City of Spokane v. Fed. Nat'l Mortgage Ass'n, No. 13-35655 (9th Cir. 2014)
Annotate this CaseThe City of Spokane filed suit against Fannie, Freddie, and FHFA, arguing that Fannie and Freddie are not statutorily exempt from paying real property transfer taxes. The court concluded that it is clear that the statutory carve-outs allowing for the taxation of real property as "other real property is taxed" encompass only property taxes, not excise taxes. Therefore, Fannie and Freddie are statutorily exempt from paying the transfer taxes in Washington. The court held that the entities' exemption statutes do not exceed Congress's constitutional authority. Because Congress has power under the Commerce Clause to regulate the secondary mortgage market, it has power under the Necessary and Proper Clause not only to create Fannie and Freddie but also to ensure their preservation by exempting them from state and local taxes. Finally, the exemptions neither commandeer state and local officials nor transgress general principles of federalism. Therefore, the court rejected Spokane's Tenth Amendment arguments. Accordingly, the court held that Congress exempted Fannie and Freddie from state and local taxation of real property transfers and that it had constitutional authority to do so. The court affirmed the judgment.
Court Description: Statutory Exemption. The panel affirmed the district court’s judgment in favor of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), and held that Congress exempted Fannie Mae and Freddie Mac from state and local taxation of real property transfers, and that it had constitutional authority to do so. The panel held that Fannie Mae and Freddie Mac were statutorily exempt from paying real property transfer taxes in Washington. The panel also held that because Congress had power under the Commerce Clause to regulate the secondary mortgage market, it had power under the Necessary and Proper Clause not only to create Fannie Mae and Freddie Mac but also to ensure their preservation by exempting them from state and local taxes. Finally, the panel held that the exemptions did not violate the Tenth Amendment.
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