Request By:
Dr. James B. Graham
Auditor of Public Accounts
Room 168, Capitol Annex
Frankfort, Kentucky 40601
Opinion
Opinion By: Steven L. Beshear, Attorney General; By Alex W. Rose, Assistant Attorney General
Re: Exemption of federal agencies from the legal process tax on real estate mortgages
On August 12, 1981, you requested an opinion on whether Production Credit Associations, the Farmers Home Administration and Federal Land Banks are exempt from the payment of the legal process tax on real estate mortgages imposed by KRS 142.010. Your second question requested the criteria for determining which lending institutions are federal agencies or instrumentalities for the purposes of exemption from the legal process tax. Your third question asked whether the federal agencies are exempt from the payment of the legal process tax when they are acting as a mortgagor or as a surety. Your final question is whether local savings and loan associations which are registered with the federal government are federal instrumentalities and exempt from payment of this tax.
In response to your first question, the obligations of the Production Credit Associations, Farmers Home Administration and Federal Land Banks are exempt from the payment of legal process tax. These institutions are federal instrumentalities and specifically exempted by federal statutes from the payment of taxes imposed on their mortgages. Federal Land Banks are exempt under the provisions of 12 U.S.C. § 2055. Production Credit Associations are exempt under the provisions of 12 U.S.C. § 2098. The Farmers Home Administration is exempt under the provisions of 42 U.S.C. § 1490h. See also
Federal Land Bank of New Orleans v. Crosland, 261 U.S. 374, 67 L. Ed. 703, 43 S. Ct. 385 (1923).
In answer to your second question, one determines which lending institutions are federal instrumentalities for the purposes of exemption from the legal process tax by examination of the applicable federal statutes and their interpretations.
In response to your third question, the above mentioned federal instrumentalities are exempt when acting either as mortgagor or surety. The above referenced statutes exempt all of their obligations as federal instrumentalities.
In answer to your fourth question, a local savings and loan association is not exempt from the legal process tax imposed by KRS 142.010. The federal statutes do not exempt those financial institutions insured by the Federal Savings and Loan Insurance Corporation.
This opinion is limited to the federal entities which were enumerated in your letter, Production Credit Associations, the Farmers Home Administration, and the Federal Land Banks. The opinion does not address any other federal agency. The status of additional federal agencies must be judged separately.