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Sixth Circuit Looks at the Collection of Transfer Taxes from GSEs

Posted By USFN, Thursday, June 6, 2013
Updated: Monday, November 30, 2015

June 6, 2013


by Matthew B. Theunick
Trott & Trott, P.C. – USFN Member (Missouri)

A recent decision from the Sixth Circuit Court of Appeals should have far-reaching effects vis-à-vis attempts of state and local taxing authorities to collect real estate transfer taxes from Fannie Mae, Freddie Mac, and the Federal Housing and Finance Agency (federal entities). The Sixth Circuit is comprised of Kentucky, Michigan, Ohio, and Tennessee.

The case is County of Oakland v. Fed. Housing Fin. Agency, Nos. 12-2135/2136, 2013 U.S. App. LEXIS 10032; 2013 FED App. 0142P (6th Cir. 2013). The judicial opinion involves cases brought by the Michigan counties of Oakland and Genesee and their respective treasurers. [Oakland Cnty. v. Fed. Hous. Fin. Agency, 871 F. Supp. 2d 662, 2012 U.S. Dist. LEXIS 40099 (E.D. Mich. 2012), and Genesee Cnty. v. Fed. Home Loan Mortgage Corp., No. 2:11-cv-14971 (E.D. Mich. 2012)]. The Sixth Circuit reversed and remanded to the U.S. District Court for the Eastern District of Michigan its decision granting summary judgment in favor of the county taxing authorities, with instructions to enter judgment in favor of the federal entities.

On June 20, 2011, Oakland County sued Fannie Mae and Freddie Mac, alleging that they failed to pay transfer taxes for transactions in which they were the grantors of real property. Oakland County later amended its complaint to add the FHFA, which had intervened in the Oakland County action, as a defendant. On November 10, 2011, in a separate action, Genesee County filed a class action lawsuit against the federal entities on behalf of itself and all Michigan counties similarly situated.

Specifically, the county taxing authorities alleged that while Congress expressly exempted all three defendants from “all [state and local] taxation” ( See, 12 U.S.C. § 1723a(c)(2) for Fannie Mae; 12 U.S.C. § 1452(e) for Freddie Mac; and 12 U.S.C. § 4617(j)(2) for FHFA.), it did not intend to exempt them from real estate transfer taxes. The Michigan State Real Estate Transfer Tax, MCL § 207.521, et seq., and the Michigan County Real Estate Transfer Tax, MCL § 207.501, et seq. impose a tax when a deed or other instrument of conveyance is recorded during the transfer of real property.

In making its ruling, the Sixth Circuit used a common sense interpretation of the “all taxation” language and held that the “all taxation” exemptions encompassed real estate transfer taxes. “… [A] straightforward reading of the statute leads to the unremarkable conclusion that when Congress said ‘all taxation,’ it meant all taxation.” Additionally, the Sixth Circuit noted, “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 … here.” Presently, it appears that Oakland County will try to petition the U.S. Supreme Court for a writ of certiorari.

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