                       UNITED STATES DISTRICT COURT
                       FOR THE DISTRICT OF COLUMBIA
__________________________________
                                   )
THE BOARD OF COUNTY                )
COMMISSIONERS OF KAY               )
COUNTY, OKLAHOMA,                  )
                                   )
            Plaintiff,             )
                                   )
      v.                           )    Civil Action No. 12-1283 (RMC)
                                   )
FEDERAL HOUSING FINANCE            )
AGENCY, et al.,                    )
                                   )
            Defendants.            )
_________________________________  )


                                           OPINION

                The Board of County Commissioners of Kay County, Oklahoma (Kay County)

brought suit against the Federal Housing Finance Agency, as conservator for Federal National

Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie

Mac), as well as against Fannie Mae and Freddie Mac (collectively, Defendants). Kay County

seeks to compel Defendants to pay a documentary stamp tax, i.e., a transfer tax, upon the sale of

real estate located in Oklahoma. Pursuant to certain federal exemption statutes, 12 U.S.C.

§§ 1452(e), 1723a(c)(2), 4617(j)(1)-(2), the Defendants are exempt from all taxation, including

the excise tax at issue here. Accordingly, Defendants’ motion to dismiss will be granted.

                                           I. FACTS

                The State of Oklahoma imposes a documentary stamp tax on sales of real

property. See 68 Okla. Stat. Ann. § 3201. 1 This tax, known as a “Transfer Tax,” is based on the



1
    The Oklahoma statute provides:


                                                1
value of the real property conveyed and attaches at the time the deed is executed and delivered to

a buyer. Id. The tax must be paid by the seller via the purchase of documentary stamps from the

county clerk, and such stamps must be affixed to the deed before it can be accepted for

recording. Id. §§ 3203-04.

               Kay County alleges that Defendants have “ignored” and “wrongfully refused to

pay” the tax, depriving Kay County of significant tax revenue to which it is entitled. Am.

Compl. [Dkt. 11] ¶¶ 4, 7. Kay County filed a two count Amended Complaint, seeking (1) a

declaratory judgment that Defendants are not exempt from the Transfer Tax; and (2) damages in

               A. A tax is hereby imposed on each deed, instrument, or writing by
               which any lands, tenements, or other realty sold shall be granted,
               assigned, transferred, or otherwise conveyed to or vested in the
               purchaser or purchasers, or any other person or persons, by his or
               their direction, when the consideration or value of the interest or
               property conveyed, exclusive of the value of any lien or
               encumbrance remaining thereon at the time of sale, exceeds One
               Hundred Dollars ($100.00). The tax shall be prorated at the rate of
               seventy-five cents ($0.75) for each Five Hundred Dollars
               ($500.00) of the consideration or any fractional part thereof.

               B. The tax is limited to conveyances of realty sold and does not
               apply to other conveyances. The tax attaches at the time the deed
               or other instrument of conveyance is executed and delivered to the
               buyer, irrespective of the time when the sale is made.

               C. As used in this section:

               1. “Sold” means a transfer of an interest for a valuable
               consideration, which may involve money or anything of value; and

               2. “Deed” means any instrument or writing whereby realty is
               assigned, transferred, or otherwise conveyed to, or vested in, the
               purchaser or, at his direction, any other person.

               3. “Consideration” means the actual pecuniary value exchanged or
               paid or to be exchanged or paid in the future, exclusive of interest,
               whether in money or otherwise, for the transfer or conveyance of
               an interest of realty, including any assumed indebtedness.

68 Okla. Stat. Ann. § 3201.
                                                2
the full amount of Transfer Taxes allegedly due and owing by Defendants. Id. ¶¶ 43-53.

Defendants move to dismiss, arguing that they are exempt from the excise taxes that Kay County

seeks to impose.

                                     II. LEGAL STANDARD

               A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6)

challenges the adequacy of a complaint on its face, testing whether a plaintiff has properly stated

a claim. Fed. R. Civ. P. 12(b)(6). A complaint must be sufficient “to give a defendant fair notice

of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550

U.S. 544, 555 (2007) (internal citations omitted). Although a complaint does not need detailed

factual allegations, a plaintiff’s obligation to provide the grounds of his entitlement to relief

“requires more than labels and conclusions, and a formulaic recitation of the elements of a cause

of action will not do.” Id. In deciding a motion under Rule 12(b)(6), a court may consider the

facts alleged in the complaint, documents attached to the complaint as exhibits or incorporated

by reference, and matters about which the court may take judicial notice. Abhe & Svoboda, Inc.

v. Chao, 508 F.3d 1052, 1059 (D.C. Cir. 2007) (internal quotation marks and citation omitted).

               A court must treat the complaint’s factual allegations as true, “even if doubtful in

fact.” Twombly, 550 U.S. at 555. But a court need not accept as true legal conclusions set forth

in a complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “While legal conclusions can

provide the framework of a complaint, they must be supported by factual allegations. When

there are well-pleaded factual allegations, a court should assume their veracity and then

determine whether they plausibly give rise to an entitlement to relief.” Id. at 679.

                                          III. ANALYSIS

               The issue here is a question of statutory interpretation. Congress exempted

Fannie Mae, Freddie Mac, and FHFA as their conservator from “all taxation” by states and

                                                  3
localities, other than property taxes. See 12 U.S.C. §§ 1452(e), 1723a(c)(2), 4617(j)(1)-(2)

(Exemption Statutes). 2 FHFA asserts that it is exempt from the Transfer Tax because it is an

excise tax, a tax levied upon the transfer or use of property, as distinct from a direct tax upon the

property itself. See United States v. Wells Fargo Bank, 485 U.S. 351, 355 (1988). Kay County

asserts that (1) the Transfer Tax is a tax on real property not subject to the exemption and (2) that




2
    Freddie Mac is exempt from “all taxation,” other than property taxes:

                 The Corporation [Freddie Mac] . . . shall be exempt from all
                 taxation now or hereafter imposed by any territory, dependency, or
                 possession of the United States or by any State, county,
                 municipality, or local taxing authority, except that any real
                 property of the Corporation shall be subject to State, territorial,
                 county, municipal, or local taxation to the same extent according to
                 its value as other real property is taxed.

12 U.S.C. § 1452(e) (emphasis added). In almost identical language, Congress exempted Fannie
Mae from all taxation, again, other than property taxes:

                 The corporation [Fannie Mae], including its franchise, capital,
                 reserves, surplus, mortgages or other security holdings, and
                 income, shall be exempt from all taxation now or hereafter
                 imposed by any State, territory, possession, Commonwealth, or
                 dependency of the United States, or by the District of Columbia, or
                 by any county, municipality, or local taxing authority, except that
                 any real property of the corporation shall be subject to State,
                 territorial, county, municipal, or local taxation to the same extent
                 as other real property is taxed.

Id. § 1723a(c)(2) (emphasis added). FHFA, as conservator, is similarly exempt:

                 The Agency [i.e., FHFA as conservator] . . . shall be exempt from
                 all taxation imposed by any State, county, municipality, or local
                 taxing authority, except that any real property of the Agency shall
                 be subject to State, territorial, county, municipal, or local taxation
                 ....

Id. § 4617(j)(2).



                                                   4
“all taxation” does not mean all taxation and instead includes only direct taxes and not excise

taxes.

               “Statutory construction must begin with the language employed by Congress and

the assumption that the ordinary meaning of that language accurately expresses the legislative

purpose.” Engine Mfrs. Ass’n v. S. Coast Air Quality Mngmt. Dist., 541 U.S. 246, 252 (2004);

see also FTC v. Tarriff, 584 F.3d 1088, 1090 (D.C. Cir. 2009) (unless otherwise defined, the

words of a statute must be construed according to their common meaning). When a statute’s

language is plain, a court must enforce it according to its terms. Jimenez v. Quarterman, 555

U.S. 113, 118 (2009). Courts should resist reading words or phrases into a statute that are not

there. Hoge v. Honda of Am. Mfg., Inc., 384 F.3d 238, 246 (6th Cir. 2004). “[W]hen the

statute’s language is plain, the sole function of the courts—at least where the disposition required

by the text is not absurd—is to enforce it according to its terms.” Hartford Underwriters Ins. Co.

v. Union Planters Bank, N. A., 530 U.S. 1, 6 (2000) (internal quotation marks omitted). Since

the Exemption Statutes do not define “all” or “taxation,” the Court must interpret the terms

according to “everyday understanding.” See Lopez v. Gonzales, 549 U.S. 47, 47 (2006). As

explained below, the meaning of the phrase “all taxation” is clear.

               The issue of whether the entities that are defendants here are exempt from other

similar state transfer taxes has been litigated frequently in the last two years. Courts across the

country uniformly agree that the phrase “all taxation” unambiguously provides an exemption

from real estate transfer taxes to FHFA as conservator, Fannie Mae, and Freddie Mac. See. e.g.,

County of Oakland v. FHFA, 716 F.3d 935, 940 (6th Cir. 2013) (exemption from Michigan real




                                                  5
property transfer taxes); 3 Butts v. Fannie Mae, Civ. No. 9:12-1912, at *11 (D.S.C. May 23,

2013) (filed as Third Notice of Supp. Authority, Ex. 2 [Dkt. 30-2]) (exemption from South

Carolina mortgage recording fee); Athens-Clarke Cnty. Unified Gov’t v. FHFA, No. 5:12-cv-355,

2013 WL 2102922, at *7-8 (M.D. Ga. May 14, 2013) (exemption from Georgia tax on the

transfer of property); Montgomery Cnty. Comm’n v. FHFA, No. 2:12-cv-885, 2013 WL 1896256,

at *2-3 (M.D. Ala. May 6, 2013) (exemption from Alabama recordation tax); Montgomery Cnty.

v. Fannie Mae, No. 13-cv-66, 2013 WL 1832370, at *5-10 (D. Md. Apr. 30, 2013) (exemption

from Maryland recordation and transfer taxes); Hennepin Cnty. v. Fannie Mae, No. 12-cv-2075,

2013 WL 1235589, at *3-6 (D. Minn. Mar. 27, 2013) (exemption from Minnesota transfer taxes

and environmental surcharges); Delaware Cnty. v. FHFA, No. 2:12-cv-4554, 2013 WL 1234221,

at *3-5 (E.D. Pa. Mar. 26, 2013) (exemption from Pennsylvania transfer tax); Fannie Mae v.

Hamer, No. 12-cv-50230, 2013 WL 591979, at *4-6 (N.D. Ill. Feb. 13, 2013) (exemption from

Illinois transfer tax); Nicolai v. FHFA, No. 8:12-cv-1335, 2013 WL 899967, at *3-5 (M. D. Fla.

Feb. 12, 2013) (exemption from Florida transfer tax); Hertel v. Bank of Am., 897 F. Supp. 2d

579, 583-87 (W.D. Mich. 2012) (exemption from Michigan transfer tax); Dist. of Columbia ex

rel. Hager v. Fannie Mae, 882 F. Supp. 2d 107, 111-12 (D.D.C. 2012) (exemption from D.C.

recordation taxes), appeal dismissed, No. 12-7095, 2013 WL 1729764 (D.C. Cir. Apr. 16, 2013);

see also Cape May Cnty. v. Fannie Mae, No. 12-cv-4712 (D.N.J.) (Tr. of Apr. 30, 2013 ruling on

the record) (filed as Second Notice of Supp. Authority, Ex. C [Dkt. 28-3]) (exemption from New

Jersey transfer tax).




3
  The Sixth Circuit in County of Oakland reversed the only district court to find no exemption
from state transfer taxes under the Exemption Statutes. See County of Oakland v. FHFA, 871 F.
Supp. 2d 662 (E.D. Mich. 2012), rev’d, 716 F.3d 935 (6th Cir. 2013).

                                                6
                Courts have construed “all taxation” in accordance with its ordinary meaning.

The Sixth Circuit explained:

                “Taxation” is the “imposition or levying of taxes;” “the action of
                taxing or the fact of being taxed.” Oxford English Dictionary 679,
                vol. XVII (2d ed. 1989). As employed in the exemption statutes,
                “all” is an adjective describing “[t]he entire or unabated amount or
                quantity of; the whole extent, substance, or compass of; the
                whole.” Oxford English Dictionary 324, vol. I (2d ed. 1989).
                Accordingly, the common sense, non-technical interpretation of
                “all taxation” has to include the State and County real estate
                transfer taxes here . . . . [A] straightforward reading of the statute
                leads to the unremarkable conclusion that when Congress said “all
                taxation,” it meant all taxation.

County of Oakland, 716 F.3d at 940 (emphasis in original). “‘All’ is an inclusive adjective that

does not leave room for unmentioned exceptions.” Hertel, 897 F. Supp. 2d at 582 (construing

Exemption Statutes).

                This interpretation of the Exemption Statutes is bolstered by the Supreme Court’s

decision in Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95 (1941). In

Bismarck, the Supreme Court construed a tax exemption for federal land banks set forth in a

statute that provided: “[E]very federal land bank . . . shall be exempt from . . . State, municipal,

and local taxation, except taxes upon real estate . . . .” Id. at 96 n.1 (quoting Federal Farm Loan

Act of 1916, 12 U.S.C. §§ 931-33). 4 Pursuant to this statutory exemption, the Federal Land

Bank of St. Paul refused to pay state sales tax when it purchased building materials. The

Supreme Court determined that the “unqualified term ‘taxation’ clearly encompasse[d] within its

scope a sales tax . . . .” Id. at 99.

                Similarly, the Supreme Court has held that a statute that provided a tax exemption

to federal home loan banks barred the collection of documentary stamp taxes on mortgage

4
 The Federal Farm Loan Act of 1916 was subsequently repealed. See Pub. L. 92-181, 85 Stat.
624 (Dec. 10, 1971).

                                                  7
recordation. See Pittman v. Home Owners’ Loan Corp., 308 U.S. 21, 29-32 (1939). The

exemption statute at issue in Pittman was in all substantive respects identical to the Exemption

Statutes. The federal home loan bank statute provided that the entity was exempt from “all

taxation” except for taxes on real property. Id. at 32 n.3 (citing 12 U.S.C. § 1463(c)).

               Kay County does not attempt to distinguish this plethora of cases. Instead, it

rehashes the same arguments that have been rejected by many courts. Kay County contends that

the Transfer Tax falls under the property tax exception set forth in the Exemption Statutes.

However, the Transfer Tax clearly does not fit into this exception. Just because a transfer tax is

measured by the value of real property does not mean that the tax is a “property tax.” See S. Ry.

Co. v. Watts, 260 U.S. 519, 530 (1923) (“[A] privilege tax is not converted into a property tax

because it is measured by the value of property.”). Further, the exception for property taxes

actually undermines Kay County’s claim that Defendants are obligated to pay the Transfer Tax.

Congress excluded property taxes from the exemption, but did not carve out taxes such as the

Transfer Tax at issue here. “When Congress provides exceptions in a statute, it does not follow

that courts have authority to create others. The proper inference . . . is that Congress considered

the issue of exceptions and, in the end, limited the statute to the ones set forth.” United States v.

Johnson, 529 U.S. 53, 58 (2000). The fact that one exception is expressly set forth in the

Exemption Statutes supports the conclusion that the exemption from “all taxation” includes the

Transfer Tax. Hertel, 897 F. Supp. 2d at 582. 5

               Despite the unambiguous language of the Exemption Statutes, Kay County relies

on Wells Fargo Bank and argues that “all taxation” is a term of art meaning only “all direct

5
 Kay County also contends that Defendants are not considered federal instrumentalities for all
purposes and questions whether they should be considered federal instrumentalities for tax
purposes. This point is irrelevant; the scope of the Exemption Statutes does not turn on the
entity’s status as an instrumentality.

                                                  8
taxation” and not including excise taxes. The impact of such a statutory construction would

make Defendants subject to the Transfer Tax.

                In Wells Fargo, the Supreme Court interpreted a provision of the Housing Act of

1937, 42 U.S.C. § 1437i(b), which attempted to stimulate housing financing by permitting state

and local authorities to issue tax-free obligations called “Project Notes.” 485 U.S. at 353. The

statute provided that “[O]bligations [i.e., Project Notes], including interest thereon . . . shall be

exempt from all taxation now or hereafter imposed by the United States.” 42 U.S.C. § 1437i(b).

The Court explained:

                Well before the Housing Act was passed, an exemption of property
                from all taxation had an understood meaning: the property was
                exempt from direct taxation, but certain privileges of ownership,
                such as the right to transfer the property, could be taxed.
                Underlying this doctrine is the distinction between an excise tax,
                which is levied upon the use or transfer of property even though it
                might be measured by the property’s value, and a tax levied on the
                property itself.

485 U.S. at 355 (emphasis in original). The Supreme Court concluded that the exemption of the

Project Notes from taxation applied to federal income taxes (direct taxes) and not to federal

estate taxes (excise taxes). Id. at 355, 358.

                Bismarck, which dealt with tax exempt entities, is the applicable precedent here,

not Wells Fargo, which dealt with tax exempt properties. See Hamer, 2013 WL 591979, at *5;

accord Nicolai, 2013 WL 899967, at *5. “[Bismarck], interpreting the tax exemption of an

entity rather than of a piece of property, provides the on point comparison for interpreting [the

Exemption Statutes].” Hager, 882 F. Supp. 2d at 113. Wells Fargo did not distinguish

Bismarck, or even mention it, because Wells Fargo arose from a different context and area of tax

law. As the district court in Hager explained, “[a] recordation tax for a deed one of the

Enterprises [FHFA, Fannie Mae, and Freddie Mac] records is indisputably a tax on that entity. It


                                                   9
thus falls within the statutory exemption.” Id. at 112 (emphasis added). Because the Exemption

Statutes provide that FHFA, Fannie Mae, and Freddie Mac are exempt from “all taxation,” they

are exempt from the Transfer Tax. Kay County’s complaint will be dismissed.

                                    IV. CONCLUSION

              For the reasons stated above, Defendants’ motion to dismiss [Dkt. 18] will be

granted and this case will be dismissed. Having dismissed the case, Kay County’s motion for

hearing [Dkt. 32] will be denied as moot. A memorializing Order accompanies this Opinion.



DATE: July 26, 2013

                                                                 /s/
                                                   ROSEMARY M. COLLYER
                                                   United States District Judge




                                              10
