Court Opinion

ID: 2651226
Source: CourtListenerOpinion
Date Created: 2014-01-27 21:40:45.296791+00
Date Added: 2024-06-11T12:18:03.991208
License: Public Domain

PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                              No. 13-1691

MONTGOMERY COUNTY, MARYLAND, on behalf of itself and all
others similarly situated,

                Plaintiff - Appellant,

          v.

FEDERAL   NATIONAL  MORTGAGE   ASSOCIATION, a corporation;
FEDERAL HOME LOAN MORTGAGE CORPORATION, a corporation;
FEDERAL HOUSING FINANCE AGENCY, a federal agency, as
conservator for Federal National Mortgage Association and
Federal Home Loan Mortgage Corporation,

                Defendants - Appellees,

UNITED STATES OF AMERICA,

                Intervenor.

Appeal from the United States District Court for the District of
Maryland, at Greenbelt.    Deborah K. CHASANOW, District Judge.
(8:13-cv-00066-DKC)

                              No. 13-1752

DALE L. BUTTS, as Register of Deeds of Beaufort County,
South Carolina, individually and on behalf of all others
similarly situated; JOHN HOPKINS, as Register of Deeds of
Richland County, South Carolina, on behalf of himself and
all others similarly situated,

                Plaintiffs - Appellants,

          and
GAIL LANEY, as Register of Deeds of Orangeburg County, on
behalf of themselves and all others similarly situated;
JAMES B. HIERS, as Register of Deeds and Clerk of Court of
Bamberg County, on behalf of themselves and all others
similarly situated; RHONDA MCELVEEN, as Register of Mesne
Conveyances and Clerk of Court of Barnwell County, on behalf
of themselves and all others similarly situated; CHARLIE
LYBRAND, as Register of Mesne Conveyances of Charleston
County, on behalf of themselves and all others similarly
situated; TIMOTHY NANNEY, as Register of Deeds of Greenville
County, on behalf of themselves and all others similarly
situated; BALLERY SKIPPER, as Register of Deeds of Horry
County, on behalf of themselves and all others similarly
situated; DAVID ADAMS, as Treasurer of Richland County, on
behalf of themselves and all others similarly situated,

                Plaintiffs,

           v.

FEDERAL NATIONAL MORTGAGE ASSOCIATION, a/k/a Fannie Mae, a
federally chartered private corporation; FEDERAL HOME LOAN
MORTGAGE CORPORATION, a/k/a Freddie Mac, a federally
chartered private corporation,

                Defendants - Appellees,

FEDERAL HOUSING FINANCE AGENCY, Conservator of Federal
National Mortgage Association; Conservator of Federal Home
Loan Mortgage Corporation,

                Intervenor/Defendant - Appellee,

UNITED STATES OF AMERICA,

                Intervenor.

Appeal from the United States District Court for the District of
South Carolina, at Beaufort.     Richard Mark GERGEL, District
Judge. (9:12-cv-01912-RMG)

Argued:   December 11, 2013               Decided:   January 27, 2014

                                 2
Before TRAXLER, Chief Judge, and NIEMEYER and DUNCAN, Circuit
Judges.

Affirmed by published opinion.        Judge Niemeyer wrote the
opinion, in which Chief Judge Traxler and Judge Duncan joined.

ARGUED: Don Springmeyer, WOLF RIFKIN SHAPIRO SCHULMAN & RABKIN,
LLP, Las Vegas, Nevada, for Appellants.         Michael Alexander
Johnson, ARNOLD & PORTER, LLP, Washington, D.C., for Appellees.
Patrick   J.  Urda,   UNITED   STATES   DEPARTMENT   OF  JUSTICE,
Washington, D.C., for Intervenor.     ON BRIEF: Howard N. Cayne,
Asim Varma, Dirk C. Phillips, ARNOLD & PORTER LLP, Washington,
D.C., for Appellee Federal Housing Finance Agency.           Jill
Nicholson, Chicago, Illinois, Michael D. Leffel, FOLEY & LARDNER
LLP, Madison, Wisconsin, for Appellee Federal National Mortgage
Association.   Michael J. Ciatti, Merritt E. McAlister, KING &
SPALDING LLP, Washington, D.C., for Appellee Federal Home Loan
Mortgage Corporation.     Kathryn Keneally, Assistant Attorney
General, Tamara W. Ashford, Principal Deputy Assistant Attorney
General, Gilbert S. Rothenberg, Jonathan S. Cohen, Tax Division,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Rod J.
Rosenstein, United States Attorney, Baltimore, Maryland, William
J. Nettles, United States Attorney, OFFICE OF THE UNITED STATES
ATTORNEY, Columbia, South Carolina, for Intervenor.

                               3
NIEMEYER, Circuit Judge:

       The    question       presented        in      these       appeals    is     whether      the

Federal      National       Mortgage        Association           (“Fannie       Mae”)    and    the

Federal      Home     Loan    Mortgage        Corporation            (“Freddie         Mac”)    are

exempt from the payment of state and local taxes imposed on the

transfer      of     real    property        in       Maryland       and     South       Carolina.

Fannie Mae and Freddie Mac claim that they are exempt from such

transfer      taxes     under     12    U.S.C.         §§     1723a(c)(2)         and    1452(e),

respectively.          Counties        in    Maryland         and    South       Carolina       (the

“Counties”), however, which collect transfer taxes, claim (1)

that    those       exemptions         do    not,       as     a    matter        of     statutory

interpretation, apply to state and local taxes relating to real

property, including transfer taxes, and (2) that, in any event,

exempting      Fannie       Mae   and       Freddie         Mac    from     state       and    local

transfer taxes for real property would be unconstitutional as an

infringement on the States’ taxing power.

       The district courts in Maryland and South Carolina rejected

the    Counties’       arguments,           concluding            that     the     general      tax

exemptions applicable to Fannie Mae and Freddie Mac, while not

applicable      to    real     property        taxes,         did    cover       real    property

transfer taxes, thus making a distinction between property taxes

and transfer taxes.           The courts also concluded that Congress, in

providing     the     tax    exemptions        to      Fannie       Mae    and    Freddie       Mac,

acted within its Commerce Clause power.

                                                  4
     We agree with the district courts, as explained herein, and

affirm.

                                           I

     Congress created Fannie Mae during the Great Depression to

provide    banks   with     more     capital     for    mortgage      lending.    See

generally    Richard      W.    Bartke,        Fannie   Mae    and    the   Secondary

Mortgage    Market,    66      Nw.   U.   L.    Rev.    1   (1971).     Its   charter

describes its purposes as follows:

     The Congress declares that the purposes of this
     subchapter   are   to    establish  secondary  market
     facilities for residential mortgages, to provide that
     the operations thereof shall be financed by private
     capital to the maximum extent feasible, and to
     authorize such facilities to --

            (1) provide stability in the secondary market for
            residential mortgages;

            (2) respond appropriately to the private capital
            market;

            (3) provide ongoing assistance to the secondary
            market for residential mortgages . . . by
            increasing the liquidity of mortgage investments
            and improving the distribution of investment
            capital    available for   residential  mortgage
            financing;

            (4) promote access to mortgage credit throughout
            the Nation . . . by increasing the liquidity of
            mortgage    investments    and    improving  the
            distribution of investment capital available for
            residential mortgage financing; and

            (5) manage and liquidate federally owned mortgage
            portfolios in an orderly manner, with a minimum
            of adverse effect upon the residential mortgage
            market   and   minimum  loss   to   the   Federal
            Government.

                                           5
12 U.S.C. § 1716.           While Fannie Mae was originally created as a

government corporation, Congress split it in 1968, creating the

Government National Mortgage Association (“Ginnie Mae”), which

remains a government corporation, and privatizing Fannie Mae.

      Freddie     Mac      was    established       by    Congress     in    1970   as    a

private corporation to compete with Fannie Mae, and its charter

describes similar purposes.            See 12 U.S.C. § 1451 note. *

      Fannie    Mae     and      Freddie   Mac    carry    out   their      missions     by

purchasing mortgages originated by third-party lenders, pooling

the   mortgages    into       investment        instruments,     and   selling      those

mortgage-backed         securities         to     raise     capital      for     further

purchases.      By providing capital to lenders, these activities

promote   access      to    mortgage       credit    throughout      the     Nation     and

stabilize the secondary market for residential mortgages.

      Congress has exempted Fannie Mae and Freddie Mac generally

from state and local taxes, “except that any real property of

[either Fannie Mae or Freddie Mac] 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.    §

      *
       During the financial crisis of 2008, Congress created the
Federal Housing Finance Agency (“FHFA”) to provide “general
regulatory authority” over Fannie Mae and Freddie Mac.        12
U.S.C. § 4511. On September 6, 2008, FHFA imposed itself as the
conservator over Fannie Mae and Freddie Mac, thus stepping into
their shoes. See id. § 4617. As conservator of Fannie Mae and
Freddie Mac, FHFA is also a party to these cases.

                                             6
1723a(c)(2) (as to Fannie Mae); see also id. § 1452(e) (as to

Freddie Mac); id. § 4617(j)(2) (as to the FHFA).

       Maryland and South Carolina, as well as many other states,

impose      taxes     on    the       ownership        of     real       property,    as    well    as

excise taxes on the transfer of real property.

       Maryland’s property tax is imposed annually on owners of

real property located in the State, based on the assessed value

of the property.             See Md. Code Ann., Tax-Prop. §§ 5-102(a), 6-

101(a), 6-201(a).               In addition, Maryland imposes a recordation

tax    on    “instrument[s]            of    writing”         (e.g.,       deeds,    leases,       and

mortgages) that are recorded with the clerk of a circuit court,

as    well     as    a     transfer         tax    on       the    same      “instrument[s]         of

writing.”           See    id.    §§     12-102,         13-202.           The    amount     of    the

recordation and transfer taxes are based on the “consideration”

paid   for     the       real    property         or    the    principal          amount    of    debt

secured.       See id.          §§ 12-103, 13-203.                 Maryland also authorizes

counties       to        impose       transfer          taxes,           which,     for     example,

Montgomery      County          has    done.       See       id.     §    13-402.1;       Montgomery

County Code § 52-19 et seq.

       South    Carolina          similarly            imposes       an    annual    tax     on    the

ownership of real property located in the State, based on its

assessed valuation.               See S.C. Code Ann. §§ 12-37-30, 12-37-210,

12-37-610.          In addition, South Carolina imposes “recording fees”

“for the privilege of recording deeds in which land . . . is

                                                   7
transferred to another person.”                Id. § 12-24-10(A).           As with

Maryland, the rate for the recording fees in South Carolina is

based on the “consideration paid or to be paid” for the real

property or for the debts recorded.                Id. § 12-24-30(A).

       In the course of their business, Fannie Mae and Freddie Mac

acquired     real    property   in   both      Maryland      and    South   Carolina

through foreclosures on mortgages that they owned or guaranteed.

When selling these properties to third persons, they refused to

pay the transfer taxes and recording fees, claiming to be exempt

from    them     under    12    U.S.C.        §§    1723a(c)(2)      and    1452(e),

respectively.        The Maryland and South Carolina counties, which

collect      these   taxes,    disputed       Fannie   Mae    and    Freddie   Mac’s

claimed exemptions, contending that the exemptions did not cover

state     and   local    transfer    taxes,         including      recording   fees,

insofar as they related to real property, and they commenced

these actions (one in Maryland and two in South Carolina) for a

declaratory judgment that Fannie Mae and Freddie Mac are liable

for transfer taxes and recording fees and to recover as damages

the taxes and fees that they refused to pay.                         The FHFA, as

conservator of Fannie Mae and Freddie Mac, was also named a

defendant in the Maryland case and intervened as a defendant in

the South Carolina cases.

       The   South   Carolina    district          court   consolidated     the   two

actions pending there and certified the consolidated action as a

                                          8
class    action,     defining        the    class       as    all    counties      in    South

Carolina.       The court thereafter rejected the counties’ claims on

the merits, concluding that the exclusion from the general tax

exemptions covered only real property taxes and not transfer

taxes.        The court also rejected the South Carolina counties’

claim    that    the     tax    exemptions         were      unconstitutional.             The

Maryland       district       court     did       not     reach      the    class       action

certification        question        but    dismissed         the    Maryland       county’s

claims as a matter of law, again concluding that the exclusion

from    the    general    tax       exemptions      did      not    apply   and     that   the

exemptions       themselves          were     a     constitutional           exercise       of

Congress’s Commerce Clause power.

       These    appeals        followed,      and       we    ordered       that    they    be

consolidated for our review.

                                              II

        The general tax exemptions for Fannie Mae and Freddie Mac

exclude state and local taxes on their “real property” “to the

same extent as other real property is taxed.”                                 12 U.S.C. §

1723a(c)(2);      id.     §    1452(e).        The      Counties      argue    that      “real

property,”      as   used      in    the    statutes,         includes      deeds    to    the

property recorded by Fannie Mae and Freddie Mac because “deeds

are ‘indispensable’ to ownership of real property; they are the

principal evidence of ownership and true title.”                              The Counties

                                              9
reason that such a construction follows from the concept that

real property ownership is a “bundle of sticks” that includes

the right to transfer title.              Consequently, by their account, a

real property transfer tax is a tax on real property, which is

excluded from the general tax exemptions provided for Fannie Mae

and Freddie Mac.

       Thus, according to the Counties, when a statute refers to a

real property tax, it is also referring to transfer taxes.                           Such

a   blur   of   the   two    taxes       would       mean   analogously      that     any

reference to a personal property tax (a tax on the ownership of

personal    property)      must    also    be    a    reference     to    sales     taxes

imposed on the transfer of personal property.                       Yet, every legal

and common understanding distinguishes a property tax from a

transfer or sales tax.

       The Supreme Court made this very point clear when it stated

that   a   property   tax    is     “levied      upon       the   property    itself,”

whereas    a    transfer     tax    is     levied       upon      the    “transfer     of

property.”      United States v. Wells Fargo Bank, 485 U.S. 351, 355

(1988).    The Court explained:

       [A]n exemption of property from all taxation ha[s] an
       understood meeting:    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.

                                          10
Id. at 355.      Thus, the exemption from a tax on real property was

not an exemption from a tax on “certain privileges of ownership,

such as the right to transfer [real] property.”                         Id.

      When that distinction is recognized, it becomes apparent

that the exclusions allowing for the taxation of real property

as “other real property is taxed,” 12 U.S.C. §§ 1723a(c)(2),

1452(e), undoubtedly refer to real property taxes imposed on the

ownership of real property and not to transfer taxes imposed on

the transfer of real property -- e.g., on the sale of real

property.

      The Supreme Court applied the same distinction in Pittman

v. Home Owners’ Loan Corp., 308 U.S. 21 (1939).                          In Pittman, the

Court    considered      whether     Maryland           could    impose       a     mortgage-

recordation     tax    on   the   Home       Owners’      Loan       Corporation.          That

corporation was subject to a statutory tax exemption with a real

property     exclusion      materially        identical         to    the     ones    in   the

present case.         See id. at 31 n.3.                 The Court found that the

corporation      was     exempt     from          the    recordation           tax,     which

necessarily meant that the real property exclusion did not apply

to the recordation tax.           Id. at 33.

      The transfer taxes in the present case are analogous to the

recordation tax in Pittman, and both are distinct from property

taxes.      See also Fed. Land Bank v. Bismarck Lumber Co., 314 U.S.

95,   101    (1941)    (“Obviously       a    tax   upon    the       sale     of    building

                                             11
materials to be used on the real estate of a federal land bank

is not a tax upon that real estate”); Southern Ry. Co. v. Watts,

260 U.S. 519, 530 (1923) (“[A] privilege tax is not converted

into a property tax because it is measured by the value of

property”).

     Moreover, the South Carolina and Maryland statutory schemes

themselves confirm the divide between excise taxes and property

taxes.      Both   States,    in    addition   to    imposing    a    tax   on   the

transfer of real property, impose a separate direct tax on real

property,    using   the     same   “subject   to”    language       used   in   the

federal exemption statutes.           Compare Md. Code Ann., Tax-Prop. §

6-101 (“[A]ll property located in [Maryland] is subject to . . .

property tax” (emphasis added)), and S.C. Code Ann. § 12-37-210

(“All real . . . property in [South Carolina] . . . shall be

subject     to   taxation”     (emphasis    added)),     with    12     U.S.C.    §

1452(e) (excluding from the general taxation exemption “any real

property . . . subject to State . . . or local taxation to the

same extent according to its value as other real property is

taxed” (emphasis added)), and 12 U.S.C. § 1723a(c)(2) (similarly

using “subject to” language).

     In sum, we hold that the real property exclusions from the

general tax exemptions of 12 U.S.C. §§ 1723a(c)(2) and 1452(e)

do not include transfer and recordation taxes.                   Accord DeKalb

Cnty. v. Fed. Hous. Fin. Agency, __ F.3d __, 2013 U.S. App.

                                       12
LEXIS 25763 (7th Cir. Dec. 23, 2013); Cnty. of Oakland v. Fed.

Hous. Fin. Agency, 716 F.3d 935, 939 n.6 (6th Cir. 2013).

                                          III

       The Counties contend that, in any event, Congress acted

impermissibly      in    providing      Fannie       Mae    and    Freddie      Mac   with

exemptions from state and local transfer taxes.                          Disputing the

district courts’ conclusion that the exemptions were justified

under the Commerce Clause, the Counties assert that the transfer

taxes were “assessed on local, intrastate activity -- the buying

and    selling    of    parcels    of    real    estate,”         and    therefore     any

efforts to       regulate   them    were       not   justified      by    the     Commerce

Clause but instead amounted to nothing less than an infringement

on the States’ sovereign power to tax -- a power “indispensable

to their existence.”           Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1,

199 (1824); see also Bode v. Barrett, 344 U.S. 583, 585 (1953)

(observing that the power of a State to tax is “basic to its

sovereignty”); Dows v. City of Chicago, 78 U.S. (11 Wall.) 108,

110 (1871) (“It is upon taxation that the several States chiefly

rely    to   obtain      the   means       to    carry       on    their     respective

governments”).

                                           A

       Before addressing the Counties’ Commerce Clause argument,

we    address    the    Counties’       contention         that   we     should     review

                                          13
Congress’s authority to exempt Fannie Mae and Freddie Mac from

state    and    local       taxes    under      the     strict-scrutiny            standard      of

review.        They argue that the “rights of the states to . . .

impose    taxes    are      just     as    fundamental,        from      a       Constitutional

standpoint,      as    the    rights       of    individuals      to     Due       Process    and

Equal    Protection         under    the    Fifth       and   Fourteenth           Amendments.”

The Counties provide no authority for this position, though,

candidly observing, “The admitted absence of judicial standards

for limiting Congressional interference with non-discriminatory

state taxes is no proper reason to apply a wrong standard or not

formulate a proper one.”

     We need not, however, formulate a new standard, as it is

established that for a federal statute to pass constitutional

muster    under       the    Commerce       Clause,      there      need         only    exist   a

“‘rational basis’ . . . for . . . concluding” that the regulated

activities       “taken       in     the        aggregate,       substantially            affect

interstate commerce.”               Gonzales v. Raich, 545 U.S. 1, 22 (2005)

(emphasis      added);       see     also       Hodel    v.   Va.     Surface           Mining   &

Reclamation Ass’n, 452 U.S. 264, 276 (1981) (“The 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   congressional

finding that a regulated activity affects interstate commerce,

if there is any rational basis for such a finding”); United

                                                14
States v. Gibert, 677 F.3d 613, 621 (4th Cir. 2012) (“[I]f a

‘rational      basis    exist[s]      for       concluding      that    a    regulated

activity      sufficiently     affect[s]         interstate     commerce,’        then    a

challenge      to    Congress’     power    under       the    Commerce      Clause      to

regulate      that   activity      must    fail”    (alterations        in    original)

(quoting United States v. Lopez, 514 U.S. 549, 557 (1995))).

       And    this    level   of    scrutiny       is    not    altered      because      a

regulation exempts an entity from state taxation.                      The Counties’

analogy to the Fifth and Fourteenth Amendments fails because

there    is    no    independent      constitutional           protection     for      the

States’ right to tax.            To be sure, Congress must speak clearly

when    preempting     a    State’s   traditional         powers,      including      the

power to tax.        See Dep’t of Revenue of Or. v. ACF Indus., Inc.,

510    U.S.   332,    345   (1994).        But    Congress’s     intent      to   exempt

Fannie Mae and Freddie Mac from state taxation in the present

case could not be clearer -- the statutes provide that Fannie

Mae and Freddie Mac “shall be exempt from all taxation now or

hereafter imposed by any State . . . or by any county.”                                  12

U.S.C. § 1723a(c)(2); id. § 1452(e).                      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.                        See, e.g., Ariz.

Dep’t of Revenue v. Blaze Constr. Co., 526 U.S. 32, 38 (1999)

(“Whether to exempt [the government contractor] from Arizona’s

                                           15
transaction privilege tax . . . rests . . . with Congress”);

United States v. New Mexico, 455 U.S. 720, 737 (1988) (“If the

[tax] immunity of federal contractors is to be expanded beyond

its narrow constitutional limits, it is Congress that must take

responsibility     for   the     decision”);     United     States       v.   City   of

Detroit, 355 U.S. 466, 474 (1958) (“[T]his is not to say that

Congress, acting within the proper scope of its power, cannot

confer   [tax]     immunity      by   statute    where     it     does    not    exist

constitutionally”).         And more particularly, in Arizona Public

Service Co. v. Snead, 441 U.S. 141 (1979), the Court upheld a

federal law invalidating a discriminatory New Mexico tax on the

transmission of electricity where “Congress had a rational basis

for finding that the New Mexico tax interfered with interstate

commerce, and selected a reasonable method to eliminate that

interference.”       Id.    at    149-50.       While     Snead    was    a     dormant

Commerce Clause case, the Court’s employment of the rational-

basis standard of review nonetheless undermines the Counties’

claim that state taxes are deserving of heightened protection.

     In the absence of a particular constitutional right that

would trigger heightened scrutiny, we hold that a congressional

exemption   from    state      taxation     under   the    Commerce       Clause     is

subject to rational-basis review.

                                        16
                                             B

     On    the    merits,     the     Counties       contend     that    the    Commerce

Clause does not authorize Congress to regulate local, intrastate

activity, such as collecting taxes on “the buying and selling of

parcels of real estate,” and therefore, they argue, the district

courts erred in holding that Congress could reasonably conclude

that state and local taxation would interfere with the stated

missions of Fannie Mae and Freddie Mac.                  See Butts v. Fed. Nat’l

Mortg. Ass’n, No. 9:12-1912, 2013 U.S. Dist. LEXIS 124999, at

*24-25 (D.S.C. May 23, 2013) (“Congress created Fannie Mae and

Freddie Mac to provide stability and competition in the national

secondary mortgage market.               Congress could reasonably conclude

that requiring Fannie Mae and Freddie Mac to pay certain state

taxes, such as the South Carolina recording fee, could interfere

with that important mission”); Montgomery Cnty. v. Fed. Nat’l

Mortg. Ass’n, No. DKC-13-0066, 2013 U.S. Dist. LEXIS 61822, at

*44-45    (D.    Md.   Apr.    30,    2013)       (concluding    that    there    is   “a

rational    basis      for    Congress       to    conclude     that    the    regulated

activity in question . . . has a substantial economic effect on

interstate commerce” and that it was reasonable for Congress to

believe that “any taxation of [Fannie Mae and Freddie Mac] by

states     and    localities         could        interfere    with     their     stated

missions”).

                                             17
      Congress has the power to “‘make all Laws which shall be

necessary and proper’ to ‘regulate Commerce . . . among the

several States.’”           Raich, 545 U.S. at 22 (omission in original)

(quoting U.S. Const., Art. I, § 8).                        The Supreme Court has

identified three forms of regulation that are authorized by the

Commerce Clause:            (1) “Congress can regulate the channels of

interstate commerce”; (2) “Congress has authority to regulate

and protect the instrumentalities of interstate commerce”; and

(3)   “Congress       has     the    power       to   regulate       activities           that

substantially        affect      interstate        commerce.”         Id.      at        16-17

(emphasis added).            Moreover, “when Congress enacts a general

statutory framework regulating economic activity, its power is

not   limited    to    the       regulation       only    of    interstate      economic

activity, but extends to the regulation of purely intrastate

economic activity as well.”               Brzonkala v. Va. Polytechnic Inst.

& State Univ., 169 F.3d 820, 835 (4th Cir. 1999) (en banc)

(emphasis omitted), aff’d sub nom.                    United States v. Morrison,

529 U.S. 598 (2000).

      In this case, the overall statutory schemes establishing

Fannie   Mae    and     Freddie       Mac      are    clearly       directed        at     the

regulation of interstate economic activity.                         Congress created

the   corporations          to    “promote        access       to   mortgage         credit

throughout     the    Nation”       and   to     foster    a   nationwide      secondary

mortgage market.       12 U.S.C. § 1716 (with respect to Fannie Mae);

                                            18
id. § 1451 note (with respect to Freddie Mac).                            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.        And at oral argument, the Counties rightly conceded

that Congress acted well within its Commerce Clause power in

establishing       Fannie     Mae    and     Freddie       Mac     for    the     purposes

indicated in their charters.                 The relevant inquiry, then, is

whether the statutory exemptions from state and local taxes are

necessary and proper to Congress’s legitimate exercise of its

Commerce Clause power.              See Raich, 545 U.S. at 34-35 (Scalia,

J.,   concurring)      (explaining          that    the    authority       to     regulate

intrastate       commerce    “derives        from    the       Necessary       and       Proper

Clause”).

      “[I]n determining whether the Necessary and Proper Clause

grants Congress the legislative authority to enact a particular

federal statute, we look to see whether the statute constitutes

a means that is rationally related to the implementation of a

constitutionally enumerated power.”                   United States v. Comstock,

560 U.S. 126, 134 (2010).            “[T]he word ‘necessary’ does not mean

‘absolutely necessary.’”            Id. (quoting McCulloch v. Maryland, 17

U.S. (4     Wheat.)    316,    413-15       (1819)).           Rather,    “the       relevant

inquiry    is    simply     ‘whether       the     means   chosen        are    reasonably

                                            19
adapted to the attainment of a legitimate end under the commerce

power.’”     Id. at 135 (quoting Raich, 545 U.S. at 37 (Scalia, J.,

concurring) (internal quotation marks omitted)).

       We conclude that Congress could rationally have believed

that    state     taxation     would     substantially        interfere    with   or

obstruct the legitimate purposes of Fannie Mae and Freddie Mac

of   regulating      and    stabilizing      the   secondary    mortgage    market.

And we conclude further that its decision to exempt Fannie Mae

and Freddie Mac from most state taxation was a reasonable means

of avoiding that risk of interference or obstruction.                        First,

excessive state taxation of Fannie Mae and Freddie Mac could

undermine their ability to purchase mortgages by reducing their

access to capital.            Second, exposure to state taxation would

subject     Fannie      Mae   and   Freddie        Mac   to   inconsistencies     in

transaction costs that would vary from state to state.                      Such a

patchwork       might      undermine   the     goal      of   providing    mortgage

liquidity to all parts of the country.                    See, e.g., 12 U.S.C. §

1716(4) (declaring that Fannie Mae should “promote access to

mortgage credit throughout the Nation (including central cities,

rural   areas,     and     underserved    areas)”        (emphasis   added)).     In

particular, inconsistent state taxation could discourage Fannie

Mae and Freddie Mac from investing in mortgages on real property

in states with the highest taxes.                  Third, absent the statutory

exemptions, states might be tempted to target Fannie Mae and

                                          20
Freddie Mac with large taxes, given the sheer volume of their

mortgage portfolios and their statutory obligations to continue

purchasing      and    guaranteeing      mortgages    throughout       the    country.

And this problem could become particularly pronounced were a

State to face a mortgage crisis.                  For these reasons, we agree

with the district courts that Congress could rationally have

believed that insulating Fannie Mae and Freddie Mac from most

state       taxation    would     substantially      further     those       entities’

purposes.       Thus, we hold that the statutory exemptions are valid

exercises of Congress’s constitutional powers.

       The Counties argue that Morrison and Lopez, two Commerce

Clause cases, suggest the opposite result, asserting that the

transfer       taxes    here    are    completely     localized       and    “no    more

commercial      in     nature   than    the     activities”    that    Congress      was

attempting to regulate in those cases because “[t]axes are not

commerce between or among the States.”                In Morrison, the Supreme

Court struck down a federal statute that imposed a civil penalty

for gender-motivated violence, 529 U.S. at 601-02, and in Lopez,

the    Court     struck    down    a    federal     statute    that    criminalized

possession of a firearm in a school zone, 514 U.S. at 551.                            In

both of those cases, the object of Congress’s regulation was

intrastate, non-economic activity.                  See Morrison, 529 U.S. at

613 (“Gender-motivated crimes of violence are not, in any sense

of    the    phrase,    economic       activity”);    Lopez,    514    U.S.    at   561

                                           21
(“[The statute] has nothing to do with ‘commerce’ or any sort of

economic    enterprise,        however    broadly       one   might      define      those

terms”).     In    contrast,      the    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.                         While local

transfer and recordation taxes might, in a vacuum, appear to be

purely    intrastate     in    nature,     Congress      could      rationally        have

believed that such taxes would substantially affect interstate

commerce by burdening Fannie Mae and Freddie Mac.                          See Wickard

v.    Filburn,    317   U.S.    111,     124   (1942)     (“[N]o        form   of    state

activity    can     constitutionally           thwart    the       regulatory        power

granted by the commerce clause to Congress.                     Hence the reach of

that power extends to those intrastate activities which in a

substantial way interfere with or obstruct the exercise of the

granted power” (quoting United States v. Wrightwood Dairy Co.,

315 U.S. 110, 119 (1942)) (internal quotation marks omitted)).

       Thus, we conclude that Congress may exempt Fannie Mae and

Freddie Mac from state and local transfer taxes, even though

they are collected in the context of intrastate transactions,

because the taxes could substantially interfere with or obstruct

the    constitutionally        justified       missions       of    Fannie     Mae     and

Freddie Mac in bolstering the secondary mortgage market.

                                          22
                                               C

        The Counties’ remaining arguments for finding the statutory

tax     exemptions          unconstitutional             do      not     merit           extensive

discussion.

       First,       they      argue        that          the     statutory           exemptions

inappropriately “commandeer” state employees by requiring them

“to    record      deeds    from     [Fannie       Mae    and    Freddie          Mac]    free    of

charge.”      See Printz v. United States, 521 U.S. 898 (1997); New

York    v.   United        States,    505     U.S.       144     (1992).           The     federal

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

local officers any affirmative obligation.                         See United States v.

Bostic,      168     F.3d     718,     724     (4th       Cir.     1999)          (rejecting       a

commandeering         argument        in     the     absence       of        an     affirmative

obligation).         Surely, South Carolina and Maryland could scrap

their title recording systems if they so desired.                                 The mere fact

that federal statutes give rise to state action does not amount

to commandeering.            See South Carolina v. Baker, 485 U.S. 505,

514 (1988) (“Any federal regulation demands compliance”).

       Second, the Counties argue that Fannie Mae and Freddie Mac

are    not   federal        instrumentalities            entitled       to    immunity       from

state    taxation,         implying    that        Congress       may    only       statutorily

exempt federal instrumentalities from taxation.                                    But such an

argument     makes     little      sense      because,          absent   waiver,           federal

instrumentalities           are    immune      from       state    taxation          under       the

                                              23
Supremacy Clause of the Constitution, regardless of statutory

enactment.       See New Mexico, 455 U.S. at 735; McCulloch, 17 U.S.

at 436.      Moreover, the Supreme Court has repeatedly stated that

Congress may grant statutory tax immunity broader than what the

Supremacy Clause would otherwise provide.                             See Blaze Constr.

Co., Inc., 526 U.S. at 38; New Mexico, 455 U.S. at 737; City of

Detroit,     355    U.S.     at    474.         The    case    of     First      Agricultural

National     Bank    v.    Tax     Commission,         392    U.S.    339       (1968),    makes

clear    that      constitutional         and        statutory       tax    exemptions       are

distinct concepts.            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 instrumentalities.”                                   Id. at

341.      Because        Congress    may       provide       for    immunity      from     state

taxation     irrespective          of     an     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.

       Third and finally, the Counties argue that the statutory

exemptions violate the Tenth Amendment.                            To be sure, the Tenth

Amendment reserves to the States powers not granted to Congress.

But    because      we    hold     today       that     Congress       acted      within     its

Commerce Clause power in granting Fannie Mae and Freddie Mac

                                                24
statutory tax exemptions, the Tenth Amendment is inapplicable.

See New York, 505 U.S. at 156 (“If a power is delegated to

Congress   in   the   Constitution,   the   Tenth   Amendment   expressly

disclaims any reservation of that power to the States”).

     Accordingly, the judgments of the district courts are

                                                                AFFIRMED.

                                  25