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Chapter 11 Transfer Tax Exemption Expanded by the Eleventh Circuit - page 4 / 8





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Berkshire Mortgage Finance Corporation was the only lender willing to advance that sum before

the deadline. However, Berkshire conditioned its offer on the agreement of Kissimmee Lodge,

Ltd., a non-debtor that owned an adjacent hotel, to refinance its hotel through Berkshire as part

of the same transaction. Kissimmee, whose hotel was not encumbered by any mortgage held by

Berkshire, agreed to do so solely as an accommodation to T.H. Orlando. Thereafter, Berkshire

committed to loan T.H. Orlando approximately $27 million secured by mortgages on its three

hotels. It also agreed to loan nearly $30 million to Kissimmee secured by a separate mortgage on

its hotel.

T.H. Orlando later filed a plan of reorganization which provided in relevant part that "[t]he

Kissimmee Lodge refinancing . . . is incident to and a condition precedent to the reorganization

of [the debtors] and that refinancing therefore is exempt from Florida documentary stamp taxes,

intangible and similar taxes pursuant to 11 U.S.C. § 1146(c)." The Florida Department of

Revenue ("FDR") objected to confirmation of the plan, arguing that the transfer tax exemption is

not available as a matter of law to non-debtor entities. The bankruptcy court agreed with FDR,

confirming T.H. Orlando's chapter 11 plan, but denying tax-exempt status to the Kissimmee

refinancing transaction.

Kissimmee paid over $160,000 in Florida documentary stamp taxes and intangible taxes under

protest. However, T.H. Orlando and Kissimmee later filed suit in Florida state court seeking a

refund. The dispute was ultimately referred once more to the bankruptcy court, which reversed

its initial determination. According to the court, Kissimmee's agreement to refinance was "done

pursuant" to T.H. Orlando's chapter 11 plan, it was "essential to the confirmation of the plan,"


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