USFN e-Update, July/August 2013: GSEs Exempt from Deed Transfer Tax

Minnesota: GSEs Exempt from Deed Transfer Tax

By Greta Burgett – Wilford, Geske & Cook, P.A
As seen in the USFN e-Update, July/August 2013

Hennepin County, the highest populated county in the state of Minnesota, has jumped on the bandwagon led by other counties throughout the nation in filing suit against Fannie Mae and Freddie Mac for failing to pay Minnesota’s state deed transfer tax. Hennepin County filed the action in August of 2012, seeking a declaration from the federal district court that Fannie Mae and Freddie Mac are not exempt from payment of deed transfer taxes upon the sale or conveyance of real property. The county also sought to recoup millions of dollars in deed transfer taxes for past-transferred properties. Further, the suit requested an injunction prohibiting Fannie and Freddie from violating the deed transfer tax payment obligations in the future.

Minnesota law provides that when any real property is conveyed and the consideration for such is over $500, the deed transfer tax is .0033 percent of such amount. Minn. Stat. § 287.21 subd. 1 (2012). Hennepin County has some extra skin in the game due to a 1997 act by the Minnesota Legislature that allowed it (and neighboring Ramsey County) to collect an additional .0001 percent of the net consideration on a deed conveyance as a means to supply environmental response funds.

On March 27, 2013, the federal court in Minnesota granted Fannie Mae and Freddie Mac’s motion to dismiss. In the order, the court agreed that the GSEs are protected by 12 U.S.C. § 1723a (c)(2) and 12 U.S.C. § 1452 (e), respectively, which state that the entities are exempt from current or future taxation imposed by any state or municipal authority. The court held that Fannie Mae and Freddie Mac are further protected by a Minnesota statute, which creates an exception to the deed transfer tax when “the United States or any agency or instrumentality thereof is the grantor …” Minn. Stat. § 287.22 (6) (2012).

In applying a “plain language” interpretation of the federal statute, the court ruled that the wording of the statute includes the term “all taxation,” evidencing an intent to permit no unenunciated exceptions. Additionally, the court reasoned that the federal exemption statute contains a carve-out for property tax payments but declined to include a carve-out for the deed transfer tax. The court further stated that when Congress provides exceptions in a statute, it doesn’t follow that courts have authority to create others. Based on those precedential statements of the law and a “textual analysis” of the federal exemption statute, the court ruled that Fannie Mae and Freddie Mac are exempt from the local county deed transfer tax.

The district court’s ruling is parallel to the Sixth Circuit Court of Appeals’ decision in County of Oakland v. Fed. Housing Fin. Agency, Nos. 12-2135/2136, 2013 U.S. App. LEXIS 10032; 2013 Fed. App. 0142P (6th Cir. 2013). (The Sixth Circuit encompasses Kentucky, Michigan, Ohio, and Tennessee.) Despite the similar outcome, Hennepin County has noticed its appeal to the U.S. Court of Appeals for the Eighth Circuit.