New Fannie Mae Financials, 2006: Fannie Mae Chops Federal Taxes by 87% ($1.1 Billion), Effective Tax Rate Drops to Less than 4%

Fannie Mae’s long delayed annual report (Form 10k)for 2006 was recently released HERE. (Warning: its 300+ pages). The report provides important details about Fannie Mae finances and operations. (Fannie Mae’s stock symbol is FNM, annual historical data is available from Reuters HERE)

Fannie Mae’s and Freddie Mac’s government charters exempt them from state or local income taxes, their income however is subject to federal taxes.

2006 vs. 2005 Summary: Fannie Mae’s annual net income dropped by 45% (from $7.569 Billion to $4.223 Billion). Net federal taxes dropped by a much higher 87% (declining by $1.11 Billion, from $1.277 Billion to $166 Million). Fannie’s federal tax rate dropped by 77% (from 16.9% to 3.93%)

2006: Total net federal taxes paid by Fannie for 2006 were $166 M after adjusting for tax credits (most notably Low Income Housing Tax Credits). That translates to an effective federal tax rate of 3.93%. Fannie's 2006 effective tax rate of 3.93% was significantly below their 17.49% five year average rate, and 87% below the 2006 S & P 500’s effective tax rate of 29.85% reported by Reuters HERE.

2005: Fannie Mae’s net effective tax rate in 2005 was 16.9% (net taxes were $1.277M vs. net income before taxes of $7.569 Billion).