By Jayette Bolinski | Illinois Watchdog
Officials in the central Illinois county filed suit Dec. 4 in federal court in Springfield, asking a judge to order the two federal mortgage finance companies, as well as the Federal Housing Finance Agency, which oversees them, to pay the transfer taxes; issue a declaration that they are subject to having to pay them; and award damages, interest, penalties, costs and attorney fees.
Macon County also wants its suit to be certified as class-action to include all 102 counties in Illinois.
A transfer tax is an excise tax that has to be paid when a property is sold or transferred to a new owner. Illinois’ statewide transfer tax rate is 50 cents for every $500 of the property’s value. There also is a county transfer tax that is 25 cents for every $500 of value.
Macon County officials say Freddie Mac and Fannie Mae have handled numerous foreclosure sales in Illinois but have not paid the transfer taxes. The few times the agencies paid the taxes, they did so “under protest,” insisting they are exempt because they are governmental bodies, officials say.
Fannie Mae and Freddie Mac are not governmental bodies, Macon County officials argue, saying they “are, and have been, private, publicly traded corporations since approximately 1968.” A Michigan judge agreed earlier this year in a similar suit there, saying the entities are not exempt from the transfer taxes because they are excise taxes, not direct taxes.
It’s unclear from the lawsuit how much back taxes are at stake in Macon County.
In June, several northern Illinois counties filed a similar lawsuit. DeKalb, Will, Winnebago, Whiteside, Kendall and Kane counties all are asking a judge to rule that Fannie Mae and Freddie Mac are subject to the taxes. DeKalb County officials estimated they were owed about $40,000 for the past five years.
The Federal Housing Finance Agency responded to the suit, saying that while it recognizes the hardship faced by local officials because of shrinking tax bases, it must resist local governments imposing “unlawful” tax-raising programs that end up costing taxpayers across the country.
Counties in other states also have filed similar suits, including Minnesota, North Carolina, South Carolina, Ohio and Florida.