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A Taxing Decision: When Tax Overpaid Cannot Be Refunded



  James F. McAuley[i]


Florida imposes tax on the transfer of real property.  The tax is commonly referred to as Florida Documentary stamp tax and is administered by the Department of Revenue (DOR).  It is imposed on conveyances of deeds in the state and other related written instruments of indebtedness, such as mortgages.[ii]   The tax was long ago patterned after a federal tax of the same nature.[iii] It is an excise tax on conveyance of real property. Id.

Recently, the First District of Florida issued an opinion which, upon review, suggests the imperative for planning by structuring the real property contracts appropriately on similar transactions.  The case outcome in this specific case is controversial because it would appear an overpayment of tax occurred which will never be refunded.  More specifically, the overpayment occurred as a result of tax remitted on property not subject to state tax on such conveyances.  The decision is styled as Fla. Dep't of Revenue v. 1701 Collins Miami Owner, LLC, 316 So. 3d 297 (Fla.1st DC A. 2021).

The Appellate Opinion

The majority opinion affirmed DOR’s denial of a refund request for tax paid on Florida Documentary Stamps for the sale of a hotel property.  The tax statute is designated as Section 201.02 Fla. Stat. and is imposed on real property conveyances within the state.  The tax does not, by definition, extend to tangible personal property or intangible property.  A review of the 11page decision (including dissent) suggests that the structure of the particular transaction was important in the appellate decision.

 There was a strong dissent from the majority opinion by First District Judge Scott Makar who took issue with how the DOR changed the Final Order by the agency (overturning findings of fact) from the Recommended Order of the ALJ. The recommended order by the Administrative Law Judge sided with the taxpayer seeking a refund for overpayment of tax. [iv]   The dissent also took issue with the overall tenor of the majority position because it seems to lay aside a basic tenant of judicial interpretation of taxing statutes, such statutes are to be read narrowly and any doubts should be resolved against application of tax.[v]

  Taxing “Consideration”- when market value doesn’t count

Tax under Section 201.02 F.S. is measured based on “consideration” given for real property transferred. The tax statute is specifically limited to taxing conveyances of real property and incumbrances, such as mortgages on such property. The opinion contains the new and important statement that court would not substitute the words “value” or “market value” for the statutory term “consideration”. The reasoning supplied for this position is tied to “bargained for consideration”.  Hence, it would appear “consideration” is what is negotiated between the parties.

The court’s decision, which stated that it would not equate “market value” with consideration, made new law.  The court’s rejection of the use of “market value” to establish evidence of “consideration” consequently resulted in overruling the ALJ and the DOAH RO to the agency including rejection of material factual evidence (findings of fact) from the administrative hearing.   Those findings were based upon report entered into evidence along with expert opinion.[vi]  Significantly this “valuation” was made after date of the closing of the sale in 1701

 The post-closing report by the expert was accepted into evidence and relied upon to established economic value of the real property conveyed at the time of closing.[vii]  The language of the ruling is, by the very nature of an extensive appellate opinion on a statute, potentially very broad.  Unless or until a sister appellate court opinion decides otherwise, the opinion should be carefully considered by transactional counsel in both tax planning and real property.

Implication for structure and documentation in advance

As noted, the court unequivocally stated it would not equate value, essentially economic value , as a yardstick for “consideration” under the statute. This statement plainly curtails prospective use of evidence of proof of consideration based on economic or market value.  This is problematic because the term “consideration”, as employed in Section 201, is not defined.  This was in fact observed in the opinion. Id. The rejection by the court ( apart from the dissenting opinion) of equating statutory consideration with value or market value suggests structuring of closing agreements to spell out value of real property conveyed.  This is slightly odd since apparently the parties to the transaction are free to “value” the property exchanged and document this prior to closing.  While the court opinion did not outright reach such a conclusion,  but by implication,  should be acceptable given the language in the opinion as to what would represent evidence of “ bargained for consideration”.   In sum, given the limitation on evidence espoused in this ruling, it would seem, as a practical matter, failure to document “consideration” specifically related to realty possibly renders the mistake permanent or unrecoverable.  .  

Technical Assistance Advisements in accord

 The decision by the agency to issue a Denial ( Notice) was not based on a dispute as to whether  more than one type of property had been transferred,  as one might expect.  Rather, it was because the relative values of the transferred property had not been established before the transfer/ closing.  There was no dispute by the parties to the case that more than one type of property had changed hands.  Logic would suggest that when there is no dispute that more than one type of property is transferred then not all property is taxable under this statute.   Because the court opinion seemingly deferred to the agency or at the very least foreclosed evidence produced after closing of demonstrating historical market value, planning is critcal prior to closing the transaction to establish “consideration”.  This approach will be consistent with Technical Assistance ruling of the DOR on its view of the scope of tax when more than one type of property is exchanged. [viii]

What if the parties can’t agree on attributing value to specific assets  ?

The 1701 majority opinion explicitly states a “contract” or “mortgage document” would be considered “competent evidence”.   This statement is made in the context of explaining why “unilateral” information such as the expert opinion created after the fact as insufficient evidence of a “mutual assent between the contracting parties”. [ix]  Prior agreement and documentation is therefore, the “easy button”, in reducing this tax, so long as it is” bargained for consideration”.  

 But,  for whatever reason (as in the 1701 case),  no agreement as to the value of specific assets subject to the contract occurs, documentation of real property value predating the closing should be used to demonstrate consideration.  This type of information, while not conclusive evidence of a “bargained for product of mutual assent”, will at least demonstrate to DOR evidence of value.

In the 1701 case, the evidence consisted of values attributed by an expert after the transaction, not before.  Although the statute itself anticipates the use of extrinsic evidence when the actual consideration is not shown on the face of  the deed it is silent when that evidence should be produced and the exact limitations on such evidence.  It is, after all, not uncommon circumstance in which the deed conveyed reflects “ $10 dollars and other valuable consideration”.   However, while the majority opinion seems to narrow what should be considered as “consideration” to “bargained for product of mutual assent”, there is no statutory definition which mandates this conclusion. 

A dissenting view of “consideration”

The dissent focused on two points related to proving “consideration”.  First, it points out that the ALJ ruled that the statutory term “consideration” must be viewed as “taxable consideration” paid for real estate rather than a concept of consideration which is broader, eg. “contractual consideration”.  Importantly, this position comports with construing tax laws narrowly.   After all, contractual consideration would, by definition, be as broad as the subject matter of the contract. What is important under the statute is taxable consideration, not “contractual consideration”. In a multi-asset conveyances, such as a hotel property,  “contractual consideration” must encompass all assets exchanged, not simply what is taxed by statute.

Yet, the majority opinion allows tax to be imposed on the  the entire subject matter of the contract unless “bargained for consideration” related to the realty is identified separately as to consideration.   In addition, the dissenting opinion points out that nothing in the documentary stamp tax laws “….limits how to determine the amount of “consideration” for every type of conveyance that include real estate”. Indeed, DOR itself in Rule 12B-4.012(5) F.A.C. anticipates use of “competent substantial evidence”. [x]

Does the agency have authority to mandate when it will accept evidence of overpayment of Documentary Stamp Tax ?

The answer to this question is probably no.   But, at least in the short run, what is important is that this decision shifts the burden of evidence to the taxpayer.  However because of the potential for more litigation on this issue, it is worthwhile mentioning that  there are several reasons why the DOR requirements found in its TAAs (regarding the value of  “consideration” paid for real property in a multi-asset transfer) is flawed.   First, the presumption of DOR that absent agreement between the contracting parties to the sale, all consideration is presumed to be for real property once the closing has occurred is wholly inappropriate.   This presumption is inconsistent with contract law and the laws of economics.

 Succinctly stated, under principles of economics, each such sale (between unrelated parties) should be presumed to be an arms- length agreement.  The DOR presumption that the absence ( on the face of the deed or in a contract) of identification of consideration, specifically “contract consideration”, attributable solely to real property is inappropriate.   All such agreements between unrelated parties should presume to be bargained for consideration.  Under this presumption, each asset involved has economic value.  

Because the DOR presumption is that only real property has value, it is artificial and consequently plainly arbitrary.  Further, under the unwritten presumption applied in 1701 ( discussed next) after the closing the DOR presumption became an irrebuttable presumption. In addition to the arbitrary nature of the presumption itself, the presumption requires an advance stipulation by the contracting parties if the operation of the presumption is to be avoided.  This aspect, as well as the presumption itself, has no basis in the tax statute.[xi]  In fact,  this aspect of the Department’s position was observed by the ALJ in the Recommended Order to the Agency. [xii]     the ALJ expressed the view that the agency decision using this presumption was not just an “unadopted rule” but equivalent to” legislating”.  

Pretzel logic and the Unadopted Rule case

Florida administrative law, Chapter 120, Florida Statutes contains a prohibition against agencies operating through use of “unadopted rules”, a term defined in Section 120.52 ( 16) [xiii].   In this case, 1701 after protesting the denial of a refund, by seeking a hearing through DOAH ( Division of Administrative Hearings ), also challenged the agency decision by alleging use of an “Unadopted Rule” as the basis for denying the refund.,  The ALJ ultimately agreed with 1701 by issuing a Final Order finding use of an unadopted rule.[xiv]  DOR appealed this Final Order to the First District and lost.  The First issued a PCA decision affirming the ALJ ruling on the 1701 claim.  Consequently, the First affirmed the agency decision on the merits but found it did so through an invalid procedure !  The First consequently appeared to disallow a refund yet award attorney fees against the agency for applying an “unadopted rule” in making its decision.  This is somewhat problematic since Florida law prohibits agency use of an “Unadopted Rule” in carrying out its decision.  Should not have the agency therefore been prohibited from denying a refund in the case?  Consequently, there is a strong argument why the two decisions by the 1st DCA do not comport with each other and, moreover, the result in the written opinion is not a narrow construction of the tax laws.


[i] James F.McAuley is a Board Certified Florida lawyer with extensive experience in various aspects of Administrative Law and State and Local taxation.  He is Martindale Hubbell Av rated counsel. He is a former Chief Assistant Attorney General, Supervising Attorney/ Chief Counsel for a state regulatory agency and, as a Senior Attorney General represented DOR in many major cases before joining the firm of Moffa, Sutton and Donnini, P.A.

[ii] Section 201.02 F.S.

[iii] Choctawhatchee Electric Co-op, 132 So.2d 556 (Fla.196

[iv] Division of Administrative Hearing, Case No. 19-1879. Findings No., 34,35

[v] Fla.S&L Servs.,v. Dept. of Revenue, 443 Sol.2d 120,122 (Fla.1st DCA 1983)

[vi] Division of Administrative Hearing, Case No. 19-1879. Findings No. 34,35.

[vii] Id.

[viii] See: TAA 88(B) 4-014 ( October 1978); TAA 83 (b) 4-003 (February 1983) 

[ix] Fla. Dep't of Revenue v. 1701 Collins Miami Owner, LLC, 316 So. 3d 297, 303 (Fla.1st DC A. 2021)

[x] See footnote No. 2 of  the 1701 decision on the merits.

[xi]  The First District at the same time as the 1701 Collins decision, issued a separate PCA, which  affirmed the ALJ finding of the use of  an unadopted rule by DOR ( through the use of the mandate requiring agreement between the parties prior to closing )

[xii] Supra, note. Iv.

[xiii] An agency statement that “implements, interprets, or prescribes law or policy or describes the procedure or practice requirements of an agency” is considered a “rule.” §§ 120.52(16),

[xiv] Division of Administrative Hearing, Case No. 19-3639RU