Cook County Record

Sunday, December 8, 2019

Appeals panel: Chicago can tax people who buy homes from Fannie Mae, Freddie Mac

State Court

By Scott Holland | Oct 3, 2019

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CHICAGO — The city of Chicago can tax home sales, even if the seller of the home is Fannie Mae or Freddie Mac, a state appeals panel has ruled, because Fannie and Freddie are not the same as the federal government.

Nina Trilisky had filed a class action complaint in Cook County Circuit Court after she had to pay a Chicago city real estate transfer tax on a property she bought through Fannie Mae in 2014. She argued federal law expressly exempts Fannie Mae and Freddie Mac from all state and local taxes. Her case was consolidated with a similar complaint, and both were stayed pending resolution of similar federal litigation.

In October 2017, the U.S. Seventh Circuit Court of Appeals said the 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. 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.


Illinois Appellate Justice Jesse Reyes | Illinoiscourts.gov

Trilisky later amended her complaint, saying purchases from the agencies should be exempt because they “involved real property acquired by or from any governmental body.” Cook County Judge Michael Otto granted the city’s motion to dismiss the complaint, prompting Trilisky’s appeal to the Illinois First District Appellate Court.

First District Appellate Justice Jesse Reyes wrote the Sept. 26 opinion. Justices Robert Gordon and Eileen O’Neill Burke concurred.

Trilisky maintained Freddie and Fannie became federal agencies in 2008 when the Federal Housing Finance Agency appointed itself conservator of the federally-sponsored home mortgage lenders. 

But the panel said Chicago’s transfer tax ordinance does not contain a definition for “governmental body,” nor is it defined elsewhere in city code.

“Even if the enterprises can be considered federal instrumentalities, a federal instrumentality is not the same as a governmental body,” Reyes wrote. “The term ‘governmental body’ is unambiguous and necessarily excludes entities such as governmental agencies and instrumentalities.”

The panel said entities like governmental agencies and "political subdivisions" have exemptions in other parts of the Municipal Code. Since such entities aren’t specifically cited in the transfer tax ordinance, the panel said the Chicago City Council did not intend home sales through Fannie and Freddie to be tax exempt.

Entitles like Fannie and Freddie “do not have the ability to impose taxes, maintain a police force or provide water or sewer treatment, and their charters do not recognize them as governmental bodies,” Reyes wrote. “Furthermore, the federal government does not fund the enterprises.”

Despite Trilisky’s contention they are “government-sponsored enterprises,” according to Reyes, “the federal statute reveals that they are privately owned, the money they borrow is not backed by the full faith and credit of the federal government, they do not exercise powers reserved to the government, they do not have the power to commit the government financially and their employees are not federal employees.”

The panel also noted the state imposes its transfer tax on people who buy property with Fannie and Freddie as the seller — an arrangement that has passed judicial muster — and ultimately determined Otto was correct to grant the city’s motion to dismiss Trilisky’s complaint.

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Organizations in this Story

Illinois First District Appellate CourtFederal National Mortgage AssociationCity of Chicago

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