Counties seeking to score big by suing Fannie Mae and Freddie Mac over unpaid transfer taxes have lost an appeal.
DeKalb County, Ill., sued the Federal Housing Finance Agency in U.S. District Court for the Northern District of Illinois.
DeKalb, along with other Illinois counties, argue that they can levy a tax on the sale of real property by Fannie or Freddie.
In Illinois, there is a transfer tax of $0.50 per $500, while the rate in Wisconsin is $0.30 per $100 of value.
Because there is a constitutional challenge to two statutes, Fannie’s and Freddie’s, the Department of Justice intervened as an additional appellee.
The counties argue that tax exemptions for Fannie and Freddie don’t apply to excise taxes.
A federal court dismissed the case, so the counties appealed to the Seventh Circuit U.S. Court of Appeals. Multiple appeals were consolidated.
But the appellate court affirmed the dismissal.
“The appellants ask us to pierce the veil, as it were, in recognition of the fact that if the tax is paid, it will be paid from assets or income of Fannie or Freddie,” the decision states. “But as long as their conservator is the United States, and the assets and income in question are those of entities charged with a federal duty (that of promoting the federal policy of encouraging home ownership), the conservator’s suit against a state’s tax collector is a suit by the United States, and so the Tax Injunction Act falls away.”
