LENDING UPDATE
Information for Georgia Lenders about legal lending topics of interest presented by the
commercial lending attorneys at Westfall, LLC
Intangible Tax Pointers No. X/4
Most lenders in Georgia are aware that each county’s clerk of the superior court collects an intangible recording tax (in other states referred to as a mortgage recording tax or deed tax stamps) in connection with recording of certain security deeds or modifications thereof.
Pursuant to O.C.G.A. § 48-6-61 an intangible recording tax is imposed at a rate of $1.50 for each $500.00 (or fraction thereof) of the face amount of the promissory note secured by a security deed. However, it is important to note that that this tax does not apply to all promissory notes secured by a security deed, but rather only to those promissory notes that constitute a “long-term note secured by real estate.” The term “long-term note secured by real estate” is defined in O.C.G.A. § 48-6-60(3) as “any note representing credits secured by real estate by means of mortgages, deeds to secure debt, purchase money deeds to secure debt, bonds for title, or any other form of security instrument, when any part of the principal of the note falls due more than three years from the date of the note or from the date of any instrument executed to secure the note and conveying or creating a lien or encumbrance on real estate for such purpose.” Thus, if a promissory note is secured by real estate and any part of the principal of the promissory note falls due more than three (3) years from the date of the promissory note or from the date of any instrument executed to secure the note, then an intangible tax is imposed.
It is important to note that intangible tax is not imposed on a promissory note secured by real estate where the whole of the principal of the promissory note falls due within three (3) years from the date of the promissory note or from the date of any instrument executed to secure the promissory note. In other words if a promissory note secured by real estate has a maturity date of three (3) years or less, generally, no intangible tax will be imposed or payable. It is also important to note that even if intangible tax is imposed, the maximum amount of such tax is capped at Twenty-Five Thousand and 00/100 Dollars ($25,000.00). The intangible tax is required to be paid to the collecting officer of the clerk of the superior court for the county in which the real estate encumbered by the security deed given to secure the obligations of the promissory note is recorded. Generally this means that the payment of the intangible tax will be paid in connection with and at the time of the presentation of the security deed for recording.
Intangible tax questions frequently arise in the context of loan modifications or renewals. The following are a few examples which help illustrate the nature and type of issues that arise: i) if an original loan maturity was 3 years or less and no tax was paid at closing, then any subsequent extension for a new term greater than 3 years will require that the tax be paid on the full loan amount at the time of extension; ii) if a loan has a maturity of 3 years or less, without an option to renew beyond such 3 year term, then if a subsequent renewal is also for a term of 3 years or less, no intangible tax will be owed upon the recording of either the original security deed or the extension, even if there is an increase in the loan amount; and iii) if the original loan maturity was greater than 3 years and a subsequent extension by the same creditor is made, also for a term greater than 3 years, then as long as intangible tax was paid at the original closing, additional intangible tax would only be owed upon the extension in the event of an increase in the loan amount, and the tax payable would be calculated only on the amount of the increase.
There are, of course, many more issues that can arise with the intangible recording tax such as those that occur when dealing with additional advances, multi-state properties, multi-county properties, lines of credit, and combined short and long term obligations, the analysis of which is outside the scope of this particular Update. As should be evident from the above, prudent lenders should carefully analyze the intangible tax ramifications of any proposed loan or modification.
Should you need any further information or have any additional questions on this area of Georgia law and how it may impact your existing loan transactions, of if you have any other lending questions, please do not hesitate to contact one of our experienced commercial lending attorneys at Westfall, LLC.
M. Todd Westfall, Esq. (678) 384-7005
Pamela G. Hill, Esq. (678) 384-7024
Kory S. Pryor, Esq. (404) 422-7200
These materials are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of or access to this Lending Update does not create an attorney-client partnership between Westfall, LLC and the reader. The opinions expressed through this Lending Update are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.
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