United States Court of Appeals

For the Eighth Circuit

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No. 13-2733

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Ronald A. Vadnais, as Treasurer of Swift County, Minnesota; Swift County,

Minnesota, individually and on behalf of all others similarly situated

lllllllllllllllllllll Plaintiffs - Appellants

v.

Federal National Mortgage, also known as Fannie Mae; Federal Home Loan

Mortgage Corporation, also known as Freddie Mac

lllllllllllllllllllll Defendants - Appellees

Federal Housing Finance Agency, in its Capacity as Conservator of Fannie Mae

and Freddie Mac

lllllllllllllllllllllIntervenor below - Appellee

United States of America

lllllllllllllllllllllIntervenor

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 Appeal from United States District Court 

for the District of Minnesota - Minneapolis

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 Submitted: May 13, 2014

 Filed: June 6, 2014

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Before BYE, MELLOY, and BENTON, Circuit Judges.

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BYE, Circuit Judge.

Swift County, Minnesota, and its Treasurer, Ronald Vadnais, (collectively,

"Swift County"), brought this action against the Federal National Mortgage

Association ("Fannie Mae"), the Federal Home Loan Mortgage Company ("Freddie

Mac"), and the Federal Housing Finance Agency ("FHFA") (collectively, "the federal

agencies"), alleging such federal agencies had violated state law by failing to pay

taxes on the transfers of deeds to real property. The district court granted the federal 1

agencies' motion to dismiss the action. Swift County appeals, and we affirm.

I

Minnesota imposes a tax "on each deed or instrument by which any real

property . . . is granted, assigned, transferred, or otherwise conveyed." Minn. Stat.

§ 287.21, subd. 1(a). An exception to the deed transfer tax exists when "the United

States or any agency or instrumentality thereof is the grantor, assignor, transferor,

conveyor, grantee or assignee" of the property. Id. § 287.22(6).

Fannie Mae and Freddie Mac are privately-owned and publicly-traded forprofit entities created by Congress to generate financial stability in the secondary

market for residential mortgages. Fannie Mae and Freddie Mac buy mortgages

originated by third-party lenders, gather them into bundles, and sell them as

securities. Following the 2008 financial crisis, Congress made the FHFA the

conservator for Fannie Mae and Freddie Mac.

The Honorable David S. Doty, United States District Judge for the District of 1

Minnesota.

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Fannie Mae and Freddie Mac have not paid deed transfer taxes when

conveying real property in Swift County, Minnesota, having taken the position they

are exempt from such taxes pursuant to the provisions of the federal statutes setting

forth their charters. See 12 U.S.C. § 1723a(c)(2); 12 U.S.C. § 1452(e) (collectively,

the "Exemption Statutes").

Swift County filed this action, seeking a declaratory judgment asto the federal

agencies having violated Minnesota law by failing to pay deed transfer taxes when

conveying real property. The district court granted the federal agencies' motion to

dismiss, concluding the Exemption Statutes established an exemption from all state

taxation. Swift County appealed the dismissal of its action. The United States

intervened and filed a brief in support of the federal agencies.

II

On appeal, Swift County contends the district court erred in dismissing its

action. We review a district court's grant of a motion to dismiss under Rule 12(b)(6)

de novo. Olympus Ins. Co. v. Aon Benfield, Inc., 711 F.3d 894, 897 (8th Cir. 2013).

Swift County first argues the Exemption Statutes do not exempt the federal

agenciesfrom paying Minnesota's deed transfer tax. This argument fails asthisissue

was decided by this Court in Hennepin County v. Fannie Mae, 742 F.3d 818 (8th Cir.

2014). The federal agencies' chartersstate they "shall be exempt from all taxation . . .

imposed by any State," and identify their real property as the sole exception to this

general rule. See 12 U.S.C. §§ 1723a(c)(2), 1452(e), 4617(j)(2). "We have

determined that the use of 'shall' in a statute makes what follows mandatory, and that

'all' means all." Hennepin Cnty., 742 F.3d at 822 (internal quotations and citations

omitted). Thus, "the federal agencies are exempt from all state taxation other than

taxes on their own real estate holdings." Id.

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Swift County next argues the Exemption Statutes do not supersede state law. 

This argument has been rejected by multiple circuits. In the Seventh Circuit, Judge

Posner addressed such a contention in DeKalb County v. Fannie Mae, 741 F.3d 795

(7th Cir. 2013). "No provision of the Constitution insulates state taxes from federal

powers granted by the Constitution, which include the power of Congress 'to regulate

Commerce with foreign Nations, and among the several States . . . .'" Id. at 801

(citing U.S. CONST. art. I, § 8, cl. 3). The Third Circuit reached the identical result,

holding the "assertion that a state's taxing authority stands on equal footing with

Congress's power under the Commerce Clause was flatly rejected by the Supreme

Court nearly 200 years ago . . . ." Del. Cnty. v. Fannie Mae, 747 F.3d 215, 225 (3d

Cir. 2014) (citing Brown v. Maryland, 25 U.S. 419, 448-49 (1827)). For the same

reasons, we conclude the Exemption Statutes do supersede Minnesota'sstate tax law.

Swift County also argues the Exemption Statutes are not a valid exercise of

Congress's power under the Commerce Clause. The Commerce Clause providesthat

Congress shall have the power "to regulate Commerce with foreign Nations, and

among the Several States . . . ." U.S. CONST. art. I, § 8, cl. 3. A federal statute, when

construed to invalidate a state tax, is a permissible exercise of Congress's Commerce

Clause power when 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);

see also Glosemeyer v. Mo.-Kan.-Tex. R.R., 879 F.2d 316, 322 (8th Cir. 1989). The

Third and Fourth Circuits have both found the Exemption Statutesto survive rational

basis review. The Third Circuit concluded "Congress acted well within the bounds

of the Commerce Clause when it exempted [the federal agencies] from paying state

and local real estate transfer taxes." Del. Cnty., 747 F.3d at 227-28. "The transfer tax

exemptions aid [the federal agencies] in regulating the secondary mortgage market,

which is clearly of an economic nature." Id. at 227. Similarly, the Fourth Circuit

reasoned "Congress could rationally have believed that state taxation would

substantially interfere with or obstruct the legitimate purposes of [the federal

agencies] purposes," and "insulating [the federal agencies] from most state taxation

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would substantially further those entities' purposes." Montgomery Cnty. v. Fannie

Mae, 740 F.3d 914, 924 (4th Cir. 2014). This belief could lead Congress to

reasonably conclude state transfer taxes "would substantially affect interstate

commerce by burdening" the federal agencies. Id. For similar reasons, we conclude

the Exemption Statutes are a valid exercise of Congress's power under the Commerce

Clause.

Finally, Swift County argues the federal agencies are privately-held

corporations, not federal instrumentalities. However, this Court has previously

rejected the argument that the federal agencies ceased to be federal instrumentalities

upon being privatized, reasoning the "congressional objective in creating them was

'governmental and unchanged; only the means of achieving it have changed.'"

Hennepin Cnty. 742 F.3d at 824 (quoting DeKalb Cnty., 741 F.3d at 803). The

federal agencies continue to serve the same important federal mission "which only

Congress has the power to revise." Id.; see also DeKalb Cnty., 741 F.3d at 802 ("The

reason we doubt that the conversion stripped Fannie of its implied constitutional tax

exemption is that if Fannie was a 'federal instrumentality' before its privatization — 

as clearly it was — and was therefore, as the appellants concede, immune then from

taxation by virtue of the McCulloch line of cases, it is a federal instrumentality

now.").

III

For the foregoing reasons, we affirm.

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