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Media Alerts - County of Oakland v. Federal Housing Finance Agency -- Sixth Circuit
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August 19, 2013
  County of Oakland v. Federal Housing Finance Agency -- Sixth Circuit
Headline: The Federal Housing Finance Agency, Fannie Mae, and Freddie Mac are exempt from Michigan state and county real-estate transfer tax.

Area of Law: Tax

Issue Presented: Does the exemption from "all [state and local] taxation" include Michigan state and county real-estate transfer tax?

Brief Summary: The State and several counties sued the Federal Housing Finance Agency, Fannie Mae, and Freddie Mac to collect real-estate transfer taxes for real-estate property transfers recorded by the defendants in Michigan. Federal law creating those agencies exempted them from "all [state and local] taxation," except for taxes on real property. The district court agreed with the State and counties that "all taxation" is a term of art, applying to direct taxes only, not to excise taxes like transfer taxes. The Sixth Circuit reversed, interpreting the phrase "all taxation" according to its common, non-technical meaning and concluding that Congress intended to include real-estate transfer taxes within the exemption. It reversed the district court and remanded for entry of summary judgment in favor of the defendants.

Significance: The Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Federal Housing and Finance Agency are exempt from state and local real-estate transfer taxes. Congress created the defendants and expressly exempted them from "all taxation" imposed by a State or county, and that phrase includes transfer taxes.

Extended summary: The State of Michigan and several counties sued the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Housing Finance Agency to collect real-estate transfer taxes for real-estate property transfers recorded by the defendants in Michigan. When creating the defendants, Congress expressly exempted them from "all [state and local] taxation," except for taxes on real property. The State and the counties argued that "all taxation" is a term of art that only applies to direct taxes and that transfer taxes are excise taxes, so the defendants would not be exempt from the State and County real-estate transfer tax.

The district court agreed with the State and counties' argument, granting summary judgment in their favor. In the district court, the parties agreed that property transfer taxes are not taxes on real estate, an exception to the statutory exemption. The district court relied on U.S. v. Wells Fargo Bank, 108 U.S. 351 (1988), which held that the phrase "all taxation" had an understood meaning, and that it applied only to direct taxes, not excise taxes.

The Sixth Circuit disagreed. It concluded that the plain meaning of "all taxation" governed, so the defendants were exempted from the State and county real-estate transfer tax. The court noted that the plain meaning of a statute governs unless the literal application of a statute would lead to an absurd result. It said that "all means all," and a straightforward, non-technical reading of the exemption applied. The court further reasoned that when Congress explicitly carves out an exception, "[t]he proper inference . . . is that Congress considered the issue of exceptions and, in the end, limited the statute to the ones set forth." Here, the only exception Congress provided was to subject defendants to taxes on real property; it did not provide an exception for transfer taxes.

In addition, the court rejected the States and counties' term-of-art argument on several grounds. In Wells Fargo Bank, the case relied on by the State and counties, the Court applied the term "all taxation" to an exemption of property, not to an exemption of an entity like the defendants. And in that case, the Supreme Court did not address the distinction or refer to earlier cases involving entity exemptions, as would be expected if the Court were introducing such a change in the law. The Sixth Circuit also said that the State and counties failed to show any evidence of legislative intent to deviate from the plain meaning of the term "all taxation" or to support a more specialized meaning. The court also noted that under the plain language of relevant Michigan statutes, the transfer tax falls on the seller, here, the federally created entities, not on a privilege. So the tax, under Michigan law, is squarely within the entity exemption. And finally, the court said that to apply the State and counties' argument would lead to an absurd result because under that interpretation, "all taxation" would apply to only one type of direct taxes, and if Congress meant for the defendants to be exempted from only one type of tax, it would not have used the phrase "all taxation." Consequently, "all taxation" was given its plain meaning, and the defendants were exempted from the State and County real estate transfer tax.

Link to full opinion:http://www.ca6.uscourts.gov/op...ns.pdf/13a0142p-06.pdf

Panel: Circuit Judges Martin, Guy, and McKeague

Argument: May 2, 2013

Date of Issued Opinion: May 20, 2013

Docket Number: 12-2135/2136

Decided: Reversed and remanded, instructing the district court to enter summary judgment for defendants.

Counsel: ARGUED: Michael A.F. Johnson, ARNOLD & PORTER LLP, Washington, D.C., for Appellants. William H. Horton, GIARMARCO, MULLINS & HORTON, P.C., Troy, Michigan, for Appellees. Matthew K. Payok, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Intervenor Appellees. Patrick J. Urda, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Amicus Curiae. ON BRIEF: Michael A.F. Johnson, Howard N. Cayne, Dirk C. Phillips, ARNOLD & PORTER LLP, Washington, D.C., David B. Goroff, Ann Marie Uetz, FOLEY & LARDNER LLP, Detroit, Michigan, Michael J. Ciatti, Merritt E. McAllister, KING & SPALDING LLP, Washington, D.C., for Appellants. William H. Horton, GIARMARCO, MULLINS & HORTON, P.C., Troy, Michigan, Kenneth J. Robinson, Bloomfield Hills, Michigan, Jason J. Thompson, SOMMERS SCHWARTZ, Southfield, Michigan, for Appellees. Matthew K. Payok, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Intervenor Appellees. Patrick J. Urda, Jonathan S. Cohen, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., Mark H. Troutman, Mark Landes, ISAAC, BRANT, LEDMAN & TEETOR LLP, Columbus, Ohio, Don Springmeyer, Jonathan H. Waller, Bradley S. Schrager, Tracy H. Slaughter, WOLF, RIFKIN, SHAPIRO SCHULMAN & RABKIN, LLP, Las Vegas, Nevada, for Amici Curiae.
Author of Opinion: Circuit Judge McKeague

Case Alert Author: Kathryn Burkhart

Supervisor: Professor Eileen Kavanagh

Edited: 08/19/2013 at 09:19 AM by Mark Cooney

    Posted By: Mark Cooney @ 08/19/2013 09:00 AM     6th Circuit  

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