Florida Documentary Stamp Tax

[Guest Yatahay]

Does anyone know if the Florida Documentary Stamp Tax applies to ERISA qualified plans? I have read Florida's statute on the subject and don't see that it was meant to include participant loans form 401(k) plans. However, our recordkeeper says it is mandatory per Florida's statute 201.08.

I don't see it that way.

Thanks.

[Demosthenes]

I agree

"Documentary stamp tax is generally payable by any of the parties to a taxable transaction." Rule 12B-4, Florida Administrative Code, Chapter 201, Florida Statutes

Interest on the loans is not a taxable transaction until distributed. At which time ERISA regs prevail.

[R. Butler]

Our position is that it applies to all loans executed in the state Florida including loans from ERISA plans. The statute doesn't seem to exempt loans from qualified plans & we don't see where there is a preemption issue since ERISA doesn't preclude such a tax.

[R. Butler]

"Documentary stamp tax is generally payable by any of the parties to a taxable transaction." Rule 12B-4, Florida Administrative Code, Chapter 201, Florida Statutes

Interest on the loans is not a taxable transaction until distributed. At which time ERISA regs prevail.

I meant to address this in the previous post. It is our understanding that this refers to situations where there is both an exempt & a nonexempt party. The taxable transaction is the loan itself (it triggers the stamp tax). The clause is saying that if there is an exempt party & a non-exempt party, the non-exempt party is still subject to the tax.

"Documentary stamp tax is generally payable by any of the parties to a taxable transaction. If one party is exempt, the tax is required of the nonexempt party. United States government agencies; Florida government agencies; and Florida's counties, municipalities, and political subdivisions are exempt from documentary stamp tax...."

[Demosthenes]

Still have to disagree. There's always this golden oldie

Title 29 Chapter 18 Sub-chapter I Subtitle B part 5 § 1144 Other laws

Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003 (a) of this title and not exempt under section 1003 (b) of this title.

Since there's no provision for a stamp tax in ERISA...

On a more practical level having worked in the state of FL and worked for organizations that serviced Plans and participants in FL, I have never applied the documentaty stamp tax. Mostly because I don't believe it's applicable but also how do you put the stamp tax language language into the Plan document? What about multi-state employers?

I also think it's an Abignale kind of thing

[R. Butler]

Reasonable minds can disagree.

[WDIK]

Reasonable minds, equally informed, seldom disagree.

(or so I've heard)

[R. Butler]

how do you put the stamp tax language language into the Plan document? What about multi-state employers?

Again I failed to address in the previous post. We have one employer where this applies. It is a multi-state employer. We do have a clause in that loan document that says something to the effect that loans initiated in Florida are subject to the Documentary Stamp Tax. The stamp tax is assessed at the rate of $.35 per $100 or any fraction thereof.

[rcline46]

As to the ERISA thing - ERISA permits plan loans, but loan notes must be enforceable under state law and are NOT an ERISA document. Therefore they are a state document.

Since they are a state document, they must follow state rules. The plan is an exempt party, but the borrower is not. Therefore the documentary tax applies. We do not put this into the plan docs nor in the SPD as it is NOT a plan item.

Why don't you check directly with the attorneys at Corbel or other pension document firm in Florida?

[Guest Yatahay]

Thanks everyone for your responses. This matter, which is new to us, has gotten the fur up on a good number of my customer's necks who believe ERISA preempts state law and the law is unenforceable.

[mbozek]

How can the FLA tax authority enforce this law on a plan loan if the plan is exempt from tax and does not require that the participant pay the tax, e.g., out of state plan with no FLA contacts. Since notes are not filed in FLA under UCC there is no way the FLA tax authorities would know of its existance.

[Guest rocnrols2]

It may be a little while since the last post, but this caugh my interest. I extensively researched this issue 10 years ago and almost all of the cases involving state tax laws have held no ERISA preemption. Much of the reasoning was that it was a traditional state law function and if the tax were not quite confiscatory, this led to the conclusion of no preemption. In addition, the US Supreme Court has narrowed the scope of ERISA preemption considerably. I also researched state law on the application of the tax. It would only apply to participants who are Florida residents. If you make arrangements to have the partiicpant sign the note in Georgia or other neighboring states, and most likely, have it notarized to prove it was executed outside of Fla. then it is possible to evade the tax.

[justanotheradmin]

https://revenuelaw.floridarevenue.com/LawLibraryDocuments/2000/07/TIP-38278_487282ff-105d-48b9-8df7-4a4d989faa2a.pdf

This publication is old, but I'm wondering if any portion has been challenged what the outcome has been in the 18 years since it was published.