Another Day, Another Transfer Tax Victory For Fannie and Freddie

Bankruptcy

The future of Fannie Mae and Freddie Mac remains unclear, but paying local transfer taxes does not appear to be on the horizon.   The Government Sponsored Entities continue to rack up victories in lawsuits brought against them by local governments seeking to recover unpaid transfer taxes when real property is transferred to or from one of the GSEs.

The latest victory comes from the U.S. Court of Appeals for the D.C. Circuit, which affirmed dismissal of an Oklahoma county’s claim that transfers to or from Fannie Mae and Freddie Mac are taxable.

As we previously discussed on this blog, the GSEs argue they are immune from paying transfer taxes because federal law exempts them from all taxes except taxes on real property itself.  The federal appellate courts have so far all agreed—and the numbers are growing.  The June 13, 2014, decision from the D.C. Circuit joins prior decisions from the Third, Fourth, Sixth, Seventh, and Eight Circuits.  The courts have unanimously rejected the counties’ arguments that the statutory exemption does not apply to taxes on transfers of property.  Some of the county-plaintiffs also made back-up arguments that statutes exempting the GSEs from taxes are unconstitutional, but the appellate courts have rejected those arguments too.

Other appeals are still pending in the First, Ninth, and Eleventh Circuit Courts of Appeals, each of which is reviewing district court rulings in favor of the GSEs.  Those appeals are fully briefed, and the First Circuit heard argument on the two cases pending there in early June.  But with no sign so far of a split among the circuits, the GSEs look like they’re on the way to victory, at least regarding transfer tax liability.

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