## Facts

- Rockford Life Insurance Company held mortgage-backed certificates issued by private institutions and guaranteed by the Government National Mortgage Association (GNMA).
- The private issuer had the primary duty to make principal and interest payments; GNMA’s obligation arose only upon issuer default.
- Illinois imposed an annual property tax on Rockford’s intangible personal property by including the value of its GNMA certificates in the company’s taxable “net assets.”
- Rockford challenged the assessment, claiming the certificates were exempt as “obligations of the United States” under R.S. § 3701 (now codified at 31 U.S.C. § 3124(a)) and also immune under constitutional intergovernmental tax immunity.
- Illinois courts rejected both claims, and Rockford appealed.

## Issues

1. Whether GNMA-guaranteed, privately issued mortgage-backed certificates are “other obligations of the United States” exempt from state taxation under R.S. § 3701 (31 U.S.C. § 3124(a)).
2. Whether the constitutional doctrine of intergovernmental tax immunity independently bars a state from taxing the holder’s interest in such certificates because of the federal guarantee.

## Decision

- The Supreme Court unanimously affirmed the judgment upholding Illinois’s tax assessment.
- The Court held the certificates were not “obligations of the United States” within the meaning of R.S. § 3701 because the federal promise was secondary and contingent, unlike enumerated federal debt instruments.
- The Court held constitutional intergovernmental tax immunity did not apply because any effect on federal borrowing or federal operations from taxing these privately issued instruments was too remote.

## Legal Principles

- The statutory exemption for “stocks, bonds, Treasury notes, and other obligations of the United States” extends only to instruments of the same general type as those listed—direct federal borrowing obligations with a primary, unconditional federal duty to pay.
- A federal “full faith and credit” guaranty of a private issuer’s payments does not, by itself, convert a privately issued security into an “obligation of the United States” for purposes of the federal tax-immunity statute.
- Constitutional intergovernmental tax immunity protects against state taxes that meaningfully burden federal borrowing or operations; taxation of private securities backed only by an indirect, contingent federal guaranty is insufficiently connected to trigger immunity.

## Conclusion

Illinois could include GNMA-guaranteed mortgage-backed certificates in Rockford’s taxable net assets because the United States was not the primary obligor on the instruments, and any resulting burden on federal financial interests was too attenuated to support statutory or constitutional tax immunity.


Rockford Life Ins. Co. v. Ill. Dep’t of Revenue, 482 U.S. 182 (1987)