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RECOMMENDED FOR FULL-TEXT PUBLICATION 

Pursuant to Sixth Circuit I.O.P. 32.1(b) 

File Name: 14a0144p.06 

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT 

_________________ 

BOARD OF COMMISSIONERS OF MONTGOMERY 

COUNTY, OHIO, and BOARD OF COMMISSIONERS OF 

SENECA COUNTY, OHIO, 

Plaintiffs-Appellants, 

v. 

FEDERAL HOUSING FINANCE AGENCY, FEDERAL 

NATIONAL MORTGAGE ASSOCIATION, and FEDERAL 

HOME LOAN MORTGAGE CORPORATION, 

Defendants-Appellees, 

UNITED STATES OF AMERICA, 

Intervenor. 

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No. 13-4429 

Appeal from the United States District Court 

for the Southern District of Ohio at Dayton 

No. 3:12-cv-00245—Thomas M. Rose, District Judge. 

Argued: June 24, 2014 

Decided and Filed: July 10, 2014 

Before: SUHRHEINRICH, MOORE, and WHITE, Circuit Judges. 

_________________ 

COUNSEL 

ARGUED: Nathaniel C. Giddings, HAUSFELD LLP, Washington, D.C., for Appellants. 

Michael A.F. Johnson, ARNOLD & PORTER LLP, Washington, D.C., for Appellees. Patrick J. 

Urda, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Intervenor. ON 

BRIEF: Nathaniel C. Giddings, James J. Pizzirusso, HAUSFELD LLP, Washington, D.C., Don 

Springmeyer, WOLF, RIFKIN, SHAPIRO, SCHULMAN & RABKIN, LLP, Las Vegas, 

Nevada, Mark H. Troutman, Mark Landes, ISAAC, BRANT, LEDMAN & TEETOR LLP, 

Columbus, Ohio, for Appellants. Michael A.F. Johnson, Howard N. Cayne, Asim Varma, Dirk 

C. Phillips, ARNOLD & PORTER LLP, Washington, D.C., Michael J. Ciatti, Merritt E. 

>
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Page 2 

McAlister, KING & SPALDING LLP, Washington, D.C., Michael D. Leffel, FOLEY & 

LARDNER LLP, Madison, Wisconsin, Jill L. Nicholson, FOLEY & LARDNER LLP, Chicago, 

Illinois, for Appellees. Patrick J. Urda, Jonathan S. Cohen, UNITED STATES DEPARTMENT 

OF JUSTICE, Washington, D.C., for Intervenor. 

_________________ 

OPINION

_________________ 

KAREN NELSON MOORE, Circuit Judge. Two Ohio counties brought this suit on 

behalf of a class of all Ohio counties against the Federal National Mortgage Association (“Fannie 

Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), as well as the 

Federal Housing Finance Agency (“FHFA”), as conservator for both Fannie Mae and Freddie 

Mac. In their suit against Fannie Mae and Freddie Mac (collectively, the “Enterprises”) and 

FHFA, the Ohio counties sought unpaid real property transfer taxes under Ohio law. The 

Enterprises claim that they are exempt, per their federal charters, from such state taxes. 

The state real property transfer taxes at issue are encompassed in the Enterprises’ 

statutory exemptions from all taxation. Moreover, real property transfer taxes are excise taxes 

rather than taxes on real property which are an exception to those tax exemptions. Finally, 

Congress had the power to enact the exemptions under the Commerce Clause, and the enactment 

does not run afoul of any constitutional provision. Therefore, because constitutionally sound 

federal statutes exempt Fannie Mae and Freddie Mac from real property transfer taxes, we 

AFFIRM the district court’s judgment dismissing the case. 

I. BACKGROUND

Fannie Mae was established by congressional enactment of its charter in 1938 “to 

establish secondary market facilities for residential mortgages.” 12 U.S.C. § 1716. This added 

liquidity allows lenders to sell mortgages and use the proceeds to fund new loans. Fannie Mae 

became a privately held corporation in 1968. Fannie Mae’s charter spells out that: 

The corporation, including its franchise, capital, reserves, surplus, mortgages or 

other security holdings, and income, shall be exempt from all taxation now or 

hereafter imposed by any State, territory, possession, Commonwealth, or 
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dependency of the United States, or by the District of Columbia, or by any 

county, municipality, or local taxing authority, except that any real property of the 

corporation shall be subject to State, territorial, county, municipal, or local 

taxation to the same extent as other real property is taxed. 

12 U.S.C. § 1723a(c)(2). 

Freddie Mac was established in 1970 to compete with Fannie Mae, expand and stabilize 

the secondary mortgage market, and provide further liquidity for mortgages. See Federal Home 

Loan Mortgage Corporation Act, Pub. L. No. 91–351, 84 Stat. 450, 451 (1970) (codified, as 

amended, at 12 U.S.C. §§ 1451 et seq.); see also DeKalb Cnty. v. Fed. Hous. Fin. Agency, 

741 F.3d 795, 797–98, 803 (7th Cir. 2013). Freddie Mac’s charter provides that: 

The Corporation, including its franchise, activities, capital, reserves, surplus, and 

income, shall be exempt from all taxation now or hereafter imposed by any 

territory, dependency, or possession of the United States or by any State, county, 

municipality, or local taxing authority, except that any real property of the 

Corporation shall be subject to State, territorial, county, municipal, or local 

taxation to the same extent according to its value as other real property is taxed. 

12 U.S.C. § 1452(e). 

FHFA, an independent federal agency, was established in 2008. Pub. L. No. 110-289, 

122 Stat. 2654 (codified in part at 12 U.S.C. § 4617 et seq.). Fannie Mae and Freddie Mac have 

been placed into conservatorship under FHFA “for the purpose of reorganizing, rehabilitating, or 

winding up [their] affairs.” 12 U.S.C. § 4617(a)(2). FHFA has its own exemption from state 

taxes: 

The Agency, including its franchise, its capital, reserves, and surplus, and its 

income, shall be exempt from all taxation imposed by any State, county, 

municipality, or local taxing authority, except that any real property of the 

Agency shall be subject to State, territorial, county, municipal, or local taxation to 

the same extent according to its value as other real property is taxed . . . . 

12 U.S.C. § 4617(j)(2). 

The Ohio counties in this dispute seek enforcement of real property transfer taxes under 

Ohio law. See Ohio Rev. Code §§ 319.54(G)(3), 322.02(A) (stating that “any county may levy 

and collect a tax to be known as the real property transfer tax on each deed conveying real 
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property or any interest in real property located wholly or partially within the boundaries of the 

county”). 

The district court granted the defendants’ motion to dismiss on October 23, 2013. R. 74 

(Entry and Order Granting Defs.’ Mot. To Dismiss Pls.’ Consol. Amended Class Action Compl. 

(Doc. 24) and Terminating Case.) (Page ID ##1260–69). In its opinion, the district court 

reasoned that the case was “largely governed” by our decision regarding Michigan’s real 

property transfer tax. Id. at 7 (Page ID #1266) (quoting County of Oakland v. Fed. Hous. Fin. 

Agency, 716 F.3d 935 (6th Cir. 2013)). It then rejected the counties’ “request[]” to “create a 

strict scrutiny of legislation that limits a state’s ability to levy taxes.” Id. at 8 (Page ID #1267). 

Rather, the district court deemed that the congressional enactment, which includes the statutory 

tax exemption, “is not aimed at state property transfer taxes, but at facilitating the secondary 

mortgage market.” Id. Thus, the district court performed a traditional analysis of the 

congressional enactment and determined that the legislation’s subject was the “secondary 

mortgage market, which has a substantial nexus with interstate commerce,” that “[e]xempting 

Defendants from state and local taxation is reasonably adapted to the end Congress sought to 

achieve—more equitable and efficient allocation of mortgage credit throughout the nation”—and 

that the means for achieving this end are “rational.” Id. at 9 (Page ID #1268). Having implicitly 

concluded that Congress intended to preempt state taxation, the district court held that this 

preemption did not run afoul of the Constitution. See id.

This circuit has previously reviewed and rejected a challenge on statutory grounds by 

Michigan counties attempting to force Fannie Mae and Freddie Mac to pay the Michigan real 

estate transfer tax. See County of Oakland, 716 F.3d 935. In that case, the Sixth Circuit panel 

held that the exemption from “all taxation” includes the Michigan real estate transfer tax. See id.

at 940.1

 In a footnote, the panel noted that the Michigan counties were, for the first time on 

appeal, arguing in the alternative that the real estate transfer tax while falling under the ban of 

“all taxation” is excluded from that ban by the real property tax exception in the various statutes. 

 1

While the counties would like to argue that Ohio’s real property transfer tax does not fall under “all 

taxation” as provided in the various statutory enactments, they concede that this panel is bound by the decision in 

Oakland County and do not argue for a different result here. 
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Id. at 939 n.6. The panel determined that the argument was forfeited because it was not argued 

in the district court, but that even if it were not forfeited, “the transfer tax, as a privilege tax, does 

not fit into the carve out allowing for taxes on real property.” Id.

II. DISCUSSION

We review the district court’s grant of the motion to dismiss de novo. Buck v. Thomas M. 

Cooley Law Sch., 597 F.3d 812, 816 (6th Cir. 2010). Similarly, we review “de novo a district 

court’s purely legal determinations, including determinations regarding statutory construction 

and the constitutionality of a federal statute.” United States v. Felts, 674 F.3d 599, 602 (6th Cir. 

2012). 

A. Statutory Issue: Real Property Exception

Fannie Mae’s charter prohibits state and local taxation of Fannie Mae “except that any 

real property of the corporation shall be subject to State, territorial, county, municipal, or local 

taxation to the same extent as other real property is taxed.” 12 U.S.C. § 1723a(c)(2). Similarly, 

Freddie Mac’s charter prohibits state and local taxation of Freddie Mac “except that any real 

property of the Corporation shall be subject to State, territorial, county, municipal, or local 

taxation to the same extent according to its value as other real property is taxed.” 12 U.S.C. 

§ 1452(e). As for FHFA, taxation is prohibited “except that any real property of the Agency 

shall be subject to State, territorial, county, municipal, or local taxation to the same extent 

according to its value as other real property is taxed.” 12 U.S.C. § 4617(j)(2). The Ohio 

counties argue that the state and local real property transfer taxes fall into the statutory 

exceptions for taxation of real property. See Appellants Br. at 47–52. If so, then the defendants 

are statutorily required to pay the tax. We first address this statutory argument in order to avoid 

the constitutional issues if possible. Ashwander v. Tenn. Valley Auth., 297 U.S. 288, 347 (1936) 

(Brandeis, J., concurring) (“The Court will not pass upon a constitutional question although 

properly presented by the record, if there is also present some other ground upon which the case 

may be disposed of.”). 

The parties disagree whether the County of Oakland panel’s statement that real estate 

transfer taxes “do[] not fit into the carve out allowing for taxes on real property,” County of 
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Oakland, 716 F.3d at 939 n.6, is binding precedent in the Sixth Circuit. The County of Oakland

panel held that the Michigan plaintiffs in that case had “forfeited this argument by not pressing it 

below in any meaningful way.” Id. The declaration that transfer taxes are not subject to the real 

property exception was made only as a counterfactual. See id. (providing the conclusion only 

after stating “[e]ven if [the Michigan counties] had not forfeited the argument”). Because the 

forfeiture conclusion disposed of the argument, the declaration that real estate transfer taxes are 

not subject to the real property exception was not necessary to the outcome of the case, and is, 

thus, mere dicta. See United States v. Stevenson, 676 F.3d 557, 561–62 (6th Cir. 2012). While 

the defendants urge this panel “to treat [both reasons] as alternative bases of decision,” Appellees 

Br. at 10 (quoting MacDonald, Sommer, & Frates v. Yolo Cnty., 477 U.S. 340, 346 n.4 (1986)), 

the cases cited do not actually support the conclusion that the real property exception declaration 

should be treated as binding precedent in this circuit. By determining that the Michigan counties 

had forfeited their argument, the Oakland County panel made clear that it did not need to reach 

the question whether real estate transfer taxes are part of the real property exception. Thus, we 

do not consider that panel’s statements to be binding precedent. 

The Oakland County panel’s conclusion that real estate transfer taxes do not fit into the 

real property tax carve out, however, is sound. While a county may levy the transfer tax “on 

each deed conveying real property or any interest in real property,” the transfer tax is “levied 

upon the grantor named in the deed.” Ohio Rev. Code § 322.02(A). Ohio courts have held that 

this transfer tax is an excise tax. Okey v. Walton, 302 N.E.2d 895, 902 (Ohio App. 1973) (“We 

hold that R.C. Section 322.02 is an excise tax that comes under Section 10, Article XII of the 

Ohio Constitution.”). The Supreme Court of Ohio has distinguished between an excise tax, 

which is levied on a privilege, and a property tax levied directly against the property. General 

Am. Transp. Corp. v. Limbach, Tax Comm’r, 473 N.E.2d 814, 818 (Ohio 1984) (“An excise tax 

is one levied on a privilege and not one levied directly against the property.”). Thus, we 

conclude that the real property transfer tax at issue is an excise tax upon the grantor of real 

property for the privilege of transferring real property rather than a real property tax levied 

directly against the property. 
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Our sister circuits have reached the same conclusion regarding real property transfer 

taxes. See, e.g., Del. Cnty., Pa. v. Fed. Hous. Fin. Agency, 747 F.3d 215, 224 (3d Cir. 2014) 

(holding that “transfer taxes are an excise tax, not a direct tax on real estate, and therefore are not 

within the scope of the [real property] exception”); Montgomery Cnty., Md. v. Fed. Nat’l Mortg. 

Ass’n, 740 F.3d 914, 920 (4th Cir. 2014) (holding similarly because “every legal and common 

understanding distinguishes a property tax from a transfer or sales tax”); Hennepin Cnty. v. Fed. 

Nat’l Mortg. Ass’n, 742 F.3d 818, 822 (8th Cir. 2014) (“Minnesota’s deed transfer tax is a tax 

imposed by the state on the transfer of real property, not on the real property itself. It therefore 

does not fall within the real property exception to the agencies’ broad tax exemptions. We 

conclude that Fannie Mae, Freddie Mac, and the FHFA are exempt from Minnesota’s deed 

transfer tax.”);2 Board of Cnty. Comm’rs Kay Cnty., Okla. v. Fed. Hous. Fin. Agency, -- F.3d --, 

2014 WL 2619884, at *4 (D.C. Cir. 2014) (“The Transfer Tax, which is measured by the value 

of the property but triggered only at its transfer, is clearly an excise tax. . . . Appellant’s attempt 

to convert the Transfer Tax into a property tax fails.”); DeKalb Cnty., 741 F.3d at 799 (“[The] 

exemption is from ‘all taxation’ except real property taxation, and a tax on a real estate sale is a 

tax not on property but on the transfer of property—a well-recognized distinction.”); see also

United States v. Wells Fargo Bank, 485 U.S. 351, 355 (1988) (noting “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”). Thus, we now hold similarly 

that the Ohio real property transfer tax is not a real property tax that fits within the statutory 

exceptions to the exemptions. 

B. Constitutional Issue: Congressional Authority

 Having concluded that the congressionally enacted charters exempt the enterprises from 

state and local real property transfer taxes, we turn now to the constitutional question whether 

Congress had the authority under the Commerce Clause to enact such exemptions.3

 We answer 

 2

This conclusion was recently reiterated in Vadnais v. Federal National Mortgage, -- F.3d --, 2014 WL 

2535276, at *3 (8th Cir. 2014). 

3

We reject the Ohio counties’ argument that we should apply strict scrutiny in evaluating the charter tax 

exemptions, see Appellants Br. at 45–47. The Ohio counties assert that “the rights of the States to exercise police 

powers and impose taxes are just as fundamental, from a constitutional standpoint, as the rights of individuals’ due 
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in the affirmative the question whether the state tax exemptions in the federal charters of these 

Enterprises “arise out of or are connected with a commercial transaction, which viewed in the 

aggregate, substantially affects interstate commerce.” United States v. Lopez, 514 U.S. 549, 561 

(1995). 

In creating Fannie Mae and Freddie Mac, Congress’s purpose was to add liquidity to the 

secondary mortgage market. In effect, Congress was creating purchasers of mortgages who 

would provide cash to the original lenders, who could then lend that money back out. The 

creation of corporations that bought mortgages on the secondary market thus produced greater 

availability of credit for home purchases. 

The Enterprises argue that by including exemptions from state and local taxes, Congress 

was attempting to accomplish two objectives: to reduce the cost of mortgage finance and to 

ensure the equitable provision of mortgages anywhere in the nation. In purchasing the 

mortgages, the Enterprises take on risk that the borrowers will default. When defaults invariably 

occur, the Enterprises will foreclose on the homes and gain ownership of real property in various 

states and localities. In order to recoup their money, the Enterprises will have to sell the 

property. The tax exemptions lower the costs of selling the homes, allowing the Enterprises to 

recoup more of their losses. Because the cost of a default is lowered, the Enterprises are willing 

to pay more originally for the mortgages they purchase. This greater demand for mortgages on 

the secondary market and the greater amount that the original lenders receive when they sell the 

mortgages leads to more lending and the greater availability of mortgages throughout the nation. 

Thus, the tax exemptions reduce the cost of mortgage finance in the nationwide secondary 

mortgage market. 

 process and equal protection.” Id. at 46. Rather than evaluate whether this assertion is accurate, we note simply that 

even if it is, we can find no legal precedent for applying strict scrutiny where a congressional enactment interferes 

with “the rights of the States to exercise police powers and impose taxes.” This lack of precedent is far from 

surprising, as we see no reason to apply strict scrutiny to defend states which are well-represented in our republic 

and which do not require special protection from the federal courts. Moreover, applying strict scrutiny to all federal 

legislation that interferes with “the rights of the States to exercise police powers and impose taxes” would be absurd, 

as much of today’s federal legislation likely in some way interferes with states’ exercise of their police powers or 

imposition of taxes. 
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The tax exemptions also ensure the equitable provision of mortgages across state lines. 

With non-uniform state and local tax rates, the Enterprises would suffer greater losses in states 

and localities that have high real property transfer taxes than in those with lower taxes. As a 

result, the Enterprises would be willing to pay more for mortgages in lower-tax locations than in 

higher-tax locations. Thus, lenders would be better compensated for selling mortgages from low 

tax locations and would be willing to make more home loans in these locations. Overall, the 

differing state and local real property transfer taxes would lead to more mortgage credit being 

available in some localities than others. The uniform exemption from all state and local taxes, 

thus not only leads to greater availability of mortgage credit, but also ensures its equitable 

distribution to all states and localities across the nation. 

We conclude that the transfer tax exemptions are connected to the sale of mortgages 

across state lines on the secondary mortgage market, and these sales, when viewed in the 

aggregate, substantially affect interstate commerce. Thus, Congress had the power under the 

Commerce Clause to enact this statutory provision. 

Moreover, we find nothing that suggests Congress cannot exercise its Commerce Clause 

power to supersede state tax laws. The counties’ argument that “the Supreme Court has 

consistently construed statutory exemptions from state taxation in favor of the States and has 

never implied the existence of such exemptions,” Appellants Br. at 20 (citing Hoge v. R.R. Co., 

99 U.S. 348, 355 (1879)), actually proves that Congress can enact such statutory exemptions. 

The Supreme Court has recognized that Congress can expand tax immunity “beyond its narrow 

constitutional limits” “by so expressly providing.” United States v. New Mexico, 455 U.S. 720, 

737 (1982). Here, Congress has expressly exempted Fannie Mae and Freddie Mac from all 

taxation by states and localities (except for real property taxes). 

Our sister circuits that have considered the issue all agree that the exemptions are 

necessary and proper to regulate the secondary mortgage market, which is without a doubt a 

national market that Congress has the authority under the Commerce Clause to regulate. See 

Del. Cnty., Pa., 747 F.3d at 227–28 (noting that “[t]he transfer tax exemptions aid the 

Enterprises in regulating the secondary mortgage market, which is clearly of an economic 
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nature,” and holding that “Congress acted well within the bounds of the Commerce Clause when 

it exempted the Enterprises from paying state and local real estate transfer taxes”); Montgomery 

Cnty., Md., 740 F.3d at 924 (“[T]he ultimate goals of the statutory scheme at issue in this case 

are to stabilize the secondary mortgage market and to promote liquidity in that market, which are 

quintessentially interstate and economic aims.”); DeKalb Cnty., 741 F.3d at 801 (“The 

constitutional basis for the statute is the commerce clause, and it is obvious that the home 

mortgage market is nationwide, and indeed worldwide, with home mortgages being traded in 

vast quantities across state lines.”). Our sister circuits also agree that where congressional 

enactments conflict with state tax laws, the Supremacy Clause ensures that the federal statute 

overrides any contrary imposition of state taxes. See DeKalb Cnty., 741 F.3d at 801 (rejecting 

the argument that “statutes authorized by the commerce clause must be subordinated to state and 

local tax statutes because taxation is fundamental to state sovereignty” and stating that “[n]o 

provision of the Constitution insulates state taxes from federal powers granted by the 

Constitution, which include of course the [Commerce Clause] power”); Del. Cnty., Pa., 747 F.3d 

at 225 (rejecting any assertion that state taxing authority can supersede or even equal Congress’s 

Commerce Clause power and later reiterating that “considerations of state sovereignty yield 

under the Supremacy Clause,” id. at 227); Vadnais v. Fed. Nat’l Mortg., -- F.3d --, 2014 WL 

2535276, at *4–5 (8th Cir. 2014) (holding that the statutory exemptions not only supersede 

Minnesota state tax laws, but are proper exercises of the Commerce Clause power). The charter 

exemptions are constitutional exercises of Congress’s Commerce Clause power that supersede 

state tax laws. 

Finally, the Tenth Amendment plays no role in this analysis because the Enterprises’ 

charters were enacted by Congress exercising the power “[t]o regulate Commerce with foreign 

Nations, and among the several States, and with the Indian Tribes,” U.S. CONST. art. I, § 8, cl. 3. 

This power was explicitly “delegated to the United States by the Constitution.” U.S. CONST. 

amend. X. Consequently, the Enterprises are statutorily exempt from paying state real property 

transfer taxes.4

 4

Because we hold that the Enterprises are statutorily exempt from state and local real property transfer 

taxes, we do not need to reach the question whether they are constitutionally exempt from such taxes as federal 
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III. CONCLUSION

 For the foregoing reasons, we AFFIRM the district court’s judgment dismissing this suit. 

 instrumentalities. See First Agric. Nat’l Bank of Berkshire Cnty. v. State Tax Comm’n, 392 U.S. 339, 341 (1968) 

(stating that congressional legislation limiting state power to tax national banks makes it “unnecessary to reach the 

constitutional question of whether today national banks should be considered nontaxable as federal 

instrumentalities”); see also Del. Cnty., Pa., 747 F.3d at 228 n.4 (determining that “because we find that Congress 

acted constitutionally in extending statutory tax immunity to the Enterprises, we need not reach the question of 

whether they are also entitled to constitutional immunity as instrumentalities of the United States”).