               United States Court of Appeals
                          For the Eighth Circuit
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                              No. 13-2733
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 Ronald A. Vadnais, as Treasurer of Swift County, Minnesota; Swift County,
    Minnesota, individually and on behalf of all others similarly situated

                    lllllllllllllllllllll Plaintiffs - Appellants

                                         v.

 Federal National Mortgage, also known as Fannie Mae; Federal Home Loan
             Mortgage Corporation, also known as Freddie Mac

                   lllllllllllllllllllll Defendants - Appellees

Federal Housing Finance Agency, in its Capacity as Conservator of Fannie Mae
                            and Freddie Mac

                 lllllllllllllllllllllIntervenor below - Appellee

                           United States of America

                           lllllllllllllllllllllIntervenor
                                  ____________

                  Appeal from United States District Court
                 for the District of Minnesota - Minneapolis
                                ____________

                           Submitted: May 13, 2014
                             Filed: June 6, 2014
                               ____________
Before BYE, MELLOY, and BENTON, Circuit Judges.
                           ____________

BYE, Circuit Judge.

       Swift County, Minnesota, and its Treasurer, Ronald Vadnais, (collectively,
"Swift County"), brought this action against the Federal National Mortgage
Association ("Fannie Mae"), the Federal Home Loan Mortgage Company ("Freddie
Mac"), and the Federal Housing Finance Agency ("FHFA") (collectively, "the federal
agencies"), alleging such federal agencies had violated state law by failing to pay
taxes on the transfers of deeds to real property. The district court1 granted the federal
agencies' motion to dismiss the action. Swift County appeals, and we affirm.

                                            I

       Minnesota imposes a tax "on each deed or instrument by which any real
property . . . is granted, assigned, transferred, or otherwise conveyed." Minn. Stat.
§ 287.21, subd. 1(a). An exception to the deed transfer tax exists when "the United
States or any agency or instrumentality thereof is the grantor, assignor, transferor,
conveyor, grantee or assignee" of the property. Id. § 287.22(6).

       Fannie Mae and Freddie Mac are privately-owned and publicly-traded for-
profit entities created by Congress to generate financial stability in the secondary
market for residential mortgages. Fannie Mae and Freddie Mac buy mortgages
originated by third-party lenders, gather them into bundles, and sell them as
securities. Following the 2008 financial crisis, Congress made the FHFA the
conservator for Fannie Mae and Freddie Mac.


      1
      The Honorable David S. Doty, United States District Judge for the District of
Minnesota.

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       Fannie Mae and Freddie Mac have not paid deed transfer taxes when
conveying real property in Swift County, Minnesota, having taken the position they
are exempt from such taxes pursuant to the provisions of the federal statutes setting
forth their charters. See 12 U.S.C. § 1723a(c)(2); 12 U.S.C. § 1452(e) (collectively,
the "Exemption Statutes").

       Swift County filed this action, seeking a declaratory judgment as to the federal
agencies having violated Minnesota law by failing to pay deed transfer taxes when
conveying real property. The district court granted the federal agencies' motion to
dismiss, concluding the Exemption Statutes established an exemption from all state
taxation. Swift County appealed the dismissal of its action. The United States
intervened and filed a brief in support of the federal agencies.

                                           II

      On appeal, Swift County contends the district court erred in dismissing its
action. We review a district court's grant of a motion to dismiss under Rule 12(b)(6)
de novo. Olympus Ins. Co. v. Aon Benfield, Inc., 711 F.3d 894, 897 (8th Cir. 2013).

       Swift County first argues the Exemption Statutes do not exempt the federal
agencies from paying Minnesota's deed transfer tax. This argument fails as this issue
was decided by this Court in Hennepin County v. Fannie Mae, 742 F.3d 818 (8th Cir.
2014). The federal agencies' charters state they "shall be exempt from all taxation . . .
imposed by any State," and identify their real property as the sole exception to this
general rule. See 12 U.S.C. §§ 1723a(c)(2), 1452(e), 4617(j)(2). "We have
determined that the use of 'shall' in a statute makes what follows mandatory, and that
'all' means all." Hennepin Cnty., 742 F.3d at 822 (internal quotations and citations
omitted). Thus, "the federal agencies are exempt from all state taxation other than
taxes on their own real estate holdings." Id.



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       Swift County next argues the Exemption Statutes do not supersede state law.
This argument has been rejected by multiple circuits. In the Seventh Circuit, Judge
Posner addressed such a contention in DeKalb County v. Fannie Mae, 741 F.3d 795
(7th Cir. 2013). "No provision of the Constitution insulates state taxes from federal
powers granted by the Constitution, which include the power of Congress 'to regulate
Commerce with foreign Nations, and among the several States . . . .'" Id. at 801
(citing U.S. CONST. art. I, § 8, cl. 3). The Third Circuit reached the identical result,
holding the "assertion that a state's taxing authority stands on equal footing with
Congress's power under the Commerce Clause was flatly rejected by the Supreme
Court nearly 200 years ago . . . ." Del. Cnty. v. Fannie Mae, 747 F.3d 215, 225 (3d
Cir. 2014) (citing Brown v. Maryland, 25 U.S. 419, 448-49 (1827)). For the same
reasons, we conclude the Exemption Statutes do supersede Minnesota's state tax law.

       Swift County also argues the Exemption Statutes are not a valid exercise of
Congress's power under the Commerce Clause. The Commerce Clause provides that
Congress shall have the power "to regulate Commerce with foreign Nations, and
among the Several States . . . ." U.S. CONST. art. I, § 8, cl. 3. A federal statute, when
construed to invalidate a state tax, is a permissible exercise of Congress's Commerce
Clause power when Congress had a "rational basis for finding the . . . tax interfered
with interstate commerce." Ariz. Pub. Serv. Co. v. Snead, 441 U.S. 141, 150 (1979);
see also Glosemeyer v. Mo.-Kan.-Tex. R.R., 879 F.2d 316, 322 (8th Cir. 1989). The
Third and Fourth Circuits have both found the Exemption Statutes to survive rational
basis review. The Third Circuit concluded "Congress acted well within the bounds
of the Commerce Clause when it exempted [the federal agencies] from paying state
and local real estate transfer taxes." Del. Cnty., 747 F.3d at 227-28. "The transfer tax
exemptions aid [the federal agencies] in regulating the secondary mortgage market,
which is clearly of an economic nature." Id. at 227. Similarly, the Fourth Circuit
reasoned "Congress could rationally have believed that state taxation would
substantially interfere with or obstruct the legitimate purposes of [the federal
agencies] purposes," and "insulating [the federal agencies] from most state taxation

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would substantially further those entities' purposes." Montgomery Cnty. v. Fannie
Mae, 740 F.3d 914, 924 (4th Cir. 2014). This belief could lead Congress to
reasonably conclude state transfer taxes "would substantially affect interstate
commerce by burdening" the federal agencies. Id. For similar reasons, we conclude
the Exemption Statutes are a valid exercise of Congress's power under the Commerce
Clause.

       Finally, Swift County argues the federal agencies are privately-held
corporations, not federal instrumentalities. However, this Court has previously
rejected the argument that the federal agencies ceased to be federal instrumentalities
upon being privatized, reasoning the "congressional objective in creating them was
'governmental and unchanged; only the means of achieving it have changed.'"
Hennepin Cnty. 742 F.3d at 824 (quoting DeKalb Cnty., 741 F.3d at 803). The
federal agencies continue to serve the same important federal mission "which only
Congress has the power to revise." Id.; see also DeKalb Cnty., 741 F.3d at 802 ("The
reason we doubt that the conversion stripped Fannie of its implied constitutional tax
exemption is that if Fannie was a 'federal instrumentality' before its privatization —
as clearly it was — and was therefore, as the appellants concede, immune then from
taxation by virtue of the McCulloch line of cases, it is a federal instrumentality
now.").

                                         III

      For the foregoing reasons, we affirm.
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