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Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

__________________________

No. 13-12615

__________________________

D.C. Docket No. 2:12-cv-00885-MHT-WC

MONTGOMERY COUNTY COMMISSION, on behalf of 

themselves, and all others similarly situated, STEVEN L.

REED, Judge of Probate for Montgomery County,

Plaintiffs-Appellants,

REESE MCKINNEY, JR., Judge of Probate for

Montgomery County, Alabama, on behalf of 

themselves and all others similarly situated, 

Plaintiff,

versus

FEDERAL HOUSING FINANCE AGENCY, as 

conservator for Federal National Mortgage 

Association, and Federal Home Loan Mortgage 

Corporation, FEDERAL NATIONAL MORTGAGE 

ASSOCIATION, a federally chartered corporation,

FEDERAL HOME LOAN MORTGAGE CORPORATION, 

a federally chartered corporation,

Defendants-Appellees.

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__________________________

No. 13-12637

__________________________

D.C. Docket No. 5:12-cv-00355-MTT

CHAIRMAN MAURICE RAINES, Upson County 

Board of County Commissioners, and on behalf of all

others similarly situated,

Plaintiff,

ATHENS-CLARKE COUNTY UNIFIED GOVERNMENT, 

Athens-Clarke County Unified Government, by and 

through Nancy Denson, Chair of the Commission and 

Mayor, Athens-Clarke County Unified Government, Georgia,

CLAYTON COUNTY, Clayton County, by and through 

Eldrin Bell, Chairman, Board of Commissioners, Clayton 

County, Georgia, SUMTER COUNTY, Sumter County, 

by and through Randy Howard, Chairman, Board of 

Commissioners, Sumter County, Georgia, AUGUSTA, 

GEORGIA, Augusta, Georgia, by and through Deke 

Copenhaver, Chair of the Commission and Mayor, 

Augusta, Georgia, BUTTS COUNTY, Butts County, by

and through Roger McDaniel, Chairman, Board of Commissioners,

Butts County, Georgia, UPSON COUNTY, Upson County, 

by and through Maurice Raines, Chairman, 

Board of Commissioners, Upson County, Georgia, 

Plaintiffs-Appellants,

versus

FEDERAL HOUSING FINANCE AGENCY, as 

Conservator for Federal National Mortgage 

Association and Federal Home Loan Mortgage 

Corporation, FEDERAL NATIONAL MORTGAGE 

ASSOCIATION, A Federally Chartered Private Corporation,

FEDERAL HOME LOAN MORTGAGE CORPORATION, 

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A Federally Chartered Corporation,

Defendants-Appellees.

__________________________

No. 13-13150

__________________________

D.C. Docket No. 2:12-cv-00553-JES-DNF

CHARLIE GREEN, etc., 

Plaintiff,

LINDA DOGGETT, as Clerk of the

Court for Lee County, Florida, and on 

behalf of all others similarly situated, 

Plaintiff-Appellant,

versus

FEDERAL HOUSING FINANCE AGENCY, as 

Conservator for Federal National Mortgage 

Association and Federal Home Loan Mortgage 

Corporation, FEDERAL NATIONAL MORTGAGE 

ASSOCIATION, a federally chartered corporation, 

a.k.a. Fannie Mae, FEDERAL HOME LOAN MORTGAGE 

CORPORATION, a federally chartered corporation,

a.k.a. Freddie Mac, 

Defendants-Appellees.

__________________________

No. 13-13267

__________________________

D.C. Docket No. 4:12-cv-00102-DHB-GRS

DANIEL W. MASSEY, 

as Clerk of the Superior Court of 

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Chatham County, Georgia, individually, and 

on behalf of all others similarly situated, 

Plaintiff-Appellant,

GABRIELLE SUMME, 

as Clerk of the Kenton, County, Kentucky, 

Interested Party-Appellant,

versus

FEDERAL HOUSING FINANCE AGENCY, 

Intervenor-Appellee,

FEDERAL NATIONAL MORTGAGE ASSOCIATION, 

a.k.a. Fannie Mae, FEDERAL HOME LOAN MORTGAGE

CORPORATION, 

Defendants-Appellees.

__________________________

No. 13-13897

__________________________

D.C. Docket No. 3:12-cv-00886-WKW-SRW

RANDOLPH COUNTY, a duly organized county of the

State of Alabama, on behalf of itself and all others

counties in the state of Alabama similarly situated, 

Plaintiff-Appellant,

versus

FEDERAL NATIONAL MORTGAGE ASSOCIATION, 

a federally chartered private corporation, FEDERAL 

HOME LOAN MORTGAGE CORPORATION, a 

federally chartered private corporation, FEDERAL

HOUSING FINANCE AGENCY, as conservator for Federal

National Mortgage Association and Federal Home Loan Mortgage

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Corporation, 

Defendants-Appellees.

__________________________

No. 13-14094

__________________________

D.C. Docket No. 1:13-cv-00056-TWT

FLOYD COUNTY, GEORGIA, a Political Subdivision

of the State of Georgia, 

Plaintiff-Appellant,

versus

FEDERAL HOUSING FINANCE AGENCY, a Conservator for

Federal National Mortgage Association and Federal Home Loan 

Mortgage Corporation, FEDERAL NATIONAL MORTGAGE

ASSOCIATION, a Federally Chartered Corporation, 

FEDERAL HOME LOAN MORTGAGE CORPORATION,

a Federally Chartered Corporation,

Defendants-Appellees. 

________________________ 

Appeals from the United States District Court

for the Middle District of Florida, the Southern District of Georgia, the Middle 

District of Alabama, the Middle District of Georgia, and the Northern District of 

Georgia

________________________

(January 16, 2015)

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Before MARTIN and ANDERSON, Circuit Judges and MORENO,∗ District 

Judge.

MORENO, District Judge: 

This consolidated appeal arises from six district court actions in this circuit. 

In each of the six cases, the district court ruled in favor of the Appellees, the 

Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan 

Mortgage Corporation (“Freddie Mac”), and the Federal Housing Finance Agency 

(collectively referred to as the “federal entities”). Appellants’ position in this 

appeal is that the state taxes normally imposed on real estate transfers apply when 

the federal entities transfer real property in their respective states. The federal 

entities have not paid the transfer taxes, citing their Congressional charter 

exemptions from “all taxation.” These statutory exemptions contain an exception

allowing states to impose real estate taxes on the federal entities, and Appellants 

contend their transfer taxes fall into that exception. Appellants also make the 

constitutional argument that even if the exemptions preclude the states from 

imposing the transfer taxes, the exemptions themselves are unconstitutional under 

the Commerce, Necessary and Proper and Supremacy Clauses. The district court 

 ∗

Honorable Federico A. Moreno, United States District Judge for the Southern District of 

Florida, sitting by designation.

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in each case, as have several Circuit Courts of Appeal,1 found the federal entities 

are exempt from paying transfer taxes, and the statutes are otherwise constitutional. 

We agree and affirm.

I. Factual Background

A. The Federal Entities and the Statutory Charter Exemption from Taxation

During the Great Depression, Congress created Fannie Mae to “establish

secondary market facilities for residential mortgages,” to “provide stability in the 

secondary market for residential mortgages,” and to “promote access to mortgage 

credit throughout the Nation.” 12 U.S.C. § 1716. Later, Congress chartered 

Freddie Mac for substantially the same mission, including to provide ongoing 

assistance to the secondary market for residential mortgages, to strengthen and 

support mortgages on housing for low and moderate income families, by 

increasing the liquidity of the market, and to promote access to mortgage credit. 

Id. at § 1451 et seq. These federally chartered entities purchase and securitize 

residential mortgages, which generates additional liquidity for mortgage lending. 

 1

See Bd. of County Comm’rs of Kay County, Okla. v. Fed. Housing Fin. Agency, 754 F.3d 

1025 (D.C. Cir. 2014); Vadnais v. Fed. Nat’l Mortg. Ass’n, 754 F.3d 524 (8th Cir. June 6, 2014); 

Delaware County v. Fed. Housing Fin. Agency, 747 F.3d 215 (3d Cir. 2014); Hennepin County

v. Fed. Nat’l Mortg. Ass’n, 742 F.3d 818, 824 (8th Cir. 2014); Montgomery County, Md. v. Fed. 

Nat’l Mortg. Ass’n, 740 F.3d 914, 917 (4th Cir. 2014); DeKalb County v. Fed. Housing Fin. 

Agency, 741 F.3d 795, 800 (7th Cir. 2013); County of Oakland v. Fed. Housing Fin. Agency, 716 

F.3d 935 (6th Cir. 2013); Town of Johnston v. Fed. Housing Fin. Agency, 765 F.3d 80 (1st Cir. 

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See id. at §§ 1452(c), 1454(a)(1), 1717(b)(1), 1719(d). During the 2008 financial 

crisis, Congress created the Federal Housing Finance Agency to regulate Fannie 

Mae and Freddie Mac, among other entities. Id. at § 4511. The Federal Housing 

Finance Agency is an independent federal agency, created by the Housing and 

Economic Recovery Act of 2008. Id. at §§ 4511, 4617 et seq. In the wake of the 

2008 financial crisis, Fannie Mae and Freddie Mac were placed into the Federal 

Housing Finance Agency's conservatorship. Id. at § 4617. As the conservator, the 

Federal Housing Finance Agency has the statutory power to "operate" Fannie Mae 

and Freddie Mac with the statutory mission of "preserv[ing] and conserv[ing] 

the[ir] assets and property." Id. at § 4617(b)(2)(B)(iv). The Federal Housing 

Finance Agency, as conservator, has the authority to “transfer or sell any asset or 

liability of the regulated entity.” Id. at § 4617(b)(2)(G). 

Congress enacted statutory exemptions from taxation for all three entities. 

The statutes are as follows: 

1. Fannie Mae’s Exemption at 12 U.S.C. § 1723a(c)(2)

 

2014); City of Spokane v. Fed. Nat’l Mortg. Ass’n, No. 13-35655, 2014 WL 7384311 (9th Cir. 

Dec. 30, 2014).

[Fannie Mae], including its franchise, capital, reserves, 

surplus, mortgages, or other security holdings, and 

income shall be exempt from all taxation now or 

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hereafter imposed by any State, . . . or by any county, . . . 

except that any real property of the corporation shall be 

subject to State. . .county. . . or local taxation to the same 

extent as other real property is taxed. 

2. Freddie Mac’s Exemption at 12 U.S.C. § 1452(e)

[Freddie Mac], including its franchise, activities, capital, 

reserves, surplus, and income, shall be exempt from all 

taxation now or hereafter imposed . . . by any State [or] 

county, . . .except that any real property of the 

Corporation shall be subject to State. . .county, . . . or 

local taxation to the same extent according to its value as 

other real property is taxed.

3. The Federal Housing Finance Agency’s Exemption at 12 U.S.C. §

4617(j)(2)

[The Federal Housing Finance Agency], including its 

franchise, its capital, reserves, and surplus, and its 

income, shall be exempt from all taxation imposed by 

any State [or] county, . . . except that any real property of 

the Agency shall be subject to State, . . .county, . . .or 

local taxation to the same extent according to its value as 

other real property is taxed. . . 

B. The Transfer Taxes

Alabama, Florida, and Georgia impose taxes upon the transfer of real 

property. In Alabama, upon the presentation of any instrument for record, a 

mandatory real property transfer tax is owed by the grantor to the judge of probate 

based upon the actual purchase price or the actual value of the property. See Ala. 

Code. §§ 40-22-1(d), 40-22-2. Similarly, Georgia’s transfer tax is imposed “on 

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each deed, instrument, or other writing” by which any property is transferred, so 

long as the consideration or value of the property conveyed exceeds $100. See Ga. 

Code Ann. § 48-6-1. Georgia’s transfer tax is owed to the Clerk of the Superior 

Court in the county in which the real property is situated “prior to and as a 

prerequisite to the filing for record of any deed, instrument, or other writing” 

subject to the tax. Id. at § 48-6-4(a). Florida’s transfer tax works in much the 

same way. Florida Statute § 201.02 states that a transfer tax of 70 cents shall apply 

on each $100 of consideration when there is a transfer of real property.

C. The District Court Proceedings

The six cases consolidated in this appeal are as follows: Montgomery County 

Commission v. Federal Housing Finance Agency, App. No. 13-12615 (on appeal 

from the Middle District of Alabama); Athens-Clarke County v. Federal Housing 

Finance Agency, et al., App. No. 13-12367 (on appeal from the Middle District of 

Georgia); Doggett v. Federal Housing Finance Agency, et al., App. No. 13-13150 

(on appeal from the Middle District of Florida) (Lee County); Massey v. Federal 

Housing Finance Agency, et al., App. No. 13-13267 (on appeal from the Southern 

District of Georgia) (Chatham County); Randolph County v. Federal Housing 

Finance Agency, et al., App. No. 13-13897 (on appeal from the Middle District of 

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Alabama); Floyd County v. Federal Housing Finance Agency, et al., App. No. 13-

14094 (on appeal from the Northern District of Georgia).

In the Randolph County action, the county filed a motion for summary 

judgment as to liability asserting that the charter exemptions from taxation were an 

unconstitutional interference with its right as a sovereign to impose nondiscriminatory transfer taxes on Fannie Mae and Freddie Mac, and that in any 

event, the statute’s own exception for real estate taxes applied to allow the local 

government to impose the tax. The federal entities also filed a motion for 

summary judgment and opposed Randolph County’s motion. The district court 

granted the entities’ motion finding that “Congress has the power to exempt 

Defendants statutorily” and that “[t]he Commerce Clause permits Congress to 

regulate activities that have a substantial relation to interstate commerce, and the 

availability of capital in the national mortgage market bears such a substantial 

relationship.” Randolph County v. Fed. Nat’l Mortg. Ass’n, No. 3:12-CV-886-

WKW, 2013 WL 3947614, *6 (M.D. Ala. July 31, 2013). The district court in the 

Randolph County case held the statutory exception that allows for taxation on real 

property did not apply to the Alabama transfer tax. Id.

Likewise, the Georgia district court’s order dismissing the amended 

complaint in the Athens-Clarke County matter found that as federally chartered 

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private corporations, Fannie Mae, and Freddie Mac may be shielded from paying 

state taxes based on a congressional exemption. Athens-Clarke County Unified 

Gov’t v. Fed. Housing Fin. Agency, 945 F. Supp. 2d 1401(M.D. Ga. 2013). The 

district court reasoned that “[the county is] essentially ask[ing] the Court, based on 

broad principles of federalism and dual sovereignty, to read new limits into the 

Commerce Clause that would rein in Congressional authority to exempt private 

entities from state taxation. However, [the district court] while respecting these 

principles, decline[d] the Plaintiffs’ expansive invitation to redraw the outer 

boundaries of Congress’s commerce power.” Id. at n.18. The Georgia district 

court similarly held the statutory exception for taxation of real property did not 

apply to except the transfer tax from the scope of the entities’ statutory exemption 

from taxation. Id., 945 F. Supp. 2d at 1410.

The other four actions that are part of this consolidated appeal met the same 

disposition in their respective district courts. The Alabama district court entered 

judgment in favor of the federal entities in the Montgomery County action.

Montgomery County Comm’n v. Fed. Housing Fin. Agency, No. 2:12-CV-885, 

2013 WL1896256 (M.D. Ala. 2013). In the Lee County action, the Florida district 

court dismissed the complaint. (App. to Brief of Plaintiff-Appellant Linda Doggett 

at 329). The Georgia district court also dismissed the Chatham County action and 

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entered judgment in favor of the federal entities in the Floyd County action. 

(Record in Chatham County Action at 82); Floyd County v. Fed. Housing Fin. 

Agency, No. 1:13-CV-56-TWT, 2013 WL 4670668 (N.D. Ga. Aug. 30, 2013). 

II. Standard of Review

This Court reviews questions of statutory interpretation de novo. See Black 

Warrior Riverkeeper, Inc. v. Black Warrior Minerals, Inc., 734 F.3d 1297, 1300 

(11th Cir. 2013). This Court reviews a district court’s grant or denial of a motion 

for summary judgment, as in the Randolph County action de novo. Swanson v. 

Worley, 490 F.3d 894, n.8 (11th Cir. 2007). Accepting all of the well-pleaded 

allegations in the complaint as true and drawing all reasonable inferences in favor 

of the plaintiff, the standard of review on the grant of a 12(b)(6) motion to dismiss, 

as in the Athens-Clarke action, is also de novo. Simmons v. Sonyika, 394 F.3d 

1335, 1338 (11th Cir. 2004).

III. Analysis 

This consolidated appeal arises out of six actions in five United States 

District Courts in this Circuit. The appeal arises out of a Congressional exemption 

from taxation granted to the federal entities. The six district court opinions found 

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the statutory exemptions2 do apply to preclude taxation and are constitutional. 

Additionally, the district courts found the statutory exceptions for taxation of real 

property contained in the federal statutes did not apply to allow Appellants to 

impose the transfer taxes. We affirm the district courts and agree with our sister 

Circuit Courts, who have held the charter exemptions do apply in this context, and 

are constitutional. See Bd. of County Comm’rs of Kay County, Okla. v. Fed. 

Housing Fin. Agency, 754 F.3d 1025 (D.C. Cir. 2014); Vadnais v. Fed. Nat’l 

Mortg. Ass’n, 754 F.3d 524 (8th Cir. June 6, 2014); Delaware County v. Fed. 

Housing Fin. Agency, 747 F.3d 215 (3d Cir. 2014); Hennepin County v. Fed. Nat’l 

Mortg. Ass’n, 742 F.3d 818, 824 (8th Cir. 2014); Montgomery County, Md. v. Fed. 

Nat’l Mortg. Ass’n, 740 F.3d 914, 917 (4th Cir. 2014); DeKalb County v. Fed. 

Housing Fin. Agency, 741 F.3d 795, 800 (7th Cir. 2013); County of Oakland v. 

Fed. Housing Fin. Agency, 716 F.3d 935 (6th Cir. 2013); Town of Johnston v. Fed. 

 2 The statutory provisions exempt the federal entities from “all [state and local] taxation,”

except taxes to which their real property is subject. 12 U.S.C. §§ 1452(e), 1723a(c)(2), 

4617(j)(2) (i.e. the exemption provisions). 

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Housing Fin. Agency, 765 F.3d 80 (1st Cir. 2014); City of Spokane v. Fed. Nat’l 

Mortg. Ass’n, No. 13-35655, 2014 WL 7384311 (9th Cir. Dec. 30, 2014).3

 

A. Do the Statutory Exemptions Prohibit the States from Charging Transfer 

Taxes? 

“It is well settled that ‘the starting point for interpreting a statute is the 

language of the statute itself.’” Gwaltney of Smithfield, Ltd. v. Chesapeake, 484 

U.S. 49, 57 (1987) (Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 

U.S. 102, 108 (1980)). “When [a] statute's language is plain, the sole function of 

the courts. . . is to enforce it according to its terms.” Dodd v. United States, 545 

U.S. 353, 359 (2005) (quoting Hartford Underwriters Ins. Co. v. Union Planters 

Bank, N. A., 530 U.S. 1, 6, (2000)). The federal charters state that they “shall be 

exempt from all taxation . . . imposed by any State.” 12 U.S.C. §§ 1723a(c)(2); 

1452(e); 4617(j)(2). These statutes proceed to identify real property as the sole 

exception to the general rule. Id. A straightforward interpretation of the provisions 

is that the federal agencies are exempt from all state taxation, other than taxes on 

 3

In addition to those cases analyzed by the various Circuit Courts, several district courts 

have also reviewed the issues and found in favor of the Fannie Mae, Freddie Mac, and the 

Federal Housing Finance Agency. See City of Bridgeport v. Fed. Nat’l. Mortg. Ass’n, No. 3:12-

cv-1218, 2014 WL 1612589 (D. Conn. April 22, 2014); County of Erie v. Fed. Housing Fin. 

Agency, No. 13-CV-284S, 2014 WL 795967 (W.D.N.Y. Feb. 27, 2014); Griffith v. Fed. Nat’l. 

Mortg. Ass’n, No. 12-02083, 2014 WL 2573329 (S.D.W. Va. June 9, 2014); Butts v. Fed. Nat’l 

Mortg. Ass’n, No. 9:12-1912 (D.S.C. May 23, 2013). 

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their own real estate holdings. See Kay County, 754 F.3d at 1029 (“all taxation 

clearly encompasses all taxation, including the Transfer Tax”).

Against this argument, Montgomery and Floyd Counties argue the district 

court erred in holding that all taxation prohibited the imposition of the transfer 

taxes. Rather, Montgomery and Floyd Counties cite United States v. Wells Fargo, 

485 U.S. 351 (1988), where the Supreme Court stated: 

 

[A]n exemption of property from all taxation ha[s] an 

understood meaning: the property [is] exempt from direct 

taxation, but certain privileges of ownership, such as the 

right to transfer the property, [can] be taxed. Underlying 

this doctrine is the distinction between an excise tax, 

which is levied upon the use or transfer of property even 

though it might be measured by the property's value, and 

a tax levied upon the property itself. 

Id., 485 U.S. at 355. Using this language, the counties argue that an exemption 

from “all taxation” has a technical, “understood meaning” that does not provide an 

exemption from indirect taxes such as transfer taxes. Id.

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As the Seventh Circuit explained in DeKalb County, 741 F.3d at 800, the 

flaw in the counties’ argument is that Wells Fargo involved an exemption of 

specific property from all taxation, whereas this case involves exemptions of 

entities. The Supreme Court in Wells Fargo was considering an estate tax, an 

excise tax on the transfer of property at death, and the transfer of Project Notes4 in 

particular, which it held could be taxed at transfer. DeKalb, 741 F.3d at 800; 

Delaware County, 747 F.3d at 222 (3d Cir. 2014). 

In DeKalb, the court found Bank of St. Paul v. Bismarck Lumber Co., 314 

U.S. 95 (1941) to be more squarely on point and this Court agrees. “Had the 

Supreme Court meant to hold that the term ‘all taxation’ means just property 

taxation – a very strange reading, equivalent to interpreting ‘all soup’ to mean ‘all 

lobster bisque’ – it would have had to overrule [Bismarck].” DeKalb, 741 F.3d at 

800. In Bismarck, the Supreme Court analyzed a statute that stated “every Federal 

land bank . . . shall be exempt from Federal, State, municipal, and local taxation, 

except taxes upon real estate held, purchased or taken.” Bismarck, 314 U.S. at 96 

 

4

The Housing Act of 1937 gave state and local housing authorities the power to issue 

tax-free financing instruments, termed “Project Notes.” These notes were property issued by 

the state and local housing authorities during the housing shortage of the 1930s. Wells Fargo, 

485 U.S. at 353. 

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n.1. The tax exemption here applies to the federal entities, like the federal land 

banks in Bismarck, and “not just its property, which was the issue in Wells 

Fargo.” DeKalb, 741 F.3d at 801 (“The important point is that, as is plain from 

reading Wells Fargo, and plainer still when it is read in conjunction with 

Bismarck, the Fannie Mae statute exempts Fannie from real estate transfer taxes 

levied by state or local government. . .”); Delaware County, 747 F.3d at 222 

(“Wells Fargo involved an exemption of specific property from all taxation, 

whereas this case involves exemptions of entities”); Kay County, 754 F.3d at 1029 

(“But that case [Wells Fargo] is not on point. The statute at issue in Wells Fargo

exempted specific property. The statute at issue in this case exempts specific 

entities. This is a distinction with a difference.”); Hennepin County, 742 F.3d at 

822 (holding the issue was akin to that in Bismarck, and distinguishing Wells 

Fargo); County of Oakland, 716 F.3d at 94-41 (finding Bismarck applies). 

Bismarck is not the only Supreme Court case on point to support the 

holding that the exemption encompasses transfer taxes. In Pittman v. Home 

Owners’ Loan Corp. of Washington, DC, 308 U.S. 21, 33 (1939), the Supreme 

Court held that a federal statutory exemption from “all taxation” granted to the 

Home Owners’ Loan Corporation prohibited a Maryland stamp tax upon the 

recording of mortgages. The Supreme Court consistently held in Laurens Fed. 

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Savs. & Loan Ass’n v. S.C. Tax Comm’n, 365 U.S. 517, 524 (1961) that a federal 

statutory exemption from “all taxation” granted to federal home loan banks 

prohibited South Carolina from collecting a similar stamp tax imposed on 

transfers to or from such banks. Based on the Supreme Court precedent, the Court 

agrees with our sister Circuit Courts that the statutory exemption from “all 

taxation” applies to excise taxes like the transfer taxes here. 

1. The Real Estate Exceptions

The federal charter exemptions each contain an exception that states that 

“any real property” of the entities “shall be subject to [state and local] taxation to 

the same extent . . . as other real property is taxed.” 12 U.S.C. §§ 1452(e), 

1723a(c)(2), 4617(j)(2). Appellants argue that the district courts erred in limiting 

the real estate exception to ad valorem taxes. Their position is that “taxation is the 

rule -- exemption is the exception” and thus, the real estate property exception 

should be broadly construed to include an exception for transfer taxes, in addition 

to ad valorem taxes. Yazoo & M.V.R. Co. v. Thomas, 132 U.S. 174 (1889). More 

specifically, Appellants argue that property ownership is a “bundle of sticks” and 

the right to transfer is one stick in the property tax bundle. Taking the argument 

one step further, Appellants argue that any privilege associated with property 

ownership is tantamount to a real property tax, falling within the statutes’ 

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exception. Our sister Circuit Courts to have reviewed this argument have 

disagreed with Appellants' position. Here is why. Although transfer taxes are 

imposed on the exercise of privileges stemming from the ownership of real 

property, they are not taxes on the property itself, and thus do not qualify for the 

real property exception. To put it another way, “A deed is not real estate, any 

more than car title is a car.” DeKalb, 741 F.3d at 801; see Hennepin County, 742 

F.3d at 822 (“deed transfer tax is a tax imposed by the state on the transfer of real 

property, not on the real property itself.”); Kay County, 754 F.3d at 1030 (“The 

Transfer Tax, which is measured by the value of the property but triggered only at 

its transfer, is clearly an excise tax. Wells Fargo, upon which the County relies 

establishes the difference: excise taxes . . . are levied upon [the property’s] use or 

transfer and not upon its existence.”); Town of Johnston, 765 F.3d at 83 (“[T]his 

distinction between direct taxes on real property and indirect taxes is reflected in 

both Massachusetts and Rhode Island law. Direct taxes on real property. . .are 

codified separately from transfer taxes. . .”); City of Spokane, 2014 WL 7384311, 

at *2 (“[I]t is clear that the statutory carve-outs allowing for the taxation of real 

property as ‘other real property is taxed’ encompass only property taxes, not 

excise taxes.”); Delaware County, 747 F.3d at 224; Montgomery County, 740 F.3d 

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at 920; County of Oakland v. Fed. Housing Fin. Agency, 716 F.3d 935, 939 n.6 

(6th Cir. 2013).

Moreover, “[w]hen Congress provides exceptions in a statute, it does not 

follow that courts have authority to create others. The proper inference . . . is that 

Congress considered the issue of exceptions, and, in the end, limited the statute to 

the ones set forth.” County of Oakland, 716 F.3d at 940 (quoting United States v. 

Johnson, 529 U.S. 53, 58 (2000)). Here, the Court declines to extend the 

exception for taxation “as other real property is taxed” to include the states’ 

transfer taxes.

B. Are the Statutory Exemptions Constitutional under the Commerce 

Clause?

Appellants next make an interesting constitutional argument to invalidate 

the statutory tax exemptions. At issue is whether Congress acted within its 

authority under the Commerce Clause and Necessary and Proper Clauses, whether 

the entities are federal instrumentalities or private mortgage lenders, and whether 

the Tenth Amendment precludes the statutory exemptions. 

1. Did Congress violate the Commerce and Necessary and Proper 

Clauses? 

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The Commerce Clause provides that Congress shall have the power “to 

regulate Commerce with foreign Nations, and among the Several States. . ..” U.S. 

Const. Art. I, § 8 cl. 3. To that end, the “Necessary and Proper Clause grants 

Congress broad authority to enact federal legislation.” United States v. Comstock, 

560 U.S. 126, 133 (2010). It gives Congress the authority to “make all Laws 

which shall be necessary and proper” to “regulate Commerce . . . among the 

several States.” U.S. Const., Art. I, § 8. Typically, when a federal statute is 

construed to invalidate a state tax, courts apply the rational basis test to determine 

whether Congress had a “rational basis for finding the . . .tax interfered with 

interstate commerce.” Ariz. Pub. Serv. Co. v. Snead, 441 U.S. 141, 150 (1979); 

Gonzales v. Raich, 545 U.S. 1, 22 (2005); Vadnais v. Fed. Nat’l Mortg., 754 F.3d 

524, 527 (8th Cir. 2014).

Appellants contend this Court should review Congress’s authority to 

exempt the federal entities under the strict scrutiny standard of review because the 

exemptions interfere with the States’ fundamental constitutional rights as separate 

sovereigns under the Tenth Amendment. However, under Hodel v. Va. Surface 

Mining & Reclamation Ass’n, 452 U.S. 264, 276 (1981) “[t]he task of a court that 

is asked to determine whether a particular exercise of congressional power is valid 

under the Commerce Clause is relatively narrow. The court must defer to a 

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congressional finding that a regulated activity affects interstate commerce, if there 

is any rational basis for such a finding.” see also Montgomery County, 740 F.3d at 

921 (“The Supreme Court has often recognized Congress’s power to exempt 

entities from state taxation, but it has never indicated that such an exercise of 

power would be subject to strict scrutiny.”); Town of Johnston, 765 F.3d at 84 

(“As the municipalities necessarily concede, there is no precedent in favor of this 

wishful argument. . .The district courts saw no reason to depart from a rational 

basis analysis, and neither do we.”). Accordingly, in the absence of a particular 

constitutional right that triggers strict scrutiny, the Court will evaluate the federal 

charter exemptions under a rational basis standard of review. 

On the merits, the Appellants contend that Congress overstepped its 

authority under the Commerce Clause because the transfer taxes are local 

intrastate activity. The Commerce Clause authorizes Congress to regulate “the 

channels of interstate commerce, persons or things in interstate commerce, and 

those activities that substantially affect interstate commerce.” Nat. Fed’n of 

Indep. Bus. v. Sebelius, – U.S.–, 132 S. Ct. 2566, 2578 (2012) (quoting United 

States v. Morrison, 529 U.S. 598, 609 (2000)). Without question, the Supreme 

Court has “firmly establishe[d] Congress’ power to regulate purely local activities 

that are part of an economic ‘class of activities’ that have a substantial effect on 

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interstate commerce.” Raich, 545 U.S. at 1, 17 (citing Perez v. United States, 402 

U.S. 146, 150 (1971)). Evaluating a statute’s validity requires this Court to 

determine only whether Congress had a rational basis for determining the 

regulated activity substantially affects interstate commerce. Id. (citing United 

States v. Lopez, 514 U.S. 549 (1995)); Hodel, 452 U.S. at 276-80.

Congress created the federal entities – Fannie Mae, Freddie Mac, and the 

Federal Housing Finance Agency – with the intention of stabilizing the secondary 

market in home mortgages and to increase the supply of mortgage lending capital. 

See 12 U.S.C. § 1716 (Fannie Mae); 12 U.S.C. § 1451 (Freddie Mac). Congress 

charged these entitities “with buying mortgages from banks that had made 

mortgage loans, thus pumping money into the banking industry that could be used 

to make more such loans.” DeKalb, 741 F.3d at 797. For this reason, all the 

Circuit Courts to have reviewed this issue have found that Congress rationally 

acted in exempting the federal entities from the burden of state and local taxation, 

allowing them to reduce transaction costs in the course of buying and selling 

mortgages. Delaware County, 747 F.3d at 227 (“It strains credulity to argue that 

the transfer taxes, aggregated nationally, do not substantially affect the [national 

mortgage market].”); DeKalb, 741 F.3d at 801 (“[I]t is obvious that the home 

mortgage market is nationwide, and indeed worldwide, with home mortgages 

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being traded in vast quantities across state lines.”); Montgomery County, 740 F.3d 

at 923 (“One need only recall the effects on the national economy that the 2008 

failure of mortgage markets had in order to recognize that the regulation and 

stabilization of those markets lie at the core of the Nation’s interest in promoting 

and maintaining a vital economy.”); Vadnais, 754 F.3d at 527 (“This belief could 

lead Congress to reasonably conclude state transfer taxes ‘would substantially 

affect interstate commerce by burdening’ the federal agencies.”) (quoting 

Montgomery County, 740 F.3d at 924); Town of Johnston, 765 F.3d at 85 (“If the 

mission of the entities as detailed in their charters is not at the heart of interstate 

commerce, it surely resides in one of the main arteries.”); City of Spokane, 2014 

WL 7384311, at *4 (“[Congress] has power under the Necessary and Proper 

Clause not only to create Fannie and Freddie but also to ensure their preservation 

by exempting them from state and local taxes.”). This Court agrees that Congress 

did not overstep its authority under the Commerce Clause in exempting the federal 

entities from the states’ transfer taxes and the exemptions were a valid exercise 

under the Necessary and Proper Clause. 

2. Are the Appellees federal instrumentalities?

Appellants do not dispute that Congress can exempt federal agencies from a 

state tax, but rather argue the Fannie Mae and Freddie Mac are privately-held 

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corporations and not federal instrumentalities. See McCulloch v. Maryland, 17 

U.S. (4 Wheat.) 316, 436-37 (1819) (holding a state or local government cannot 

tax a federal entity).5 Recognizing that McCulloch controls, Appellants contend 

the constitutional immunity granted by McCulloch and the statutory exemptions 

must be identical for a private entity to be exempt. The Seventh Circuit has held 

that whether the constitutional and statutory exemptions are identical is 

inconsequential. DeKalb, 741 F.3d at 802. This Court agrees that requiring the 

constitutional and statutory exemption to be identical would strip Congress’s 

power under the Commerce Clause. Id., 741 F.3d at 802 (quoting Ariz. Dep’t of 

Revenue v. Blaze Constr. Co., 526 U.S. 32, 35-36). 

Against this logic, Appellants urge this Court to find the privatization of 

Fannie Mae and Freddie Mac precludes Congress from exempting them from state 

taxation. Appellants argue the district courts improperly relied on the decision in 

First Agricultural Nat’l Bank v. State Tax Comm’n, 392 U.S. 339 (1968). In First 

Agricultural, the Supreme Court held that a national bank had been statutorily 

exempted from a state tax, which made it “unnecessary to reach the constitutional 

question of whether . . .national banks should be considered nontaxable as federal 

 5

Fannie Mae was converted into a private entity by Congress, but its charter remained 

unchanged. Fannie Mae cannot change its charter, unless Congress does so statutorily. 12 

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instrumentalities.” Id., 392 U.S. at 341. The Supreme Court added that “[b]ecause 

of pertinent congressional legislation in the banking field, we find it unnecessary 

to reach the constitutional question. . ..” Id. Likewise here, Congress had the 

authority to provide for “immunity from state taxation irrespective of [the] entity’s 

status as a federal instrumentality and because Congress has done so in the present 

case, it is unnecessary to address whether Fannie Mae and Freddie Mac indeed 

qualify as federal instrumentalities.” Montgomery County, 740 F.3d at 925; see 

also Blaze Constr. Co., Inc., 526 U.S. at 36-38 (stating that tax exemption could 

stem from constitutional immunity or congressional exemption); Delaware 

County, 747 F.3d at 228, n.4. Put another way, “[t]his focus on whether the 

entities are federal instrumentalities is off-target. Private entities may be shielded 

from paying a state tax by either ‘constitutional immunity or congressional 

exemption.’” Town of Johnston, 765 F.3d at 85 (quoting Blaze Constr. Co., Inc., 

526 U.S. at 36-38). Again, it simply does not matter whether Fannie Mae and 

Freddie Mac were privatized, as long as they are fulfilling a federal policy found 

in their charters. Because that is the case, the Court must honor the Congressional 

exemption. DeKalb,741 F.3d at 802 (“Congress’s purpose in creating Fannie in 

the first place – to expand home-mortgage lending in the United States – remains 

 

U.S.C. § 1716. Freddie Mac was always private, but its charter like that of Fannie Mae’s, is to

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federal policy, and therefore remains the policy that private Fannie is obligated as 

its sole mission, to promote. . .. The objective was governmental and unchanged; 

only the means of achieving it was changed.”). 

Bismarck also lends support for this position. In Bismarck, the Supreme 

Court held that “when Congress constitutionally creates a corporation through 

which the federal government lawfully acts, the activities of such corporations are 

governmental.” Id., 314 U.S. at 102; see also Pittman, 308 U.S. at 32 (“[T]he 

activities of the Corporation through which the national government lawfully acts 

must be regarded as governmental functions and as entitled to whatever immunity 

attaches to those functions when performed by the government itself.”). The 

Bismarck Court ultimately held that Congress had the power to exempt from 

taxation the federal land banks, which it viewed as extensions of the federal 

government. Bismarck, 314 U.S. at 102. This case is nearly identical to Bismarck. 

Hennepin County, 742 F.3d at 823. Congress constitutionally created Fannie Mae 

and Freddie Mac to provide access to mortgages and support to the secondary 

mortgage market. Like the federal land banks, Congress had the authority to 

exempt them from state taxation as these entities are carrying out a federal policy 

that their charters require them to pursue. This Court therefore agrees with the 

 

promote federal home financing policy. 12 U.S.C. § 1451.

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sister Circuit Courts to have reviewed this issue that Congress has the authority to 

protect these federal entities by exempting from state taxation. DeKalb, 741 F.3d 

at 802; Hennepin County, 742 F.3d at 824; Montgomery County, 740 F.3d at 925; 

Vadnais, 754 F.3d at 527.

3. Do the exemptions run afoul of the 10th Amendment?

Relying on New York v. United States, 505 U.S. 144 (1992) and Printz v. 

United States, 521 U.S. 898 (1997), Appellants argue the federal charter 

exemptions run afoul of the 10th Amendment by commandeering state officials to 

record deeds from the federal entities free of charge. New York and Printz explain 

the general “anti-commandeering” parameters of the Tenth Amendment: (i) 

Congress may not require a state legislature to enact any laws or regulations and 

(ii) Congress may not command state officers to administer or enforce a federal

regulatory program. New York, 505 U.S. at 162-170; Printz, 521 U.S. at 935. 

This Court does not view the exemptions at issue to require the state legislature or 

the state officers to take any action to implement a federal program. Rather, the 

Court views the exemptions as valid under the Supremacy Clause, which allows 

Congress to properly enact statutes under the Commerce Clause, which supercede 

state tax law. 

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The statutory exemptions are in line with those upheld by the Supreme 

Court in South Carolina v. Baker, 485 U.S. 505 (1988), in which the Court found 

a federal statute requiring bond registration did not improperly commandeer the 

states. In Baker, the Supreme Court wrote: “Any federal regulation demands 

compliance. That a State wishing to engage in certain activity must take 

administrative and sometimes legislative action to comply with federal standards 

regulating that activity is a commonplace [and] presents no constitutional defect.” 

Id., 485 U.S. at 514; see also Reno v. Condon, 528 U.S. 141, 151 (2000). The 

federal charter exemptions at issue in this case certainly do not improperly 

commandeer the state actors in violation of the 10th Amendment.

In this case, the Supremacy Clause does not set forth a different standard for 

legislation enacted under the Commerce Clause, including any legislation such as 

the state taxes here at issue. This Court also recognizes the Supreme Court has 

required Congress to “speak clearly when it intends to exercise its lawful authority 

under the Supremacy Clause to preempt traditional state powers” such as taxation. 

Delaware County, 747 F.3d at 225 (citing Dep’t of Rev. of Or. v. ACF Indus., Inc., 

510 U.S. 332, 345 (1994)) (“We will interpret a statute to pre-empt the traditional 

state powers only if that result is ‘the clear and manifest purpose of Congress.’”). 

Indeed, the Supreme Court has long held that the federal commerce power 

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supercedes state tax authority. Brown v. Maryland, 25 U.S. (12 Wheat.) 419 

(1827); see also Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824) (“[The 

Commerce Clause] is complete in itself, may be exercised to its utmost extent, and 

acknowledges no limitations, other than are prescribed in the constitution.”). In 

evaluating this issue, the Seventh Circuit explained, “[n]o provision of the 

Constitution insulates state taxes from federal powers granted by the 

Constitution.” DeKalb, 741 F.3d at 801; see Delaware County, 747 F.3d at 228 

(“A state official’s compliance with federal law and non-enforcement of a 

preempted state law– as required by the Supremacy Clause– is not an 

unconstitutional commandeering.”); Montgomery County, 740 F.3d at 925 (“The 

federal statutes in question, however, do not impose upon the states or local 

officers any affirmative obligation.”); City of Spokane, 2014 WL 7384311, at *4 

(“The exemptions neither commandeer state and local officials nor transgress 

general principles of federalism.”). This Court agrees that the Congressional 

exemptions here demonstrate a clear intention by Congress to exercise its lawful 

authority under the Supremacy Clause to prohibit the imposition of state taxes on 

the federal entities. 

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The district courts’ decisions holding that the federal entities are exempt 

from paying transfer taxes and that the federal statutes are constitutional are 

affirmed. 

AFFIRMED.

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