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Board of County Commissioners of kay County v. Federal Housing Finance Agency

United States District Court, District Circuit

July 26, 2013



ROSEMARY M. COLLYER United States District Judge.

The Board of County Commissioners of Kay County, Oklahoma (Kay County) brought suit against the Federal Housing Finance Agency, as conservator for Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), as well as against Fannie Mae and Freddie Mac (collectively, Defendants). Kay County seeks to compel Defendants to pay a documentary stamp tax, i.e., a transfer tax, upon the sale of real estate located in Oklahoma. Pursuant to certain federal exemption statutes, 12 U.S.C. §§ 1452(e), 1723a(c)(2), 4617(j)(1)-(2), the Defendants are exempt from all taxation, including the excise tax at issue here. Accordingly, Defendants’ motion to dismiss will be granted.


The State of Oklahoma imposes a documentary stamp tax on sales of real property. See 68 Okla. Stat. Ann. § 3201.[1] This tax, known as a “Transfer Tax, ” is based on the value of the real property conveyed and attaches at the time the deed is executed and delivered to a buyer. Id . The tax must be paid by the seller via the purchase of documentary stamps from the county clerk, and such stamps must be affixed to the deed before it can be accepted for recording. Id. §§ 3203-04.

Kay County alleges that Defendants have “ignored” and “wrongfully refused to pay” the tax, depriving Kay County of significant tax revenue to which it is entitled. Am. Compl. [Dkt. 11] ¶¶ 4, 7. Kay County filed a two count Amended Complaint, seeking (1) a declaratory judgment that Defendants are not exempt from the Transfer Tax; and (2) damages in the full amount of Transfer Taxes allegedly due and owing by Defendants. Id. ¶¶ 43-53. Defendants move to dismiss, arguing that they are exempt from the excise taxes that Kay County seeks to impose.


A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the adequacy of a complaint on its face, testing whether a plaintiff has properly stated a claim. Fed.R.Civ.P. 12(b)(6). A complaint must be sufficient “to give a defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). Although a complaint does not need detailed factual allegations, a plaintiff’s obligation to provide the grounds of his entitlement to relief “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. In deciding a motion under Rule 12(b)(6), a court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits or incorporated by reference, and matters about which the court may take judicial notice. Abhe & Svoboda, Inc. v. Chao, 508 F.3d 1052, 1059 (D.C. Cir. 2007) (internal quotation marks and citation omitted).

A court must treat the complaint’s factual allegations as true, “even if doubtful in fact.” Twombly, 550 U.S. at 555. But a court need not accept as true legal conclusions set forth in a complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Id. at 679.


The issue here is a question of statutory interpretation. Congress exempted Fannie Mae, Freddie Mac, and FHFA as their conservator from “all taxation” by states and localities, other than property taxes. See 12 U.S.C. §§ 1452(e), 1723a(c)(2), 4617(j)(1)-(2) (Exemption Statutes).[2] FHFA asserts that it is exempt from the Transfer Tax because it is an excise tax, a tax levied upon the transfer or use of property, as distinct from a direct tax upon the property itself. See United States v. Wells Fargo Bank, 485 U.S. 351, 355 (1988). Kay County asserts that (1) the Transfer Tax is a tax on real property not subject to the exemption and (2) that “all taxation” does not mean all taxation and instead includes only direct taxes and not excise taxes.

“Statutory construction must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose.” Engine Mfrs. Ass’n v. S. Coast Air Quality Mngmt. Dist., 541 U.S. 246, 252 (2004); see also FTC v. Tarriff, 584 F.3d 1088, 1090 (D.C. Cir. 2009) (unless otherwise defined, the words of a statute must be construed according to their common meaning). When a statute’s language is plain, a court must enforce it according to its terms. Jimenez v. Quarterman, 555 U.S. 113, 118 (2009). Courts should resist reading words or phrases into a statute that are not there. Hoge v. Honda of Am. Mfg., Inc., 384 F.3d 238, 246 (6th Cir. 2004). “[W]hen the statute’s language is plain, the sole function of the courts—at least where the disposition required by the text is not absurd—is to enforce it according to its terms.” Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530 U.S. 1, 6 (2000) (internal quotation marks omitted). Since the Exemption Statutes do not define “all” or “taxation, ” the Court must interpret the terms according to “everyday understanding.” See Lopez v. Gonzales, 549 U.S. 47, 47 (2006). As explained below, the meaning of the phrase “all taxation” is clear.

The issue of whether the entities that are defendants here are exempt from other similar state transfer taxes has been litigated frequently in the last two years. Courts across the country uniformly agree that the phrase “all taxation” unambiguously provides an exemption from real estate transfer taxes to FHFA as conservator, Fannie Mae, and Freddie Mac. See. e.g., County of Oakland v. FHFA, 716 F.3d 935, 940 (6th Cir. 2013) (exemption from Michigan real property transfer taxes);[3] Butts v. Fannie Mae, Civ. No. 9:12-1912, at *11 (D.S.C. May 23, 2013) (filed as Third Notice of Supp. Authority, Ex. 2 [Dkt. 30-2]) (exemption from South Carolina mortgage recording fee); Athens-Clarke Cnty. Unified Gov’t v. FHFA, No. 5:12-cv-355, 2013 WL 2102922, at *7-8 (M.D. Ga. May 14, 2013) (exemption from Georgia tax on the transfer of property); Montgomery Cnty. Comm’n v. FHFA, No. 2:12-cv-885, 2013 WL 1896256, at *2-3 (M.D. Ala. May 6, 2013) (exemption from Alabama recordation tax); Montgomery Cnty. v. Fannie Mae, No. 13-cv-66, 2013 WL 1832370, at *5-10 (D. Md. Apr. 30, 2013) (exemption from Maryland recordation and transfer taxes); Hennepin Cnty. v. Fannie Mae, No. 12-cv-2075, 2013 WL 1235589, at *3-6 (D. Minn. Mar. 27, 2013) (exemption from Minnesota transfer taxes and environmental surcharges); Delaware Cnty. v. FHFA, No. 2:12-cv-4554, 2013 WL 1234221, at *3-5 (E.D. Pa. Mar. 26, 2013) (exemption from Pennsylvania transfer tax); Fannie Mae v. Hamer, No. 12-cv-50230, 2013 WL 591979, at *4-6 (N.D. Ill. Feb. 13, 2013) (exemption from Illinois transfer tax); Nicolai v. FHFA, No. 8:12-cv-1335, 2013 WL 899967, at *3-5 (M. D. Fla. Feb. 12, 2013) (exemption from Florida transfer tax); Hertel v. Bank of Am., 897 F.Supp.2d 579, 583-87 (W.D. Mich. 2012) (exemption from Michigan transfer tax); Dist. of Columbia ex rel. Hager v. Fannie Mae, 882 F.Supp.2d 107, 111-12 (D.D.C. 2012) (exemption from D.C. recordation taxes), appeal dismissed, No. 12-7095, 2013 WL 1729764 (D.C. Cir. Apr. 16, 2013); see also Cape May Cnty. v. Fannie Mae, No. 12-cv-4712 (D.N.J.) (Tr. of Apr. 30, 2013 ruling on the record) (filed as Second Notice of Supp. Authority, Ex. C [Dkt. 28-3]) (exemption from New Jersey transfer tax).

Courts have construed “all taxation” in accordance with ...

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