Fannie Mae and Freddie Mac are exempt from Michigan state and local real estate transfer taxes, a U.S. appeals court ruled, overturning a lower-court decision.
The government-owned home-mortgage finance companies were sued by Oakland County, Michigan, which argued that a congressionally authorized exemption from “all taxation” didn’t apply to state and county real estate transfer levies.
“The statutes at issue here plainly state that the defendants are exempt from ‘all taxation,’” U.S. Circuit Judge David McKeague wrote on behalf of a three-judge panel in Cincinnati, reversing a ruling by a judge in Detroit. “We are not in a position to second-guess Congress and create a new exception in the statute,” he said.
Today’s ruling is the latest in a line of similar suits across the country brought against Fannie Mae and Freddie Mac to recover the taxes. A federal judge in Maryland dismissed a claim brought by that state’s Montgomery County, and a federal judge in Philadelphia threw out a lawsuit by two Pennsylvania counties.
Don Springmeyer, a Las Vegas attorney who has advised local governments on many of the complaints, including the one in Michigan, said no decision has been made whether to appeal.
Springmeyer said he has coordinated similar cases in 14 other states, including Maryland, and that plaintiffs have so far lost all of those that have come to a decision at the district court level.
“We definitely plan to appeal in other circuits,” Springmeyer said.
The eventual goal is to get the U.S. Supreme Court to address the question of “whether Congress has the right under the Constitution to exempt a private corporation from state taxation,” Springmeyer said.
Today’s appeals court ruling didn’t address that issue and focused on the meaning of the language used by Congress in insulating Fannie Mae and Freddie Mac from taxation.
Fannie Mae and Freddie Mac own or guarantee $5.2 trillion in mortgages and back more than two-thirds of mortgages currently being originated.
The complaint also named the Federal Housing Finance Agency, which took Fannie Mae and Freddie Mac into U.S. conservatorship in September 2008 after the government bailed out the companies.
The case is County of Oakland v. Federal Housing Finance Agency, 12-2135, U.S. Court of Appeals for the Sixth Circuit (Cincinnati).