Hennepin County officials are hoping a federal lawsuit against mortgage lending giants Fannie Mae and Freddie Mac will recoup more than $10 million in unpaid taxes, money local officials say is owed to Minnesota for failure to pay the state's deed transfer tax.
The civil lawsuit was filed Friday in U.S. District Court. It centers around Minnesota's Deed Transfer Tax, a tax homeowners pay when they sell their property.
The suit seeks to claim more than $10 million from Fannie Mae and Freddie Mac, two publicly-traded, for-profit corporations that acquired and resold a large number of foreclosed properties when the housing bubble burst several years ago. The lawsuit maintains deed taxes are owed to Minnesota by the corporations for the sale of homes since February 2006
"When the mortgage foreclosure crisis hit, all of a sudden Fannie and Freddie got into the home sale business big time, and they have been refusing to pay their state deed tax," said Mike Freeman, Hennepin County Attorney.
Freeman said Fannie Mae and Freddie Mac have maintained they do not have to pay the deed tax because they're an agency set-up by the federal government. The federal charter given to the two corporations says they are exempt from taxation by states or counties.
"We don't believe that's accurate," said Freeman. "We believe Fannie or Freddie, just like any other homeowner ought to pay that tax."
Several other states have filed similar lawsuits, and Freeman said he believes the case will ultimately reach the United States Supreme Court.
If the state wins its case, the county said millions of dollars would be returned to Hennepin County and a portion of that money would go to cleanup polluted properties and land and return them to the property tax rolls through the Environmental Response Fund. That could benefit local sites such as the Howe Fertilizer site in Brooklyn Center that's poised for redevelopment once funds come through for contamination cleanup.
"This lawsuit, hopefully its successful conclusion will keep us in the business of cleaning up polluted land for a while now into the future," said Mike Opat, Hennepin County Board Chairman.
Alexandra Renslo reporting