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Milwaukee County offers argument for real estate tax appeal

Milwaukee County is continuing its campaign to get Fannie Mae and Freddie Mac to pay real estate transfer taxes.

In a federal appeal brief filed Tuesday, the county claims Fannie Mae, formally the Federal National Mortgage Association, and Freddie Mac, formally the Federal Home Loan Mortgage Corp., illegally claimed a tax exemption.

The county sued Fannie and Freddie in 2012. U.S. District Judge Charles Clevert dismissed the lawsuit in July.

A home seller pays tax at a rate of $3 for every $1,000 of a property’s value, and the county’s register of deeds has estimated Fannie and Freddie could owe at least $1 million.

Fannie, Freddie, their conservator and the U.S. have until Sept. 26 to respond to the brief.

According to the appeal brief, Fannie and Freddie are private corporations not controlled by the federal government, so they cannot claim the tax exemption.

The county relies on New York v. United States, in which a court determined the federal government could not compel the New York Legislature to create a toxic waste disposal program; and Printz v. United States, in which a judge ruled the federal government could not require local law enforcement to perform background checks on potential handgun owners. Clevert’s ruling, according to the brief, would “permit the funding of Congressional objectives at the expense of state revenues, which is patently unconstitutional under New York and Printz.”

Furthermore, an exemption for Fannie and Freddie would not be allowed under the Commerce Clause, according to the brief, and Wisconsin’s taxing authority is protected by the 10th Amendment.

“This is because an individual unconstitutional act—the preemption of a single transfer tax collected on a single transaction for a single parcel of Wisconsin real property—cannot become constitutional through aggregation,” according to the brief. “Multiple or ‘aggregated’ wrongs do not make a right.”

But if a judge disagrees and rules Fannie and Freddie are eligible for the exemption, according to the brief, they are still liable for the taxes. According to both exemptions, any real property, such as a home, is subject to state, county and other taxes, such as the transfer tax.

“If Congress subjects its own instrumentalities to state and local real property taxes,” according to the brief, “one would expect that private, non-governmental corporations such as Fannie and Freddie would be subject to those taxes as well.”

— Follow Beth on Twitter


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