Vol. 5 No. 2, Spring 2014; “You Can’t Handle the Truth” . . . Well, the States That Is: The Legality of State-Imposed Transfer Taxes on Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency
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Fannie Mae and Freddie Mac were created by Congress to help stabilize the housing market. Congress included an express exemption from all taxation imposed by states, counties, and municipalities, albeit real property owned by Fannie and Freddie. In 2008, the Federal Housing Finance Agency (FHFA), a similarly exempt government entity, became conservator of the federally chartered entities. Across the United States, Fannie and Freddie purchase mortgages to ensure all families have access to affordable housing. This is where the problem lies: when Fannie and Freddie offer the deed for recording, localities attempt to tax the recording of the deed. This Comment argues that Fannie, Freddie, and FHFA are exempt from the recording tax because it is legally intuitive that states cannot tax an instrumentality of the federal government, especially when the federal government has provided explicit exemption statutes. Through examination of federal statutes, federal case law, constitutional principles, and other authoritative sources, this Comment urges courts to classify Fannie and Freddie as federal instrumentalities and uphold the clear meaning of the exemption statutes as just that—exempting statutes from all taxation imposed by local authorities.