In a class action suit brought on behalf of 159 Georgia counties to collect unpaid real estate transfer taxes from Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency, the U.S. District Court, N.D. Georgia, held that the government-sponsored entities were exempt from paying transfer taxes because their federal charters exempted them from paying any state taxes except real property taxes. The court also rejected the counties’ argument that Fannie Mae and Freddie Mac were no longer federal instrumentalities, because private entities may be shielded from paying state taxes by constitutional immunity or congressional exemption.
In this case, the counties argued that the statutory exemptions applied only to direct taxes, not excise taxes such as the transfer tax. The counties also argued that the government-sponsored entities were not federal instrumentalities capable of claiming exemption from state taxes and that the exemptions violated notions of state sovereignty. The counties further contended that because the transfer tax is triggered by the government-sponsored entities’ ownership of real property, it fell into the exceptions to the entities’ exemptions.
The court concluded that the counties could not show that the reference to “all taxation” in the government-sponsored entities’ charters was limited to only direct taxes. Rather, the statutes’ plain language exempted all taxation except for taxes on real property. Moreover, the federal charters at issue exempted Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency as entities. In this context, a distinction between direct taxes and excise taxes made no sense. Further, the counties could not establish that Fannie Mae and Freddie Mac were not federal instrumentalities because they were entities created by Congress through which Congress exercised its powers. The counties were also unable to show that the transfer tax was a real property tax because the tax was an excise tax on transactions involving the transfer of property, not on the property itself.
Hall County, Georgia v. Federal Housing Finance Agency, U.S. District Court, N.D. Georgia, No. 1:12-CV-4402-TWT, August 30, 2013, ¶200-868