SBM Real Property Law Section eNewsletter

August 2013

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Howard A. Lax, Bodman PLC

Patricia Paruch, Kemp Klein Law Firm

Fannie/Freddie Exempt From Transfer Taxes

By Christopher A. Knight, University of Virginia School of Law, Bodman PLC

The Sixth Circuit Court of Appeals reversed a district court decision which held Fannie Mae and Freddie Mac liable for unpaid real estate transfer taxes. In County of Oakland v. Federal Housing Finance Agency, 716 F.3d 935 (C.A.6 2013), the court rejected the distinction between excise taxation and direct taxation, vacated the district court decision, and remanded the case with instructions to enter summary judgment for Fannie May and Freddie Mac.

The sole issue in the case was whether federal law exempted Fannie Mae and Freddie Mac from "all" state and local taxes, including real estate transfer taxes. The Court explained, "a straightforward reading of the statute leads to the unremarkable conclusion that when Congress said 'all taxation,' it meant all taxation." The Court further explained that this conclusion is "reinforced by the Supreme Court's decision in Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95 (1941), and [the Sixth Circuit's] decision in United States v. State of Michigan, 851 F.2d 803,805, n.1 (CA 6 1988). Both of those cases involved similar exemption statutes and confirm that "when Congress broadly exempts an entity from 'taxation' or 'all taxation' it means all taxation."

The Court rejected the district court's argument that under United States v. Wells Fargo Bank, 485 U.S. 351 (1988), "all taxation" meant only direct taxes and not excise taxes. The Sixth Circuit distinguished Wells Fargo, explaining that Wells Fargo only applied to property exemptions, not entity exemptions.

This decision will impact government finances in many jurisdictions. Counties in Illinois, Minnesota, North Carolina, South Carolina, Ohio, and Florida also sued Fannie Mae and Freddie Mac to collect transfer taxes. Oakland County officials intend to appeal to prevent the loss of revenue.

STC Uncapping News

As noted at the Summer Conference, the Michigan State Tax Commission has issued an updated version of its Transfer of Ownership Guidelines (June 2013). The new version includes updates on applying the joint tenancy exception to uncapping of taxable value. The new Guidelines attach prior Revenue Bulletins that are still relevant and applicable. Keep in mind, these are guidelines, not settled law. A court may disagree.

Interested in writing a future article for the e-Newsletter?
Please contact co-editors:
Howard Lax at or Patricia Paruch at

Supreme Court Orders Reconsideration of Summary Proceedings Ruling

By Roger B. Chard

In Clohset v. No Name Corp., 296 Mich App 525 (2012), the Court of Appeals upheld a $222,102.09 consent judgment entered by a district court in summary proceedings, holding that the Court's action "flowed" from its power arising under the summary proceedings act, was within "the scope" of MCL 600.8302(3) (concurrent equitable jurisdiction of district and circuit courts), and that § 8302(3)'s "specific" jurisdiction superseded § 8301(1)'s "general" jurisdiction limit of $25,000.

The Clohset court ignored the statute ". . . A claim or counterclaim for money judgment shall not exceed the amount in controversy that otherwise limits the jurisdiction of the court." MCL 600.5739(1). It also ignored the court rule "If a money claim or counterclaim exceeding the court's jurisdiction is introduced, the court, on motion of either party or on its own initiative, shall order removal of that portion of the action to the circuit court, if the money claim or counterclaim is sufficiently shown to exceed the court's jurisdictional limit." MCR 4.201(G)(2)(b)). As I argued in my Michigan Real Property Review article this past winter, even if specific statutory language customarily supersedes general statutory language, the Clohset court did not distinguish the exception seemingly provided by the legislature and the court rule. See R. Chard, Michigan Real Property Review, Vol. 39, No. 3 & 4 (Winter 2013, p56).

In early July, 2013, the Michigan Supreme Court expressed similar misgivings in vacating Clohset and remanding the case to the Court of Appeals "for reconsideration in light of MCL 600.5739(1) and MCR 4.201(G)(2)(b)." Clohset v. No Name Corp., (Mich No 145658, July 3, 2013. Summary proceedings subject matter jurisdiction remains where it was before Clohset, except that 2012 PA 338 (concurrent jurisdiction plans) has since taken effect.

The views and opinions expressed in these articles are those of the authors, and they do not reflect in any way the positions of the State Bar of Michigan or the Real Property Law Section. These columns are meant for informational purposes only and should not be construed as legal advice.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, by any person for the purpose of (i) avoiding tax-related penalties or (ii) promoting, marketing, or recommending to another person any transaction or matter addressed in this communication.