not. And some of the exemptions aren’t very clear. But, really, other than figuring out if a conveyance of a real property interest is occurring and whether consideration is being given or is deemed to have been given and whether any random exemptions apply, it’s all pretty simple.

Oh, I forgot. Documentary stamp tax is also due on obligations to pay money (such as a promissory note) executed or delivered in the State of Florida. Executed OR delivered. In state. So a borrower and lender can take one step over the state line, sign a note, and no tax is due? Or take a boat out into international waters? True! As long as it is signed AND delivered outside of the State of Florida. So let’s just always do that, right, because we’ll save money, right? Not so fast. The tax is capped at $2,450 if it’s not secured by real estate so travelling out of state is generally not worth the trouble and expense because the cap makes it cheaper to just pay the tax in most cases. Why $2,450? The State is smart enough to have calculated the average cost that a person is willing to tolerate paying before going to all the effort to travel out of state with their banker just to execute and deliver a note. Pretty clever, huh?

[Update Feb. 13, 2014 – Question posed to me: What about an out of state lender with an out of state borrower who wants to sign a note while he’s here on vacation? With no other connection to the State of Florida except that he’s vacationing here. Tax is due because the note was executed in-state. Crazy!]

 Ok, I lied. I understand exactly why everyone is so confused. It’s because, sometimes, Florida’s documentary stamp tax makes no sense whatsoever!

At least Florida’s intangibles tax is pretty easy to understand. If you have an obligation to pay money secured by Florida real property the intangibles tax is due. Period. End of story. I think.

And so it goes. Just call your trusted commercial real estate attorney (hey, maybe that’s me!) if you have questions about Florida’s documentary stamp tax or non-recurring intangibles tax. It’s confusing enough that occasionally he or she (or I) may not have the answer immediately and might have to do a little research to get you the right answer, we might even have to call the Department of Revenue to figure it out, but it will be worth it (a) to save tax where tax can be saved, and (b) to avoid a Florida Department of Revenue inquiry if tax should be paid, but isn’t.

As always, thanks for reading. Please send your questions and comments and SHARE this article with others!

BH

Orlando Real Estate Market On The Rise

Orlando Commercial Real Estate Market Statistics Improving

 

Is now the right time to invest in commercial real estate in Orlando, Florida? The property market, both domestic and commercial, has been highly volatile since the start of the economic crisis. People are scared to invest in anything, particularly commercial properties. Considering the public has little money to spend, investing in commercial property seems incredibly risky, since a large proportion of newly starting businesses fail and go under very rapidly. However, it seems some good news is on the horizon.

After a precipitous decline in 2008 and a faltering recovery since then, the Florida housing market appears to have returned to a growth path this year.

Research economists aren’t sure if this is a true recovery,or rather a quick up tick in prices or part of just the first wave of a full blown recovery. So, it seems that the time to buy commercial properties in Orlando, Florida, is here.

Orlando Is Back in Businesses

A great example that proves the growth in the commercial real estate market in Orlando is found in the Lake Nona area. Whenever you attend this part of the city, you will notice that new businesses have been added and that the face of the area has changed yet again. This is a wonderful positive development .

The Orlando City Council on April 8 approved Lake Nona Land Co. LLC’s master plan for a 17-acre office park near the fast-growing biotech hub of Medical City. The estimated $85 million project includes 570,000 square feet of general office space in three buildings, a 150-room hotel and two 10,000-square-foot restaurants, along with 2,830 parking spaces in two parking structures and surface parking lots.

And that is just part of the good news, as restaurants and shopping centers are also being developed. Residential real estate has already been on the rise for some time now in Lake Nona, but the commercial side of things is now picking up.

Orlando, Florida Commercial Real Estate Statistics

For those who like and understand numbers, the following statistics should help you even further. Various statistics are being collated, with Jones Lang Lasalle  providing regular statistics on offices and industries, to name but a few. According to their research, which is always well received and highly truthful

Orlando’s seasonally adjusted unemployment rate dipped 10 basis points from July to August. At 8.5 percent, Orlando’s Metro unemployment rate dipped to a post-recession low and 190 basis points below its rate one year ago. Moreover, nonfarm payrolls expanded by a moderate pace of the 12 month period as employers added a total of 26,400 new jobs, amounting to a 2.8 percent expansion of nonfarm payrolls.

This is but a part of the positive news however. It seems that the rate of direct vacancies is down, the rate of vacancies is down and the leasing activity is up. Similar pictures are seen across the other areas monitored by Jones Lang and Lasall as well, showing a highly promising future for the young boy. The local economy is becoming stronger and stronger ant his is mainly found in the construction industry, making that a particularly interesting area of commerce and businesses.

A number of companies who held off on investing in commercial real estate in Orlando are now actively considering a number of properties. All the statistics and information tell us that you will be able to get a great deal on your piece of commercial land, whether you want to use it to build your own business, or whether you want to buy it with a business included and rent it out.