Delaware County v. Federal Housing Finance Agency
747 F.3d 215
3rd Cir.2014Background
- Consolidated appeals from suits by New Jersey and Pennsylvania counties and recorders seeking unpaid real-estate transfer taxes from Fannie Mae, Freddie Mac, and the FHFA (the "Enterprises").
- Enterprises are federally chartered entities created to support the national secondary mortgage market; Congress granted them exemptions from "all taxation" by states and localities, except taxes on real property. 12 U.S.C. §§ 1723a(c)(2), 1452(e), 4617(j)(2).
- Plaintiffs argued county-level real-estate transfer taxes are not preempted and must be paid; enterprises moved to dismiss, and district courts granted dismissal. Appeals were consolidated.
- Core legal dispute: whether the statutory phrase "all taxation" covers state/local real-estate transfer (excise/transfer) taxes, and whether Congress exceeded constitutional authority in granting the exemption (Commerce Clause and Tenth Amendment concerns).
- Third Circuit affirmed dismissal: held "all taxation" includes transfer taxes, the real-property exception does not encompass transfer taxes, and Congress acted within its constitutional powers.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does "all taxation" in the Enterprises' charters exclude transfer (excise) taxes? | "All taxation" should be read as a term-of-art limited to "direct" taxes (property, capitation) and thus not preempt transfer/excise taxes. | "All taxation" is plain and expansive; exemption of entities covers excise/transfer taxes unless expressly excluded. | Held: "All taxation" covers state and local real-estate transfer taxes. |
| Do transfer taxes fall within the statutory carve-out for "taxes on real property"? | Transfer taxes are effectively taxes on real property because payment/recording is prerequisite to perfecting interests and liens arise for nonpayment. | Transfer taxes are excise/privilege taxes on transactions, not direct taxes on property, so they are outside the real-property carve-out. | Held: Transfer taxes are excise taxes, not taxes on real property, and thus not within the exception. |
| Commerce Clause: Did Congress exceed its commerce power by preempting state/local transfer taxes? | States' sovereign taxing authority is protected; exempting transfer taxes improperly displaces state taxation. | Congress may preempt state taxes as a rational part of regulating the national mortgage market; exemptions reduce transaction costs and further interstate commerce. | Held: Congress acted within Commerce Clause/Necessary and Proper authority; exemption rationally related to regulating the nationwide mortgage market. |
| Tenth Amendment/anti-commandeering: Does the exemption unlawfully commandeer state officials by forcing free recording/enforcement? | Requiring counties to record transactions at no cost commandeers state functions and resources. | The exemption preempts state taxes; it does not command states to administer federal programs or to take affirmative action. | Held: No commandeering; merely preempts state taxation and does not compel state officers to administer federal law. |
Key Cases Cited
- United States v. Wells Fargo Bank, 485 U.S. 351 (1988) (interpreting "all taxation" in a property-exemption context and distinguishing property exemptions from entity exemptions)
- Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95 (1941) (holding an entity exemption from "taxation" covers sales/excise taxes)
- DeKalb County v. Federal Housing Finance Agency, 741 F.3d 795 (7th Cir. 2013) (holding entity tax immunity covers transfer taxes; distinguishing Wells Fargo)
- County of Oakland v. Federal Housing Finance Agency, 716 F.3d 935 (6th Cir. 2013) (rejecting narrow Wells Fargo reading and applying Bismarck)
- Hennepin County v. Federal Nat'l Mortgage Ass'n, 742 F.3d 818 (8th Cir. 2014) (same conclusion: transfer taxes not covered by Wells Fargo limitation)
- Brown v. Maryland, 25 U.S. (12 Wheat.) 419 (1827) (establishing that state taxing power yields to federal authority when in conflict)
- McCulloch v. Maryland, 4 Wheat. 316 (1819) (federal instrumentalities and limits on state taxation under Supremacy Clause)