Opinion ID: 2101506
Heading Depth: 1
Heading Rank: 2

Heading: Does Hammond Lead Decide This Case?

Text: The Department contends that the Tax Court should have been bound by its statement in Hammond Lead Products v. State of Indiana Tax Commissioners (1990), Ind.Tax, 549 N.E.2d 424, 429, aff'd, Ind., 575 N.E.2d 998 (1991), that repurchase agreements are in effect ... collateralized loan[s]. The Department maintains that failure to follow this caselaw creates an ambiguity which hinders administration of the tax laws. HWI responds that the Tax Court's decision is not inconsistent with Hammond Lead. It says the issue in Hammond Lead was not classification of repurchase agreements, but rather ownership of the underlying government obligations for purposes of determining whether the interest in the transaction was exempt from gross income tax under the exemption for U.S. government obligations. The court's consideration was thus limited, HWI argues, to whether the interest recipient was the owner of the obligations. Considering the elements of ownership, the court concluded that the taxpayer did not own the obligations and that its interest from the transaction was therefore fully taxable. Moreover, HWI contends, Hammond Lead has marginal bearing on the present case because it involved only the application of the adjusted gross income tax. The parties had stipulated that the intangibles tax was not at issue. We agree with HWI and the Tax Court that Hammond Lead does not answer the question presented in this case. The statement that repurchase transactions are in effect ... collateralized loan[s], Hammond Lead, 549 N.E.2d at 429, was dictum because the court was not required to classify such transactions, but only to determine whether such transactions really transferred ownership of the underlying securities. The court's language indicates merely that as between a sale and a loan, repurchase agreement transactions more resemble loans and that the bank retained ownership of the securities for tax purposes.