1 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

_________________

B OARD OF C OMMISSIONERS O F M ONTGOMERY C OUNTY , O HIO , and B OARD O F C OMMISSIONERS OF S ENECA C OUNTY , O HIO , Plaintiffs-Appellants ,

v

.

F EDERAL H OUSING F INANCE A GENCY , F EDERAL N ATIONAL M ORTGAGE A SSOCIATION , and F EDERAL H OME L OAN M ORTGAGE C ORPORATION , Defendants-Appellees ,

U

NITED S TATES OF A MERICA , Intervenor

. ┐ │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ ┘ No. 13-4429

Appeal from the United St ates 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, Wa shington, D.C., for Appe llees. Patrick J. Urda, UNITED STATES DEPARTMENT OF JUST ICE, Washington, D.C., for Intervenor. ON BRIEF: Nathaniel C. Giddings, James J. Pizzi russo, HAUSFELD LLP, Wa shington, 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, Washingt on, D.C., Michael J. Ciatti, Merritt E. 

### >No. 13-4429 Bd. of Comm’rs of Montgomery Cnty. et al. v. Fed Housing Fin. Agency et al. Page 2

McAlister, KING & SPALDING LLP, Washi ngton, D.C., Michael D. Leffel, FOLEY & LARDNER LLP, Madison, Wisconsi n, Jill L. Nicholson, FOLEY & LARDNER LLP, Chicago, Illinois, for Appellees. Patrick J. Urda, J onathan 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 Nationa l Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Co rporation (“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 Fre ddie Mac (collectively, the “Enterprises”) and FHFA, the Ohio counties sought unpaid real pr operty transfer taxes under Ohio law. The Enterprises claim that they are exempt, per th eir federal charters, fr om such state taxes.
The state real property transf er 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 prope rty which are an exception to those tax exemptions. Finally, Congress had the power to enac t the exemptions under the Comm erce Clause, and the enactment does not run afoul of any const itutional provision. Therefore, be cause 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 facil ities 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, reserv es, surplus, mortgages or other security holdings, and income, sha ll be exempt from all taxation now or hereafter imposed by any State, terr itory, possession, Commonwealth, orNo. 13-4429 Bd. of Comm’rs of Montgomery Cnty. et al. v. Fed Housing Fin. Agency et al. Page 3

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, c ounty, 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 provi de 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). Fred die Mac’s charter provides that:
The Corporation, including its franchise, ac tivities, capital, reserves, surplus, and income, shall be exempt from all taxation now or hereafter imposed by any territory, dependency, or possession of th e 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, te rritorial, county, m unicipal, 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, wa s established in 2008. Pub. L. No. 110-289, 122 Stat. 2654 (codified in pa rt at 12 U.S.C. § 4617 et seq. ). Fannie Mae and Freddie Mac have been placed into conservatorshi p 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, a nd 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 St ate, territorial, county, muni cipal, 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 enfo rcement 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 realNo. 13-4429 Bd. of Comm’rs of Montgomery Cnty. et al. v. Fed Housing Fin. Agency et al. Page 4

property or any interest in real property locate d wholly or partially w ithin 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 “l argely governed” by ou r 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 lim its a state’s ability to levy taxes.” Id. at 8 (Page ID #1267). Rather, the district court deemed that the cong ressional enactment, which includes the statutory tax exemption, “is not aimed at st ate property transfer taxes, but at facilitating the secondary mortgage market.” Id. Thus, the district court perfor med 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 r easonably 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 in tended 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 M ae 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” includ es 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.No. 13-4429 Bd. of Comm’rs of Montgomery Cnty. et al. v. Fed Housing Fin. Agency et al. Page 5

Id. at 939 n.6. The panel determined that the ar gument was forfeited because it was not argued in the district court, but that ev en if it were not forfeited, “the transfer tax, as a privilege tax, does
not fit into the carve out allowi ng for taxes on re al 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 de terminations 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 loca l taxation of Fannie Mae “except that any real property of the corpor ation shall be subject to State, territorial, coun ty, 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 Fre ddie Mac “except that any real property of the Corporation shall be subject to State, territorial, count y, 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, terr itorial, county, municipal, or lo cal 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 pr operty transfer taxes fa ll 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 statut ory 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 al so present some other ground upon which the case may be disposed of.”).
The parties disagr ee 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 ofNo. 13-4429 Bd. of Comm’rs of Montgomery Cnty. et al. v. Fed Housing Fin. Agency et al. Page 6

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 cas e had “forfeited this argu ment 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 onl y as a counterfactual. See id. (providing the conclusion only after stating “[e]ven if [the Mi chigan counties] had not forfeite d the argument”). Because the forfeiture conclusion disposed of the argument, the declaration that real es tate transfer taxes are not subject to the real property exception was not necessary to th e outcome of th e 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 alternativ e 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 conclu sion that the real proper ty 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 tr ansfer taxes are part of the real property exception. Thus, we do not consider that panel’s statem ents 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, how ever, is sound. While a county may levy the transfer tax “on each deed conveying real property or any interest in real propert y,” 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 Oh io has distinguished be tween 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 ex cise tax upon the grantor of real property for the privilege of tran sferring real property rather th an a real property tax levied directly against the property.No. 13-4429 Bd. of Comm’rs of Montgomery Cnty. et al. v. Fed Housing Fin. Agency et al. Page 7

Our sister circuits have reached the same conclusion regarding re al 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 sim ilarly because “every legal and common understanding distinguishes a property tax from a tran sfer or sales tax”); Hennepin Cnty. v. Fed. Nat’l Mortg. Ass’n , 742 F.3d 818, 822 (8th Cir. 2014) (“Minne sota’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 Tran sfer 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 proper ty taxation, and a tax on a real estate sale is a tax not on property but on the transfer of pr operty—a well-recogni zed 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 transf er of property even though it might be measured by the property’s value, and a tax levied upon the pr operty 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 enact ed 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 Commer ce 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 th at “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’ dueNo. 13-4429 Bd. of Comm’rs of Montgomery Cnty. et al. v. Fed Housing Fin. Agency et al. Page 8

in the affirmative the question whether the state ta x 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, Congr ess’s purpose was to add liquidity to the secondary mortgage market. In effect, Congr ess was creating purchasers of mortgages who would provide cash to the origin al lenders, who could then lendthat money back out. The creation of corporations that bought mortgages on the secondary ma rket thus produced greater availability of credit for home purchases.
The Enterprises argue that by including exemptions from st ate 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 natio n. In purchasing the mortgages, the Enterprises take on risk that the bo rrowers 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 orde r 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 th e 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 th e 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 ex ercise police powers and impose taxes.” This lack of precedent is far from surprising, as we see no reason to ap ply strict scrutiny to defend states wh ich are well-represented in our republic and which do not require special protection from the federal c ourts. 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’ exerci se of their police powers or imposition of taxes.No. 13-4429 Bd. of Comm’rs of Montgomery Cnty. et al. v. Fed Housing Fin. Agency et al. Page 9

The tax exemptions also ensure the equitabl e provision of mortgages across state lines. With non-uniform state and local tax rates, the En terprises 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 mo re for mortgages in lower-tax locations than in higher-tax locations. Thus, lenders would be be tter 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 ta xes would lead to more mortgage credit being
available in some localities than others. The un iform exemption from all state and local taxes, thus not only leads to greater availability of mo rtgage credit, but also ensures its equitable
distribution to all states a nd localities across the nation.
We conclude that the transfer tax exempti ons are connected to the sale of mortgages across state lines on the secondary mortgage ma rket, 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 Congr ess cannot exercise it s Commerce Clause power to supersede state tax laws. The coun ties’ 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 ex emptions,” 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 Congres s 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 (exc ept 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 Comm erce 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 s econdary mortgage market, whic h is clearly of an economicNo. 13-4429 Bd. of Comm’rs of Montgomery Cnty. et al. v. Fed Housing Fin. Agency et al. Page 10

nature,” and holding that “Congr ess 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 a nd 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 wo rldwide, 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 Supr emacy Clause ensures that the federal statute overrides any contrary impos ition of state taxes. See DeKalb Cnty. , 741 F.3d at 801 (rejecting the argument that “statutes authorized by the comme rce clause must be subordinated to state and
local tax statutes because taxati on 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 supe rsede 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) (hol ding that the statutory exem ptions not only supersede Minnesota state tax laws, but are proper exercise s of the Commerce Clause power). The charter exemptions are constitutional exercises of C ongress’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 Congr ess exercising the power “[t]o re gulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes,” U.S. C ONST . art. I, § 8, cl. 3. This power was explicitly “delegated to the United States by the Constitution.” U.S. C ONST

. amend. X. Consequently, the Enterprises are stat utorily exempt from pa ying 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 federalNo. 13-4429 Bd. of Comm’rs of Montgomery Cnty. et al. v. Fed Housing Fin. Agency et al. Page 11

III. CONCLUSION
For the foregoing reasons, we AFFIRM the dist rict court’s judgment dismissing this suit.

instrumentalities. See First Agric. Nat’l Bank of Berk shire Cnty. v. State Tax Comm’n , 392 U.S. 339, 341 (1968) (stating that congressional legislation limiting state power to tax national ba nks 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”).