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Attorneys continue fight over real estate transfer taxes

By: Beth Kevit, [email protected]//December 13, 2012//

Attorneys continue fight over real estate transfer taxes

By: Beth Kevit, [email protected]//December 13, 2012//

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Attorneys representing all 72 Wisconsin counties in a class-action federal lawsuit against Fannie Mae and Freddie Mac are fighting to keep the case alive in the face of a request for dismissal.

Attorneys argue Fannie Mae and Freddie Mac improperly claimed exemptions from real estate transfer taxes, which are excise taxes each county’s register of deeds collects when a property is sold.

If the counties win, Milwaukee County alone could recoup at least $200,000. Payments to other counties have not yet been released.

Attorneys Charles Crueger, Erin Dickinson and Timothy Hansen, all from the Milwaukee law firm Hansen Reynolds Dickinson Crueger LLC, filed the suit in July with Milwaukee County as the lead plaintiff.

In October, Fannie Mae, formally the Federal National Mortgage Association, and Freddie Mac, formally the Federal Home Loan Mortgage Corp., argued the suit should be dismissed.

Fannie Mae and Freddie Mac both claim to be federal entities and exempt from all taxation. Cases similar to that in Wisconsin have been filed in Georgia, Tennessee, Rhode Island, Florida, Illinois and Michigan.

In March, a Michigan judge ruled Fannie Mae and Freddie Mac are not federal entities but publicly traded companies backed by the federal government. Statute exempts them from direct taxation, the judge found, but not indirect taxation, such as transfer taxes.

Fannie Mae and Freddie Mac are appealing the Michigan decision.

In Wisconsin, interpreting precedent, including the Michigan decision, forms the bulk of arguments from both sides.

The counties’ and Freddie Mac’s attorneys did not respond to multiple requests for comment by deadline Wednesday afternoon. Kristina Matic of Foley and Lardner LLP, Milwaukee, who represents Fannie Mae, directed questions to co-counsel Jill Nicholson, who could not be reached for comment.

In their motion to dismiss, Fannie Mae and Freddie Mac argue the Michigan decision misinterpreted two precedent-setting cases and shouldn’t apply to Wisconsin.

In their response, the counties’ attorneys argue Fannie Mae and Freddie Mac are trying to “stretch” the findings in one of those cases, Federal Land Bank of St. Paul v. Bismarck Lumber Co.

Fannie Mae and Freddie Mac claim Michigan erred by not viewing Bismarck, which explored whether a federal land bank in North Dakota was subject to sales taxes, as a direct comparison to their case.

The counties claim Bismarck didn’t distinguish between direct and excise taxes and did include a federal entity. For both reasons, the counties argue, Bismarck shouldn’t apply.

Fannie Mae and Freddie Mac claim the second case, United States v. Wells Fargo, should not have been considered because it deals with whether specific types of property should be exempt from taxation, rather than exemptions for entities. In Wells Fargo, the U.S. Supreme Court determined project notes for public housing agencies were subject to the estate tax despite exemption from other forms of taxation.

The counties’ attorneys argue Michigan was right to rely on Wells Fargo and that decision overrules additional precedent-setting cases Fannie Mae and Freddie Mac offer to support their claims.

Fannie Mae and Freddie Mac offered other challenges to Milwaukee County’s case, including the claim that only the state’s Department of Revenue has the authority to file this type of suit.

John La Fave, Milwaukee County’s register of deeds, discounted that idea.

“I would think the county has just as much interest in this,” he said. “We’re the one who collects the transfer fees.”

La Fave has estimated Fannie Mae and Freddie Mac owe Milwaukee County alone at least $1 million. The county keeps 20 percent of the transfer taxes it collects, so La Fave estimates the county could gain at least $200,000 if it wins.


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