Federal Court Rules Fannie, Freddie Owe Millions in Back Transfer Taxes
A U.S. District Court Judge has ruled that Fannie Mae and Freddie Mac owe a Michigan county millions in back transfer taxes-- taxes for which Fannie and Freddie have claimed an exemption. The ruling could cost Fannie and Freddie hundreds of millions, as other counties nationwide seek to collect similar unpaid taxes.
The lawsuit, filed by Oakland County, Michigan and joined by the Michigan Attorney General's office, sought an estimated $3 to $4 million for the county and $11 to $20 million for the state in back transfer taxes on transactions in Oakland County, Michigan alone. Oakland County Michigan has a population of 1.2 million, or about one-eighth of Michigan's total population, suggesting that Fannie and Freddie may owe well over $100 million in back transfer taxes in Michigan alone. In addition, Fannie and Freddie have been claiming the exemption in several other states which assess similar transfer taxes.
Transfer taxes are an excise tax, typically based on the sale price or the value of the property and collected by county offices when a deed memorializing a property sale or transfer is recorded. The transfer tax in Michigan is $8.60 per $1,000, $7.50 of which goes to the state, and the rest to the county.
But Fannie Mae and Freddie Mac have never paid the taxes, claiming to be exempt from the taxes as federal entities. They have pointed to their own federally sponsored charters in support of their claim. Fannie Mae's federal charter, for instance, says that Fannie Mae "shall be exempt from all taxation now or hereafter imposed by any State... or by any County". Freddie Mac's charter is similar.
In its ruling, the court agreed that Fannie and Freddie were exempt from "all taxation", but noted that this exemption only pertained to the corporations themselves, not their real estate holdings... for example, their real estate holdings were still subjec