“Transferring property can logically be understood as an activity,” Judge Kanne wrote. The Seventh Circuit panel this time sided with the city. On appeal, City Hall maintained its assertion a plain reading of the law should limit the exemption only to property acquired or held by the federal lenders, not any transactions in which they may be parties. Ellis sided with the federal lenders, finding the exemption should apply to the federal lenders’ property transactions from beginning to end, “regardless of whom Defendants (the city) require to pay the tax.”
“Yet, that is what the City and its officials purport to do.” “The City cannot lawfully impose excise taxes on an Enterprise’s sale of real property or collect such taxes from any party to such a transaction,” Fannie Mae said in its original complaint. In four specific instances cited by Fannie Mae in its lawsuit, the city sent tax bills of as much as $3,200 to people buying homes from Fannie Mae. In this case, though, the city sought to sidestep that law by waiting for the properties to be sold and then sending the tax bills to the buyers.
The real estate transfer tax is typically paid by the buyer at the time the title to the property is transferred to the new owner.įederal law prohibits cities and other local governments from levying such taxes to property held by federal lenders.
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Typically when a property is sold in Chicago, the city seeks to collect taxes equivalent to $3.75 per every $500 of the assessed value, plus an additional special tax for the Chicago Transit Authority of $1.50 per $500. The case dates to October 2015, when Fannie Mae and the Federal Housing Finance Agency first filed suit in Chicago federal court against the city of Chicago, asserting the city has no authority under the law to collect its so-called real estate transfer taxes either from the federal lenders themselves or from the people purchasing foreclosed homes from the federal lenders. Miller Jr., of the Northern District of Indiana, concurred in the decision. The panel’s other members, Circuit Judge Daniel A. Seventh Circuit Judge Michael Kanne authored the panel’s opinion. The judges based their ruling on a strict interpretation of the “clear and manifest purpose of Congress,” as expressed in the wording of the law exempting the Fannie- and Freddie-owned properties from taxation. Seventh Circuit Court of Appeals said a federal judge had erred in finding Fannie and Freddie’s tax exemption should be limited only to transactions in which the federal mortgage lenders are the buyers of property, and should not extend to those in which they are the sellers. While federal law bars the city of Chicago and other local governments from slapping taxes on homes acquired by federal home mortgage lending giants Fannie Mae and Freddie Mac, the law does nothing to stop such cities from merely passing on those tax bills to the people who later buy the property from Fannie or Freddie, a federal appeals panel says.
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