COUNTY OF OAKLAND and Andrew E. Meisner (12-2135); Genesee County and Deborah Cherry (12-2136), Plaintiffs-Appellees, Michigan Department of Attorney General and Michigan Department of Treasury, Intervenors-Appellees, v. FEDERAL HOUSING FINANCE AGENCY, Federal National Mortgage Association, and Federal Home Loan Mortgage Corporation, Defendants-Appellants.
Nos. 12-2135, 12-2136
United States Court of Appeals, Sixth Circuit
Decided and Filed: May 20, 2013
Argued: May 2, 2013
716 F.3d 935
III.
For these reasons, we affirm.
Before: MARTIN, GUY and McKEAGUE, Circuit Judges.
OPINION
McKEAGUE, Circuit Judge.
The State and County plaintiffs sued the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Housing and Finance Agency in an effort to collect state and local real estate transfer taxes that plaintiffs claim are owed for real property transfers made by defendants. Congress expressly exempted all three defendants from “all [state and local] taxation.” In an effort to get around the plain language of the exemption statutes, plaintiffs argue that when Congress exempted the defendants from “all taxation,” it did not intend to exempt them from State and County real estate transfer taxes. The district court agreed with this argument and granted summary judgment in plaintiffs’ favor. We now reverse and remand with instruc-
I.
The Michigan State Real Estate Transfer Tax,
Defendant Fannie Mae is a corporation chartered by Congress to “establish secondary market facilities for residential mortgages,” in order to “provide stability in the secondary market for residential mortgages,” and “promote access to mortgage credit throughout the Nation.”
When Congress created defendants, it expressly exempted them from “all” state and local taxes except for taxes on real property. Fannie Mae‘s charter provides:
The corporation, including its franchise, capital, reserves, surplus, mortgages or other security holdings, and income, shall be exempt from all taxation now or hereafter imposed by any State, county, municipality, or local taxing authority, except that any real property of the corporation shall be subject to State, county, municipal, or local taxation to the same extent as other real property is taxed.
Similarly, Freddie Mac‘s charter provides:
The Corporation, including its franchise, activities, capital, reserves, surplus, and income, shall be exempt from all taxation now or hereafter imposed by any State, county, municipality, or local taxing authority, except that any real property of the Corporation shall be subject to State, county, municipal, or local taxation to the same extent according to its value as other real property is taxed.
Finally, when Congress enacted the Housing and Economic Recovery Act, it granted the Agency a similar exemption in its role as Conservator:
The Agency [as Conservator], including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all taxation imposed by any State, county, municipality, or local taxing authority, except that any real property of the Agency [as Conservator] shall be subject to State, territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed....
On June 20, 2011, Oakland County sued Fannie and Freddie alleging they failed to pay transfer taxes for transactions in which they were the grantors of real property.2 On November 10, 2011, in a separate action, Genesee County filed a class action suit against all of the defendants on behalf of itself and all Michigan counties similarly situated. The class Complaint made the same allegations as the Oakland County Complaint. The district court certified the class in the Genesee County case. Oakland County opted out. The Michigan Attorney General and Department of Treasury intervened in both actions.
The parties in both actions filed cross-motions for summary judgment, and the district court ultimately granted summary judgment in favor of the State and County plaintiffs. Oakland Cnty. v. Fed. Hous. Fin. Agency, 871 F.Supp.2d 662, 671 (E.D.Mich.2012).3 The court first noted that the parties largely agreed on several issues, including that the statutes control the outcome of the case, and that “transfer taxes are excise taxes, not taxes on real property. Therefore, the Transfer Taxes do not fit into the exception in the statutes for real property.” Id. at 666-67. The court drew two other relevant conclusions. First, it held that United States v. Wells Fargo Bank, 485 U.S. 351, 108 S.Ct. 1179, 99 L.Ed.2d 368 (1988) was “dispositive of Plaintiff‘s case,” and that “[t]he Court in Wells Fargo recognized that ‘all taxation’ had an understood meaning, and that it applied only to direct taxes, not excise taxes.” Id. at 669.
Second, even though defendants did not argue that they were immune from the Michigan taxes based on their status as federal instrumentalities,4 the court nevertheless addressed the issue, and held that because Fannie and Freddie were not federal instrumentalities, “they are not exempt under the Michigan statute.” Id. at 671. Defendants appealed the district court‘s summary judgment decision, and the cases were consolidated for argument.5
This Court generally reviews a district court‘s grant of summary judgment de novo “using the same Rule 56(c) standard as the district court.” Bowling Green v. Martin Land Dev. Co., Inc., 561 F.3d 556, 558 (6th Cir.2009). Where the “district court‘s decision turned on its interpretation of a federal statute, ... this Court reviews that question of law de novo.” Id.
III.
The issue before us is whether defendants’ exemptions from “all [state and local] taxation” include Michigan State and County real estate transfer taxes.6
“It is well settled that ‘the starting point for interpreting a statute is the language of the statute itself.‘” Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Found., Inc., 484 U.S. 49, 56, 108 S.Ct. 376, 98 L.Ed.2d 306 (1987) (quoting Consumer Prod. Safety Comm‘n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 64 L.Ed.2d 766 (1980)). “[W]hen the statutory language is plain, [the court] must enforce it according to its terms.”
Id.; Delaware Cnty., Pa. v. FHFA, No. 2:12-cv-4554, 2013 WL 1234221 (E.D.Pa. Mar. 26, 2013); Hennepin Cnty. v. Fannie Mae, No. 12-cv-2075, 2013 WL 1235589 (D.Minn. Mar. 27, 2013); Vadnais v. Fannie Mae, No. 12-1598, 2013 WL 1249224 (D.Minn. Mar. 27, 2013); Montgomery Cnty., Md. v. Fed. Nat. Mortg. Ass‘n, No. DKC 13-0066, 2013 WL 1832370 (D.Md. Apr. 30, 2013); Cape May Cnty., N.J. v. Fed. Nat‘l Mortg. Ass‘n, No. 12-cv-4712 (D.N.J. Apr. 30, 2013). Defendants also allege there are more than 50 other pending actions in federal courts across the country involving the same issue. Appellant‘s Br. at 9. There are also at least three cases, including this one, in federal circuit courts. See Dist. of Columbia ex rel. Hager v. Fed. Nat‘l Mortg. Ass‘n, No. 12-7095 (D.C.Cir.); State of Nev. ex rel. Hager v. Countrywide Home Loans Serv., L.P., No. 11-17491 (9th Cir.).
The statutes at issue here plainly state that defendants are exempt from “all taxation” imposed by the state or local taxing authority. See
Accordingly, the common sense, non-technical interpretation of “all taxation” has to include the State and County real estate transfer taxes here, which impose a tax on the “seller or grantor” when a deed or other instrument of conveyance is recorded during the transfer of real property.
The statutes’ text is revealing in another way. In granting each of the defendants’ an exemption, Congress explicitly created a carve-out from the “all taxation” language by permitting taxes on real property. But Congress did not provide a similar carve out for the type of transfer taxes at issue here. “When Congress provides exceptions in a statute, it does not follow that courts have authority to create others. The proper inference ... is that Congress considered the issue of exceptions and, in the end, limited the statute to the ones set forth.” United States v. Johnson, 529 U.S. 53, 58, 120 S.Ct. 1114, 146 L.Ed.2d 39 (2000). Accordingly, because the statutes are clear, we are not in a position to second-guess Congress and create a new exception in the statute for state and county real estate transfer taxes.
The conclusion that the plain language of the statutes should control here is reinforced by the Supreme Court‘s decision in Fed. Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 62 S.Ct. 1, 86 L.Ed. 65 (1941), and our decision in United States v. State of Mich., 851 F.2d 803, 805 n. 1 (6th Cir.1988). Both of those cases involved entity exemptions in statutes similar to the exemption statutes here.
In Bismarck, the Court interpreted an exemption under the Federal Farm Loan Act of 1916. 314 U.S. at 99, 62 S.Ct. 1. The Act stated “That every Federal land
We passed upon a similar exemption in Michigan, 851 F.2d at 805 n. 1. Congress had exempted “Federal credit unions ..., their property, their franchises, capital, reserves, surpluses, and other funds, and their income ... from all taxation now or hereafter imposed by ... any State, ... or local taxing authority; except that any real property ... shall be subject to ... State, ... and local taxation to the same extent as other similar property is taxed.” Id. (quoting
Bismarck and Michigan both interpreted a statute much like the one at issue here (in Bismarck the statute said “taxation” and in Michigan it said “all taxation“) and in both cases, the courts concluded that the exemption precluded a sales tax on the entities’ purchases, even though sales taxes were not a specifically enumerated exemption in the statute. In other words, Bismarck and Michigan support the straightforward, nontechnical reading of the exemptions here. They stand for the proposition that when Congress broadly exempts an entity from “taxation” or “all taxation” it means all taxation.
Contrary to this commonsense reading and to the cases supporting it, plaintiffs employ a more arcane line of reasoning in an effort to persuade us that the plain language of the statute should not control here. They argue that when Congress said “all taxation” in the exemption statutes, it did not really mean all taxation.
In Wells Fargo, the Court interpreted a provision of the Housing Act of 1937. Wells Fargo, 485 U.S. at 353, 355, 108 S.Ct. 1179. The Act attempted to stimulate financing for local housing projects by permitting state and local authorities to issue tax-free “Project Notes.” Id. at 353, 108 S.Ct. 1179. The statute stated that “[Project Notes], ... shall be exempt from all taxation now or hereafter imposed by the United States.” Id. at 355, 108 S.Ct. 1179. The Court explained that for 50 years after the Act‘s passage, it was assumed the exemption on the Notes applied to federal income tax (a direct tax), but not to federal estate tax (an excise tax). Id. at 353, 108 S.Ct. 1179. The reason for this assumption, the Court stated, was that “[w]ell before the Housing Act was passed, an exemption of property from all taxation had an understood meaning: the property was exempt from direct taxation, but certain privileges of ownership, such as the right to transfer the property, could be taxed.” Id. at 355, 108 S.Ct. 1179 (emphasis added). The Court thus concluded that the Project Notes were not exempt from federal estate taxes because estate taxes were excise taxes, “levied upon the use or transfer of property ...” rather than “a tax levied upon the property itself.” Id.
In support of its conclusion, the Court cited a series of cases standing for the principle that an exemption of specific property from taxation did not necessarily extend to excise taxes involving that property. Id. at 355, 108 S.Ct. 1179 (citing Greiner v. Lewellyn, 258 U.S. 384, 386-87, 42 S.Ct. 324, 66 L.Ed. 676 (1922) (holding that federal estate tax applied to municipal bonds despite immunity barring a direct tax on the bond); Murdock v. Ward, 178 U.S. 139, 148, 20 S.Ct. 775, 44 L.Ed. 1009 (1900) (holding that state inheritance tax measured by the total amount of a bequest was a valid tax even if the amount of the bequest included bonds statutorily exempt from taxation); Plummer v. Coler, 178 U.S. 115, 117, 20 S.Ct. 829, 44 L.Ed. 998 (1900) (permitting federal estate tax under the same rationale as Murdock where statute exempted federal bonds from “all taxes or duties of the United States, as well as from taxation in any form by or under state, municipal, or local authority....“);8 United States Trust Co. v. Helvering, 307 U.S. 57, 60, 59 S.Ct. 692, 83 L.Ed. 1104 (1939) (relying on Murdock and Plummer to hold that an exemption for War Risk Insurance from “all taxation” did not exempt the insurance from federal estate tax)). From these cases, the Court surmised that “on the rare occasions when Congress has exempted property from estate taxation it has generally adverted explicitly to that tax, rather than generically to ‘all taxation.‘” Wells Fargo, 485 U.S. at 356, 108 S.Ct. 1179 (emphasis added) (quotation marks and citation omitted).
First, plaintiffs’ argument would require us to stretch Wells Fargo beyond its clear language and beyond the precedents upon which it is based. While it is true that Wells Fargo says that the phrase “all taxation” had an understood meaning, contrary to plaintiffs’ argument, that understood meaning applied to an “exemption of property from all taxation ...,” Wells Fargo, 485 U.S. at 355, 108 S.Ct. 1179 (emphasis added), not an exemption of an entity. Moreover, neither the State nor the Counties submitted any evidence specific to the statutes here, e.g., legislative history, that would suffice to overcome the plain language of the statute and establish that Congress used “all taxation” in some more specialized way. Hoge, 384 F.3d at 246.
Second, plaintiffs have not explained why, if Wells Fargo is in fact supposed to apply not only to property exemptions but also to entity exemptions, the case fails to discuss or even mention Bismarck, or for that matter any of the Supreme Court‘s other earlier entity exemption cases.9 If the 1988 Wells Fargo decision was in some fashion altering the legal landscape with respect to how courts should interpret Congress’ exemptions of entities from “all taxation,” it seems likely that the Court would have discussed, or at least mentioned, its several prior decisions on the issue.
Third, even assuming a “nature and effect of the tax” inquiry is appropriate here, and that we should be looking at whether the tax falls on the exempt entity or in the alternative on some privilege, plaintiffs’ argument that the tax here does not fall on defendants is inadequate in the face of the plain language of the Michigan statutes. Those statutes expressly state that the transfer taxes are laid directly on defendants. See
Fourth, carrying plaintiffs’ argument to its logical conclusion would lead to a somewhat absurd result. Assuming the distinction between direct taxes and excise taxes matters in the context of entity exemptions, plaintiffs’ reading of the statute would mean that when Congress exempts an entity from “all taxation” it is only exempting that entity from direct taxes. The Supreme Court has recently reaffirmed there are only three types of direct taxes: capitations (taxes paid by every person “without regard to property, profession, or any other circumstance“), taxes on personal property, and taxes on real property. See Nat‘l Fed‘n of Indep. Bus. v. Sebelius, 567 U.S. 519, 132 S.Ct. 2566, 2598-99, 183 L.Ed.2d 450 (2012). The transfer taxes here are clearly not capita-
Accordingly, we VACATE the district court‘s decision and REMAND with instructions to enter summary judgment for defendants.