Federal National Mortgage Association, et al., Plaintiffs-Appellees,
City of Chicago, et al., Defendants-Appellants.
September 20, 2017
from the United States District Court for the Northern
District of Illinois, Eastern Division. No. 15 CV 9150 - Sara
L. Ellis, Judge.
Manion and Kanne, Circuit Judges, and Miller, District Judge.
2013, this court held that state and local taxing authorities
could not charge the Federal National Mortgage Association,
Federal Home Loan Mortgage Corporation, or Federal Housing
Finance Agency with real estate transfer taxes, because such
taxes are preempted by federal laws exempting these entities
from all taxation. We must now determine whether the federal
statutory exemptions apply when the transfer tax is charged
to a private buyer who purchases real estate from one of the
exempt federal entities. The district court concluded that,
because the imposition of a transfer tax impacts the price
the federal entities can charge for real property, the tax is
unconstitutional regardless of who is required to pay it.
Because this conclusion is contrary to the plain language of
the tax exemption provisions, the judgment of the district
court is reversed.
Federal National Mortgage Association ("Fannie
Mae") and Federal Home Loan Mortgage Corporation
("Freddie Mac") are federally chartered, privately
owned corporations. They were created by Congress to bolster
the housing market by establishing a secondary mortgage
market. In 2008, Fannie Mae and Freddie Mac were placed into
conservatorship, and the Federal Housing Finance Agency
(FHFA) was appointed as conservator. Fannie Mae and Freddie
Mac generally carry out their mission by purchasing mortgages
from third party lenders, bundling or pooling the mortgages,
and then selling securities backed by the mortgages. When a
borrower defaults, the mortgage-holding entity (Fannie Mae or
Freddie Mac) forecloses and takes title to the real estate
securing the loan. The mortgage-holding entity then sells the
foreclosed property to a private buyer. Between August 2013
and December 2014, Amy Wettersten, Rama Group International,
Inc., Angel Ramos, Barbara Ramos, and Veeral Patel ("the
buyers") purchased real property in Chicago from Fannie
City of Chicago imposes a Real Property Transfer Tax on the
transfer of real property located within Chicago. Chi., 111.
Municipal Code § 3-33-030. The "primary incidence
of the tax and the obligation to pay the tax are on the
purchaser, grantee, assignee, or other transferee" of
the property. Id. § 3-33-030(C). This is
referred to as the "City portion" of the transfer
tax. A supplemental tax, referred to as the "CTA
portion" of the transfer tax, is to be paid by the
transferor, unless the transferor is exempt by operation of
state or federal law, in which case the transferee is held
responsible for that portion of the tax as well. Id.
§ 3-33-030(F). The tax is due upon the earlier of the
delivery or the recording of the instrument of transfer.
Id. § 3-33-030(B)(1).
the buyers paid the transfer tax when they received or
recorded the titles to the properties they purchased from
Fannie Mae. The Illinois Department of Finance assessed the
buyers for the tax, and the buyers protested on the basis
that Fannie Mae, Freddie Mac, and FHFA are exempt from all
taxation. An administrative law judge in the Department of
Finance ruled that each buyer was liable for the tax, and the
director of the Department affirmed. The buyers and the
federal entities (together, the plaintiffs-appellees) sued
the City of Chicago and its relevant taxing officials in
federal court seeking review of the Department's
district court for the northern district of Illinois
concluded that the tax was preempted by the federal exemption
statutes. Accordingly, the court granted summary judgment for
the appellees, issued declarations stating that the
transactions were exempt from taxation, and issued an
injunction barring the City from collecting the taxes from
the federal en- tities or the buyers. The district court also
denied the appellants' motion to dismiss for lack of
jurisdiction, which the appellants do not challenge on
Supremacy Clause of the United States Constitution provides
that "the laws of the United States ... shall be the
supreme Law of the Land; ... any Thing in the Constitution or
Laws of any State to the contrary notwithstanding." U.S.
Const, art. VI, cl. 2. "[S]tate law that conflicts with
federal law is 'without effect.'" Cipollone
v. Liggett Group, Inc., 505 U.S. 504, 516 (1992)
(quoting Maryland v. Louisiana, 451 U.S. 725, 746
appellees contend that the Chicago Real Property Transfer Tax
conflicts with the tax exemption provisions in the federal
statutes governing Fannie Mae, Freddie Mac, and FHFA and,
therefore, that the tax is "without effect." In
DeK-alb County, this court held that the federal tax
exemptions preempted such a tax, insofar as the tax was
charged to Fannie Mae, Freddie Mae, or FHFA. 741 F.3d 795
(7th Cir. 2013). All other circuits that have addressed this
issue reached the same conclusion. Montgomery Cty.
Comm'n v. Fed. Hous. Fin. Agency, 776 F.3d 1247,
1255 (11th Cir. 2015); City of Spokane v. Fed. Nat'l
Mortg. Ass'n, 775 F.3d 1113 (9th Cir. 2014);
Town of Johnston v. Fed. Hous. Fin. Agency, 765 F.3d
80 (1st Cir. 2014); Bd. of Cty. Comm'rs v. Fed. Hous.
Fin. Agency, 754 F.3d 1025 (D.C. Cir. 2014);
Delaware County v. Fed. Hous. Fin. Agency, 747 F.3d
215 (3d Cir. 2014); Hennepin County v. Fed. Nat'l
Mortg. Ass'n, 742 F.3d 818 (8th Cir. 2014);
Montgomery County v. Fed. Nat'l Mortg.
Ass'n, 740 F.3d 914 (4th Cir. 2014); County of
Oakland v. Fed. Hous. Fin. Agency, 716 F.3d 935 (6th
now determine whether the scope of the exemptions expands so
far as to exempt individuals who purchase property from the
federal entities. We review the district court's grant of
summary judgment in favor of the appellees on this issue
de novo. Alston v. City of Madison,853 F.3d 901,
906 (7th Cir. 2017). A grant of summary judgment is
appropriate if "there is no genuine dispute as to any
material fact/' and the moving party is "entitled to
judgment as a ...