DeKalb County v. Federal Housing Finance Agency
741 F.3d 795
7th Cir.2013Background
- Consolidated appeals from Illinois counties, the state of Illinois, and a Wisconsin county about taxing Fannie Mae/Freddie Mac transfers.
- Fannie/Freddie are exempt from all taxation except real property taxation; Freddie’s exemption mirrors Fannie’s under 12 U.S.C. §1723a(c)(2) and §1452(e).
- Fannie/Freddie became conservatorship under FHFA after 2008 housing crisis; FHFA acts as conservator to restore solvency.
- States imposed real estate transfer taxes on Fannie/Freddie foreclosed-property sales to buyers; states argued transfer taxes are permissible under the exemption.
- Key authorities discuss Wells Fargo (excise vs. property tax) and Bismarck Lumber (property tax exemption scope); transfer taxes relate to entity, not property.
- Question of jurisdiction and the Tax Injunction Act arises because FHFA is involved and the conservator acts as United States protector of federal policy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Fannie/Freddie are exempt from transfer taxes | Appellants: exemption covers transfer taxes | Appellees: exemption not limited to property taxes | Yes; transfer taxes fall within exemption |
| Nature of the transfer tax under exemption (excise vs property tax) | Appellants: transfer tax is tax on property; not exempt | Appellees: transfer tax is excise; exempt | Transfer tax is an excise tax; exemption applies to it |
| Commerce Clause preemption vs state taxation | States cannot tax federal instrumentality under commerce clause | Federal exemption supersedes state taxation concerns | Commerce Clause does not immunize states from applying tax that exemptions permit |
| Tax Injunction Act applicability given FHFA conservatorship | Act bars federal injunctions against state taxes | FHFA/US as conservator removes barrier | Act does not bar where US/conservator seeks to protect federal interests |
Key Cases Cited
- United States v. Wells Fargo Bank, 485 U.S. 351 (1988) (exemption to property taxes; transfer taxes treated as excise taxes not exempted)
- Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95 (1941) (exemption for real-estate taxes; transfers not taxed as real estate)
- Brown v. Maryland, 25 U.S. (12 Wheat.) 419 (1827) (commerce power preempts state taxation in appropriate scope)
- CSX Transportation, Inc. v. Georgia State Board of Equalization, 552 U.S. 9 (2007) (commerce clause limits on state taxation of interstate activity)
- Exxon Corp. v. Hunt, 475 U.S. 355 (1986) (commerce power preemption considerations)
- State Board of Insurance v. Todd Shipyards Corp., 370 U.S. 451 (1962) (federal supremacy over state taxation when applicable)