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U.S. Supreme Court

Rockford Life Ins. v. Dept. of Revenue, 482 U.S. 182 (1987)

Rockford Life Insurance Co. v. Illinois Department of Revenue

No. 86-251

Argued March 31, 1987

Decided June 8, 1987

482 U.S. 182


Under financial instruments commonly known as "Ginnie Maes," the issuing private financial institution has the primary obligation of making timely principal and interest payments. However, in order to attract investors into the private mortgage market, Ginnie Maes also contain a provision whereby the Government National Mortgage Association, a Government corporation, guarantees payment if the issuer defaults. After state taxing officials included the value of appellant's Ginnie Mae portfolio in calculating net assets, appellant filed suit challenging its annual property tax assessment. The state courts rejected appellant's contention that the Ginnie Maes could not be taxed under the constitutional principle of intergovernmental tax immunity and under Revised Statutes § 3701, which exempts from state taxation "all stocks, bonds, Treasury notes, and other obligations of the United States."

Held: Ginnie Maes are not exempt from state taxation under § 3701. The statutory phrase "other obligations of the United States" refers only to obligations or securities of the same type as those specifically enumerated. Ginnie Maes are fundamentally different from the enumerated instruments, in that the Government's obligation as guarantor is secondary and contingent. Nor is the indirect, contingent, and unliquidated promise that the Government makes in Ginnie Maes the type of obligation that is protected by the constitutional principle of intergovernmental tax immunity. The purpose of that principle is to prevent States from taxing federal obligations in a manner which has an adverse effect on the United States' borrowing ability. Ginnie Maes' failure to include a binding governmental promise to pay specified sums at specified dates renders any threat to the federal borrowing power far too attenuated to support constitutional immunity. Pp. 482 U. S. 187-192.

112 Ill.2d 174, 492 N.E.2d 1278, affirmed.

STEVENS, J., delivered the opinion for a unanimous Court. chanroblesvirtualawlibrary

Page 482 U. S. 183

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