765 F.3d 80
1st Cir.2014Background
- Municipalities Johnston, RI and Bristol County, MA sue Fannie Mae, Freddie Mac, and FHFA for unpaid transfer taxes on foreclosed property.
- FHFA acts as conservator for Fannie Mae and Freddie Mac under the Housing and Economic Recovery Act of 2008, acquiring all rights of the corporations.
- Charters of Fannie Mae, Freddie Mac, and FHFA exempt from state and local taxes except real property taxed like other real property.
- Massachusetts and Rhode Island collect real estate transfer taxes based on purchase price, collected by local authorities.
- Foreclosures increased post-2008, with entities taking title to many properties and not paying transfer taxes.
- District courts dismissed under Rule 12(b)(6) for failure to state a claim; municipalities appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether transfer taxes fall within the real property exemption. | Municipalities: transfer tax is a tax on real property. | Entities: transfer tax is an excise tax on transfer, not on real property. | Transfer taxes are not within the real property exemption. |
| Whether Charter Exemptions are constitutional under Commerce Clause and Tenth Amendment. | Exemptions fail to rationally relate to interstate commerce and burden federal authority. | Exemptions rationally relate to Congress's regulation of interstate commerce; respect federalism limits. | Charter Exemptions are constitutional under Commerce Clause; Tenth Amendment challenges fail. |
Key Cases Cited
- United States v. Wells Fargo Bank, 485 U.S. 351 (U.S. 1988) (distinction between excise taxes and taxes on real property)
- United States v. Jimenez, 507 F.3d 13 (1st Cir. 2007) (statutory interpretation reviewed de novo)
- Hodel v. Virginia Surface Mining & Reclamation Ass'n, 452 U.S. 264 (U.S. 1981) (Commerce Clause rational basis review standard guidance)
- Gonzales v. Raich, 545 U.S. 1 (U.S. 2005) (federal regulation of interstate commerce framework)
- Heart of Atlanta Motel v. United States, 379 U.S. 241 (U.S. 1964) (commerce power reach over intrastate activities)
- Brown v. Maryland, 25 U.S. (2 Cranch) 419 (U.S. 1827) (federal supremacy over state taxation limits)
- New York v. United States, 505 U.S. 144 (U.S. 1992) (federal regulation and states' sovereignty interaction)
- South Carolina v. Baker, 485 U.S. 505 (U.S. 1988) (federal regulation impact on state compliance)
- United States v. Coccia, 446 F.3d 233 (1st Cir. 2006) (Commerce Clause scrutiny standard)
- Delaware County v. Fed. Hous. Fin. Agency, 747 F.3d 215 (3d Cir. 2014) (circuit approach to tax exemptions for federal instrumentalities)
- Montgomery County v. Fed. Nat. Mortgage Ass'n, 740 F.3d 914 (4th Cir. 2014) (Commerce Clause rational basis analysis)
- DeKalb County v. Fed. Hous. Fin. Agency, 741 F.3d 795 (7th Cir. 2013) (uniform treatment of federal instrumentalities under exemptions)