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Fannie, Freddie win right to appeal tax ruling

Fannie Mae and Freddie Mac won the right to appeal a federal judge’s decision that they are liable for unpaid real estate transfer taxes in 82 of Michigan’s 83 counties.

Fannie Mae, formally the Federal National Mortgage Association, and Freddie Mac, formally the Federal Home Loan Mortgage Corp., claim to be exempt from paying the taxes, which are levied based on a property’s worth when it is sold. Judge Victoria Roberts decided they are not federal entities, which are exempt from taxation, but rather publicly traded enterprises backed by the federal government.

Although the case remains open until the judge determines how much Fannie Mae and Freddie Mac owe, the U.S. Court of Appeals for the 6th Circuit agreed to hear an appeal because the entities’ argument is based on legal interpretation rather than the facts of the case. Under normal circumstances, an appeal can’t be heard until the original litigation is closed.

William Horton, who filed the class-action lawsuit on behalf of the Michigan counties, said no appellate hearing has been scheduled.

The Michigan lawsuit and 34 similar lawsuits, including one filed in Milwaukee County on behalf of all Wisconsin counties, could be merged into one, multidistrict litigation, Horton said, and the process to determine whether to do so will begin Sept. 20 in New York City. If the cases were merged into one, Horton said, he would expect it to go to the U.S. District Court Eastern District of Michigan, where the Michigan lawsuit was heard.

John La Fave, Milwaukee County’s register of deeds, has said Milwaukee County alone could have missed out on at least $1 million in transfer taxes, $200,000 of which would have stayed in the county as revenue.

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