Judge dismisses Florida taxation case against GSEs

U.S. District Judge Virginia Hernandez Covington tossed out a proposed class action suit filed by the Hernando County Circuit Clerk, located about 60 miles north of Tampa, against both Fannie Mae and Freddie Mac.

The proposed class action claimed the government-sponsored enterprises sidestepped property-related excise taxes and ruled the mortgage giants are exempt from state excise taxes, according to Law360, a LexisNexis publication. 

Covington sided with Fannie Mae and Freddie Mac in ruling that the language of certain exemptions in federal statutes unambiguously declared the GSEs to be “exempt from all taxation” by any state or county. This suit was dismissed with prejudice, meaning the court cannot be asked to rule on the same issue again. 

“The Exemption Statutes for the Enterprises and the FHFA [Federal Housing Finance Agency, the conservator of the mortgage companies] do not exempt property from taxation; they exempt the entities from taxation,” Covington wrote.

She added, “Accordingly, the Transfer Tax – a tax on the entities for engaging in a particular action – triggers the exemption found in the Exemption Statutes.” 

The suit was filed in June on behalf of Hernando county as well as 66 other counties in Florida. The suit hoped to prove that any entity who transfers interest in real estate to another party must pay a real estate transfer tax.

Both Fannie Mae and Freddie Mac did not pay the tax because of claimed exemptions. The suit asked the court to declare the GSEs were subject to the tax.

Covington also referred to precedent set by a previous U.S. Supreme Court case noting, “the Supreme Court case law supports Defendants’ argument that Defendants are exempted from ‘all taxation’ imposed by the state; and thus the FHFA and the Enterprises are exempted from Florida’s Transfer Tax.” 

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