tax we recognize that numerous courts of consider this issue in favor of fannie and freddie since we filed a complaint what we asked this court to do is to give us a fresh independent look and to help frame that look let me point out briefly in two paragraphs a key observation that frankly has not been clearly discussed in prior decisions concerning fannie and freddie that is the difference of exemptions for federal instrumentalities versus statutory exemptions for everything else let me explain when considering the federal government itself or its instrument how these it is clear that because of sovereign immunity immunity from local taxation is quite bro congress must explicitly waive immunity to allow local taxation absent an express waiver local government cannot impose local taxes that was the case situation in the bismarck lumber case here in fa and freddie the broad presumption of immunity from local taxation does not apply fannie and freddie are not federal instrumentalities in fact the opposite presumption applies when congress while congress has the power to  nonfederal instrumentalities from local taxes statutorily it must do so explicitly here by exempting fannie and freddie from all taxation congress explicitly exempted fannie and freddie from direct taxes and did not expressly exempt them from excise taxes like the federal d tax here we have pled and argued that fannie and freddie are not federal instrumentalities if they are we lose because minnesota law exempts federal government or federal instrumentalities the district court the honorable david doty did not reach specifically the question we're talking with you about today whether fannie and freddie are federal instrumentalit we believe this question must be resolved and ask this court to conclude as a matter of law that fannie and freddie are not federal instrumentalities and accordingly are not exempt from the minnesota d tax in the alternative we asked you this case of the district court so we can develop facts to establish that fannie and freddie are not federal instrumentalities and that the logic a wells fargo applies and they are not exempt from this deed excise transfer  and freddie were and is it controlled by government appointees which fannie and freddie or not therefore it is not a federal instrumentality when fannie and freddie were established they were organized which is the effect of the charters freddie have been in essence unmoored from the federal government they are not directed or control i'm sorry congress didn't change the exemption did they didn't change exact exemption but they changed how fannie and freddie's operated they're no longer a federal control by federal and point ts they are private corporations private shareholders a private board of directors and in fact when fannie mae and jenny mack were changed a period of time in the language in twelve u s c section seven hundred sixteen be stated that fannie mae is a government quote government sponsored private corporation why jenny may remains in the government a government sponsored private corporation versus ginnie mae staying in the government we think this is key because as i said earlier if it's a constitutional supremacy clause exemption it's brought and in order for that now become nonexempt because of behavior yes or behavior and also congressional action now your honor is correct they did not change the words of the exemption but they changed the words and the concept for where they once were federal instrumentalities controlled by the federal government reporting the federal government to today and recently where they are not controlled by the federal government they're a private corporation private shareholders in fact even borrowed money from the federal government which thankfully they paid most of it back courts have been attracted to the concept creatively come up with by fannie and freddie that there are two different exemptions one a property exemption and one entity exemption number one that distinction was never talked about in bismarck lumber or wells fargo which of the two leading cases here moreover there is no discussion in any supreme court case i've seen that creates this what this is affectively done is to remove the argument away from wait a minute if you really truly a federal it's metallic like the national federal banks are in some cases then you have this broad exemption but if you are no longer a federal instrumentalities you still can be exempt congress can still exempt you but that has to be narrowly construed and the key language in here exempt from all taxations imposed now or hereafter is specifically  specifically defined as that exemption extends only to all direct taxes and not to indirect taxes as we have here this excise tax which is in minnesota a d transfer tax is very similar to the estate tax and wells fargo it's a tax upon the transfer an estate tax from a generation to another generation or when you when i buy or sell our homes we pay a deed to excise tax as do property owned by federal bank federal credit unions even the american fortress press publishing company in minneapolis totally owned by the even joke lutheran church of america paid over twenty five thousand dollars in a deed transfer  it's only episode of ball that when fannie and freddie became private and got into big time selling of homes that they should pay that did excise tax your honors it's not a lot of fun to be here when some thirty it's always fun to be here your honor for not when some thirty k cases have ruled against you but no one has really or really discussed the federal instrument tallied with preciseness the the district court did not hear the district court in the eastern district of michigan held that fannie and freddie were not federal instrumentalities now when the court michigan court's decision was considered by the sixth circuit and their determination that fannie and freddie had to pay the taxes reversed them they did not directly discuss the federal instrument tallish now a couple of courts have discussed that over not federal and sma tallis for fifth amendment due process purposes so i guess what i'm saying is i want to go by this creatively stablished dr and that fannie and fr lauri's have done that there is a difference between entity and property and to look at the tax itself the tax here the transfer tax is an excise tax estate tax is a transfer tax well fargo  interpret in the exact same language that is in the fanny charter exempt from all taxation is the language and we believe those two that wells fargo case controls and therefore this tax ought to be issued if there are no further questions i'll save the remainder of my time for rebuttal thank finance agency and its capacity as conservator of fannie mae and freddie mac i'm speaking on behalf of all pelleas today the district court correctly dismissed this action and should be affirmed to reverse this court would need to disregard controlling supreme court precedent and create a split with at least two other circuits and depart from the uniform outcomes of dozens of federal district court decisions in cases just like this one mr freeman gave  two arguments and i'll take them in the order i perceived him to consider their import first federal instrumentality mr freeman's argument is for close by a supreme court decision called first agricultural national bank of berkshire county the exact same argument was presented to the supreme court there that case involved a state the state of massachusetts attempting to impose an excise tax there a sales tax on a set of well national banks were probably federal instrumentalities back in the nineteenth century when they were created but since then the economy has sort of grown up around them and the federal reserve system has grown up around them and there are all sorts state banks that compete with the national banks so they shouldn't be treated as federal instrumentalities anymore and if they're not the federal statute that protects them from state taxation shouldn't apply virtually the identical argument mr freeman makes to this court one of the supreme court say the supreme court said it's unnecessary on necessary the supreme court's word on necessary to decide the federal instrument issue because of pertinent congressional legislation in the banking field in other words the supreme court held we're going to apply the statute whether or not there are federal instrumentalities it's unnecessary to decide that issue it was unnecessary and first ag it's unnecessary here whether or not fannie mae and freddie mac are federal instrumentalities they are entitled to the protection from state taxation congress enacted first ag isn't the only case the ninth circuit case we cite in our briefs the california credit union league that dress the exact same issue a statute protects credit unions from all state and local taxation with an exception for real property taxes as there is here in that case an amicus raised the same argument that the massachusetts revenue department raised in first ag and that mr freeman raises here in substance saying hey credit unions might have been federal instrumentalities at some time but in today's world they shouldn't be treated that way anymore and the ninth circuit said you know what we're not going to address that issue we're not going to address that issue ninety five f third page thirty one we do not address that issue because the statute protects the credit unions so the federal instrumentality issue has no substance although if the court wanted to reach out and address it under the six circuits decision in michigan where an entity is created by the federal government limited to a particular set of activities a mission that congress deems important and continuously supervised by the federal government to ensure that it is pursuing that mission it is a federal instrumentality for purposes of state and local taxation that cases directly on point the cases mr freeman cited le bron and the others that involve constitutional issues whether something is a government act or for constitutional purposes not a federal instrumentality for purposes of state taxation different doctrine different test different outcome they are not controlling here and frankly they are not relevant finally on federal instrumentality if mr freeman were right then we would have to infer that the supreme court has repeatedly made statements that either it didn't mean or that it was just wrong about cases like new mexico blaise detroit all cases where the court was considering whether a particular private entity was immune from state and local taxation because it may be a federal instrumentalities the court held that the end entities in those cases to government contractors one lessee of government property were not constitutionally immune because they weren't federal instrumentalities but the court went on to say in each instance if ponderous wants to immunize them by statute that's congress prerogative i'm paraphrasing of course but that's the statement the substance of the statement at the conclusion of each of those decisions  is not a federal instrumentality so it is subject to state taxation but if congress wants to fix it that's congress's parag and if it can't be that mr freeman is right that you have to be a federal instrumentality to be acted by a congressional enacted statute let's talk about wells fargo and bismarck for a moment i said for this court to rule in favor of mr freeman's client that it would have to contravene controlling precedent and i meant that bismarck is virtually identical to this case bismarck involved a statute that protected an entity mr freeman says we just made it up we made up this idea that there are entity exemptions statutes and property exemptions statutes well let me tell you how the supreme court described the statute at issue in bismarck it described it as a broad exemption accorded to every federal land bank every federal land bank that's an entity exemption statute the tax at issue in that case was an excise tax this court no in the south dakota case the supreme court in the bismarck holding surely implies the ninth circuit held in the forty four thirty two master cases of cigarettes case the seventh circuit in the rosenow case every court to consider whether a sales tax is an excise tax  held that it is so in bismarck we have an entity exemption statute and a state trying to impose an excise tax on the exempt entity the supreme court says no can do the statute controls this tax is barred the tax is barred now i mentioned that this court would have to depart from the sixty ninth circuit's the court as judge murphy noted this six circuit in oakland ruled on this very issue that's not the only six circuit case in the michigan case the court was looking at an entity exemption statute held it barred sales tax and excise tax the ninth circuit california credit union league case again entity exemption statute covering credit unions excise tax a it was a hotel occupancy tax which is almost a quintessential excise tax so bismarck controls here now what's point us rejoin and i see i'm into mr rogers time he's graciously agreed to cede me such time as i may need i will certainly a term of art definition for the phrase all taxation or exempt from all taxation so what we ought to do in the first instance is look at what the supreme court actually said and in the two sentences that that  mr freeman relies on in his brief at page six the supreme court specifically says at the time the housing act was enacted an exemption of property from all taxation had an understood meaning th supreme court didn't say the words all taxation haven't understood meaning or any exemption from all taxation has an understood meaning the supreme court was extraordinarily careful to use the word property six time times in the two relevant sentences so the thought that the supreme court wasn't thinking specifically about property exemptions and wells fargo it's just not so your honour's that's exactly what the court was thinking about and that's why the court didn't have to address bismarck because bismarck as we said earlier was addressing a different kind of statute a statute the supreme the supreme court described as the broad exemption according accorded to every federal land banks we've got two lines of cases one that says property exemptions don't cover excise taxes because excise taxes are not imposed on the property that's the wells fargo line we have no issue with that because our exemption statutes are not property exemptions statutes there entity exemptions statutes we have the bismarck line of cases that includes bismarck oakland michigan california credit union league those all hold entity exemptions statutes cover excise taxes because of course excise taxes are imposed on the entities liable for their payment imagine if it were otherwise imagine if we we believe mr freeman's argument that the taxes imposed on the privilege are on the transaction and not on the entity well suppose payment weren't made and the taxing authority needed to send a deficiency notice could it send it to a transaction or a privilege couldn't bring a transaction or a privilege into court is there any jurisdiction any court jurisdiction over transactions or privileges no it can't be done two things can be taxed entities and property that's in persona jurisdiction in ram jurisdiction that's how tax is going to force if they're not paid that's how they get refunded if they're overpaid the check goes to the party the tax payer not the privilege not the transaction for every tax there's a tax payer if a would be taxpayer is exempt from all taxation that that entity can't be liable for any tax congress enacted an extraordinarily broad exemption here exempted these enterprises from all transact all taxes now or hereafter imposed by any state locality county anything else if we sat down to draft a more comprehensive exemption i don't think we could come up with one so the practical consequence here of ruling in favor of mr freeman would be number one similar statutes that exempt to spend a moment on the federal instrumentality argument that was raised by opposing counsel the federal interment tell any argument as even opposing counsel and mid in his argument does not make a w difference opposing counsel noted that congress had the power to exempt nonfederal instrumentalities from taxes that is damning for his case that's the whole ball of wax as long as congress has that power that it can extend to private entities like fannie and freddie here and as judge smith pointed out congress chose when it privatized fannie and freddie not to revoke that exemption so now turning to the actual exemption itself the language is pretty clear the statutes provide that the additives shall be exempt from all taxation imposed by states and localities accepting only direct taxation on real property opposing counsel and h in county expressly concede that this is not a direct tax on real property therefore it fits within the broad exemption on all taxation as mr johnson correctly explained wells fargo which is not control in that case the supreme court was dealing only with exemptions of real property and here when they used all taxation and wells fargo it met all taxation with reference to those taxes that could be imposed on real property so direct taxation that's what the supreme court was talking about of course in bismarck lumber the supreme court made a more expansive ruling when the  taxation exemption dealt with and here the the taxes come straight from the congressionally authorized operations of fannie and freddie and therefore fit clearly within the all taxation  six or to know it and county of oakland there are no questions away the remainder of my time which is exactly where we think it should be now the court and its clerks can read these cases that counsel and i are discussing as happily as we can but i want to point out to you that the first ever cultural national bank case is a banking case and the courts and the congress have treated national banks different since mccullough versus maryland there are special and distinct entities and the question they're a support on foot no three in the first egg case it sets forth congressional language that sets forth the only four areas that states can tax federal banks with the sales tax massachusetts was trying to tax isn't one of those so that really has very little relevance to what we're doing here the credit union case out of california well the credit union was and is a federal it's metallic accordingly they have the brought opportunities to to to tax and the discussion about the difference between the constitutional exemptions that i framed and the statutory ones are very briefly noted in one paragraph and really not expanded what i'm suggesting to the court there is a true and complete difference between the broad federal instrumentality such as the federal land bank of st paul experienced and had in bismarck versus the exemption that exists with  freddie and in the estate tax and wells fargo that in fact congress knew what it was doing when it did not exempt fannie and freddie from federal income tax it only says state local municipal but by using those cases said well in the briefs track that ending up with wells fargo what we're asking this court to do is to move away from the clutter of entity versus property and look at the tax and to look at the the constitutional exemptions or the statutory and we are going members of the court the statutory ones a much more limited and that in fact the exemptions must be explicitly stated well congress said explicitly state in all taxation and the exemption is only for all direct taxation now there's a lot of clutter the court is always good at working through clutter