# U ni te d S ta te s Co ur t of A pp ea ls For the Eig hth Circu it

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__ __ __ __ __ __ __ __ __ __ __ __ __ _ Ro na ld A. Vadn ai s, as Treas ur er o f Swif t Co un ty, Mi nn es ot a; Swift Co un ty, Mi nn es ot a, in di vi du al ly and on be ha lf o f al l o th ers si m il arl y si tu at ed

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff s - Ap pe ll an ts

v.

Fed eral Nati on al Mo rtg ag e, al so kn own as F an ni e Ma e; Fed eral Hom e Loa n

Mo rtg ag e Co rp or at io n, al so kn own as F red di e Ma c

ll ll ll ll ll ll ll ll ll ll l Defe nd

an ts - App el le es

Fed eral Hou si ng Fin an ce Ag en cy , in it s C ap aci ty as Co ns erv at or of F an ni e Ma e
an d F red di e Ma c

ll ll ll ll ll ll ll ll ll ll l In te rv en or be lo w - App el le e

Uni te d S ta te s o f Am eri ca

ll ll ll ll ll ll ll ll ll ll l In te rv en or

__ __ __ __ __ __ App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Dis tri ct of M in ne so ta - Mi nn eap ol is

__ __ __ __ __ __ Su bm it te d: May 13, 2 01 4 Fil ed : J un e 6 , 20 14

__ __ __ __ __ __Befo re BYE, MELLOY, and BENTON, Circu it Ju dg es

.

__ __ __ __ __ __ BYE, Cir cu it Ju dg e.

Swif t Co un ty, Mi nn es ot a, a n d it s Treas ur er, Ro na ld Vad na is , (co ll ect iv el y , "Swi ft Co un ty"), br ou gh t th is act io n ag ai ns t th e F e d e r al Nati on al Mo rtg ag e Ass oc ia ti on ("F an ni e Mae "), th e Fed eral Hom e Loa n Mo rtg ag e Co m pa ny ("F red di e Mac "), an d th e Fed eral Hou si ng Fi na nc e Age nc y ("F HFA") (co ll ect iv el y , "t he fed eral
ag en ci es "), al le gi ng su ch fed eral ag en ci es ha d vi ol at ed st at e la w by fai li ng to pa y ta xe s on th e tra ns fers of de ed s to real pr op ert y

. The di st ric t co ur t gr an te d th e fed eral 1
ag en ci es ' m ot io n t o d is m is s t he act io n. Swi ft C ou nt y ap pe al s, an d we a ffi rm

.

I

Mi nn es ot a imp o s e s a ta x "o n each de ed or in st ru m en t by whi ch an y real
pr op ert y

. . . is gr an t ed , as si gn ed , tra ns ferr ed , or ot he rwis e co nv ey ed ." Mi nn

. St at

. § 28 7.2 1, su bd

. 1( a). An exce pt io n to th e de ed tra ns fer tax ex is ts whe n "th e Uni te d St at es or an y ag en cy or in st ru m en ta li ty th ereo f is th e gr an to r, as si gn o r , t r an sf ero r,

co nv ey or , gra nt ee o r as si gn ee" of t he pro pe rty. Id. § 2 87 .22 (6 ).

Fan ni e M a e a nd Fred di e Mac are pr iv at el y -o wne d an d pu bl ic ly-trad ed fo rpr of it en ti ti es crea te d by Co ng res s to ge ne rat e f i n a nc ia l st ab il it y in th e se co nd ary

mar k e t fo r res id en ti al m or tg ag es

. Fan ni e Mae an d Fred di e Mac bu y m or tg ag es

or ig in at ed by th ird -p art y le nd ers , ga th er th em in to bu nd le s, an d se ll th em as

se cu rit ie s. Fo ll owi ng th e 20 08 fin an ci al cri s is , Co ng res s m ad e th e FHFA th e

co ns erv at or for Fan ni e Ma e an d F red di e Ma c.

The Hon or ab le Dav id S. Dot y , Uni te d St at es Dis tri ct Ju dg e fo r th e Dis tri ct of 1 Mi nn es ot a.
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-Fan ni e Mae an d Fred di e Mac ha ve no t pa id de ed tra ns fer ta xe s whe n

co nv ey in g real pr op ert y in Swif t Co un ty, Mi nn es ot a, ha vi ng ta ke n th e po si ti on th ey

are ex em pt fro m su ch ta xe s pu rs ua nt to th e pr ov is io ns of th e fed eral st at ut es se tt in g fo rth th ei r ch art ers

. See 12 U.S.C. § 17 23 a(c) (2 ); 12 U.S.C. § 14 52 (e) (co ll ect iv el y , th e "Ex em

pt io n S ta tu te s" ).

Swif t Co un ty fil ed th is act io n, se ek in g a de cl arat or y jud gm en t as to th e fed eral

a g e nc ie s ha vi ng vi ol at ed Mi nn es ot a la w b y fai li ng to pa y de ed tra ns fer ta xe s w h e n

co nv ey in g real pr op ert y

. The di st ric t co ur t gr an te d th e fed eral ag en ci es ' m ot io n to di sm is s, co nc lu di ng th e Exe m pt io n St at ut es es ta bl is he d an exempti on fro m al l st at e ta xa ti on

. Swif

t Co un ty ap pe al ed th e di sm is sa l of it s act io n

. Th e U n i te d St at es in te rv en ed an d fi le d a bri ef i n s up po rt o f th e fed eral ag en ci es

.

II

On ap pe al , Swif

t Co un ty co nt en ds th e di st ric t co ur t erre d in di sm is si ng it s act io n. W e rev ie w a di st ric t co ur t's gr an t of a m ot io n to di sm is s un de r Ru le 12 (b )(6 ) de no vo

. Olym

pu s In s. Co

. v. Aon Ben fie ld , In c., 71 1 F.3 d 89 4, 89 7 (8 th Ci r. 20 13 ).

Swif t Co un ty fir st arg ue s th e Exe m pt io n St at u t e s do no t ex em pt th e fed eral
ag en ci es fro m pa y in g Mi nn es ot a's de ed tra ns fer ta x. Thi s arg um en t fai ls as th is is su e

was de ci de d by th is Co ur t in Hen ne pi n Co un ty v. Fan ni e Mae , 74 2 F.3 d 81 8 (8 th Ci r. 20 14 ). The fed eral ag en ci es ' ch art ers st at e th ey "s ha ll be ex em pt fro m al l ta xa ti on

. . . im po se d by an y St at e," an d id en ti fy th ei r real pr op ert y as t h e s o l e ex cep ti on to th is
ge ne ral ru le

. S e e 12 U.S.C. §§ 17 23 a(c) (2 ), 14 52 (e), 46 17 (j)(2 ). "We ha ve de te rm in ed th at th e us e of 'sh al l' in a st at ut e m ak es wha t fo ll ows m an da to ry , an d th at 'al l' m ean s al l." Hen ne pi n Cn ty., 74 2 F.3 d at 82 2 (in te rn al q u ot at io ns an d ci ta ti on s

om it te d)

. Thu s, "t he fed eral ag en ci es are ex emp t f r o m a l l st at e ta xa ti on ot he r th an ta xe s o n t he ir o wn re al est at e h ol di ng s." Id.

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-Swif

t Cou nt y ne xt arg ue s th e Exe m pt io n Stat ut es do no t s up ers ed e st at e la w. Thi s argu m en t has be en reject ed by m ul ti pl e ci rcu it s. In th e Sev en th Ci rcu it , Ju dg e Po sn er ad dr es se d su ch a co nt en ti on in DeKal b Co un ty v. Fan ni e Mae , 74 1 F.3 d 79 5 (7 th Ci r. 20 13 ). "No pr ov is io n of th e Co ns ti tu ti on in su la te s st at e ta xe s fro m fed eral
po wers gr an te d by th e Co ns ti tu ti on , whi ch in cl ud e th e po wer of Co ng res s 'to reg ul at e Co m m erce wit h fo rei gn Nati on s, an d am on g th e se ve ral St at es

. . . .'" Id

. at 80 1 (ci ti ng U.S. C O N S T

. art

. I, § 8, cl

. 3)

. The Thi rd Cir cu it reac he d t he id en ti cal res ul t, ho ld in g th e "as se r t i o n t h a t a st at e's ta xi ng au th or it y st an ds on eq ua l fo ot in g wit h Co ng res s's po wer un de r th e Co m m erce Cl au se was fla tl y reject ed by th e Su pr em e Co ur t ne arl y 20 0 years a go

. . . ." Del . Cnt y . v. Fan ni e Ma e, 74 7 F .3d 21 5, 22 5 (3 d Ci r. 20 14 ) (ci ti ng Bro wn v. Mar y la nd , 25 U.S. 41 9, 44 8- 49 (1 8 2 7 ) )

. Fo r th e sa m e

reas on s, we co nc lu de th e Exe m pt io n St at ut es do su pe rs ed e Mi nn es ot a's st at e ta x la w.

Swif t Co un ty al so arg ue s th e Exe m pt io n St at ut es are no t a va li d ex erci se of Co ng res s's po wer un de r th e Co m m erce Cl au se

. The Co m

m erce Cl au se pr ov id es th at Co ng res s sh al l ha ve th e p o w e r " t o reg ul at e Co m m erce wit h fo rei gn Nati on s, an d

am on g th e Sev eral St at es

. . . ." U.S. C O N S T

. art

. I, § 8, cl

. 3. A fed eral st at ut e, whe n

co ns tru ed to in va li da te a st at e ta x, is a pe rm is si bl e ex erci se of Co ng res s's Co m m erce Cl au se po wer w he n Con gr es s had a "ra ti on al ba si s fo r fin di ng th e

. . . ta x in te rfer ed wit h in te rs ta te co m

m erce ." Ariz

. Pu b. Serv

. Co

. v. Sn ead , 44 1 U.S. 14 1, 15 0 (1 97 9) ;

se e al so Glo se m ey er v. Mo .-Kan .-Tex

. R.R., 87 9 F.2 d 31 6, 32 2 (8 th Ci r. 19 89 ). The Thi rd an d Fo ur th Ci rcu it s ha ve bo th fo un d th e Exe m pt io n St at ut es to su rv iv e rat io na l ba si s revi ew. The Thi rd Cir cu it co nc lu de d " Co ng res s acte d well wit hi n th e bo un ds of th e Co m

m erce Cl au se whe n it ex em pt ed [th e fed eral ag en ci es ] fro m pa y in g st at e

an d lo cal real es ta te tra ns fer ta xe s." Del. Cn ty., 74 7 F.3 d at 22 7- 28

. "Th e tra ns fer ta x

ex em pt io ns ai d [th e fed eral ag en ci es ] in reg ul at in g th e se co nd ary m or tg ag e m ark et , whi ch is cl earl y of an eco no m ic na tu re." Id

. a t 22 7. Si m il arl y , th e Fo ur th Ci rcu it

re a so ne d "Co ng res s co ul d rat io na ll y ha ve be li ev ed th at st at e ta xa ti on wou ld

su bs ta nt ia ll y in te rfer e wit h or ob st ru ct th e le gi ti m at e pu rp os es of [th e fed eral
ag en ci es ] pu rp os es ," an d "in su la ti ng [th e fed eral ag en ci es ] fro m m os t st at e ta xa ti on

-4

-wou ld su bs ta nt ia ll y fu rth er th os e en ti ti es ' pu rp os es ." Mo nt go m ery Cn ty. v. Fan ni e

Mae , 74 0 F.3 d 91 4, 92 4 (4 th Ci r. 20 14 ). Thi s be li ef co u l d l e a d C o ng res s to

reas on ab ly co nc lu de st at e tra ns fer ta xe s "wo ul d su bs ta nt ia ll y affe ct in t e rs ta te

co m m erce by bu rd en in g" th e fed eral ag en ci es

. Id

. Fo r si m il ar reas on s, we co nc lu de th e Exe m pt io n St at ut es are a va li d ex erci se of Co ng res s's po wer un de r th e Co m m erce Cl au se

.

Fi na ll y , Swif

t Co un ty arg ue s th e fed eral ag en ci es are pr iv at el y -h el d

co rp or at io ns , no t fed eral in st ru m en ta l it ie s. Howev er, th is Co ur t ha s pr ev io us ly reject ed th e arg um en t th at th e fed eral ag en ci es ceas ed to be fed eral in st ru m en ta li ti es up on be in g pri va ti zed , reas on in g t he "co ng res si on al ob jecti ve in crea ti ng th em was 'go ve rn m en ta l an d un ch an ge d; on ly th e m ea n s o f ach ie vi ng it ha ve ch an ge d.'" Hen ne pi n Cn ty. 74 2 F

. 3 d a t 8 2 4 (q uo ti ng DeKal b Cn ty., 74 1 F.3 d at 80 3)

. The fed eral ag en ci es co nt in ue to se rv e th e sa m e im po rt a n t f e d e ral m is si on "wh ic h on ly Co ng res s ha s th e po wer to rev is e." Id .; se e al so DeKal b Cn ty., 74 1 F.3 d at 80 2 ("Th e

reas on we do ub t th at th e co nv ers io n st rip pe d Fan ni e of it s im pl ie d co ns ti tu ti on al ta x

ex em pt io n is th at if Fan ni e was a 'fed eral in st ru m en ta li ty' be fo re it s pr iv at iz at io n —
as cl earl y it was — an d was th eref or e, as th e ap pe ll an ts co nc ed e, im m un e th en fro m ta xa ti on by vi rtu e of th e McC ul lo ch li ne o f cas es , it is a fed eral in st ru m en ta li ty

no w.").

III

Fo r th e fo reg oi ng reas on s, we af fir m

.

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