Opinion ID: 2604202
Heading Depth: 1
Heading Rank: 4

Heading: the interest earned on fnma bonds is taxable.

Text: The savings and loan associations contend that the bonds issued by FNMA are tax exempt. We do not agree. The FNMA is authorized to issue obligations under 12 U.S.C. § 1719(b). [30] The authorizing statute requires that bonds issued under this section contain language disclaiming that the obligations are not notes or obligations of the United States or any agency other than the issuing corporation. Obviously, the intent of § 1719 is that these bonds are not permanent public debts exempt from taxation. The savings and loan associations rely on Memphis Bank & Trust Co. v. Garner, 459 U.S. 392, 398, 103 S.Ct. 692, 696, 74 L.Ed.2d 562, 568 (1983), in which the United States Supreme Court found that the Tennessee bank tax violated the immunity of obligations of the United States from state and local taxation. The tax was held to be discriminatory in favor of securities issued by Tennessee and its political subdivisions. [31] There, the bonds issued by the Federal Farm Credit Banks did not contain the language not a debt or obligation of the United States, and the Court found that it was an obligation under 31 U.S.C. § 742 because no distinction had been made between the obligations of the United States Treasury and the obligations of the Federal Credit Banks. Here, § 1719 specifically mandates that the bonds issued by FNMA are not obligations of the United States. The savings and loan associations assert that the state's imposition of a tax on federal obligations but not on state obligations is discriminatory. This appeal involves the threshold question of whether obligations held by appellants constitute obligations of a federal agency qualifying for exemption from state tax under either specific statutory authority or general constitutional principles  the proper classification of the obligations themselves is an issue on appeal. Even so, the issue of discrimination was not raised in the hearing before the Oklahoma Tax Commission and is not properly preserved on appeal. [32] Nevertheless, because the State of Oklahoma taxes neither federal nor state exempted obligations no discrimination is apparent. Title 68 O.S. Supp. 1982 § 2358, [33] specifically provides that income which is exempt under the Federal Constitution, State Constitution, federal laws or laws of Oklahoma is shielded from taxation. Discrimination is not the issue, the question is whether the bonds are federal obligations and as such are exempt. We find that the FNMA bonds were specifically excluded from obligations of the United States and that the interest is taxable.