Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 58-61

1958-1 C.B. 456

Caution: Superseded by Rev. Rul. 75-486

IRS Headnote

The Connecticut River Valley Flood Control Commission is an instrumentality of the participating States and, therefore, comes within the scope of the exemptions from certain excise taxes provided by sections 4055, 4224, and 4292 of the Internal Revenue Code of 1954.

Full Text

Rev. Rul. 58-61

Advice has been requested whether The Connecticut River Valley Flood Control Commission comes within the scope of the exemptions from certain Federal excise taxes provided with respect to transactions with states and other local governmental units.

The Connecticut River Valley Flood Control Commission was created and is operated under the Connecticut River Flood Control Compact as a joint and common agency of the Commonwealth of Massachusetts and the States of Connecticut, New Hampshire, and Vermont. The compact, which has been approved by the legislatures of each State and by the Congress of the United States, provides that the Commission shall constitute a body, both corporate and politic. The purpose of the Commission is to accomplish the object of flood control and water resources utilization in the basin of the Connecticut River and its tributaries. The individual members of the Commission are chosen by their respective States and the compensation of the members is fixed, determined, and paid by the State which they represent. The Commission's funds, out of which are paid all of its operating expenses, come from appropriations made for that purpose by the legislature of each of the four participating States. The Commission is required to make an annual report to the governor and legislature of each of the states setting forth in detail the operations and transactions conducted by it pursuant to the compact.

Sections 4055 and 4224 of the Internal Revenue Code of 1954 provide that the retailers and manufacturers excise taxes will not apply to the sale of any article for the exclusive use of any State, Territory of the United States, or any political subdivision of the foregoing, or the District of Columbia.

Section 4292 of the Code provides that no tax shall apply to payments received for communication and transportation services and facilities furnished to the government of any State, Territory of the United States, or to any political subdivision of the foregoing, or the District of Columbia. That section also provides that the tax shall not be imposed upon amounts paid for the transportation of property to or from such governmental units.

These state and local governmental exemptions apply to the Federal excise taxes tabulated below along with the applicable sections of the regulations which prescribe the manner of establishing the right to the exemptions. Those regulations issued under the Internal Revenue Code of 1939 have been made applicable to the 1954 Code by Treasury Decision 6091, C.B. 1954-2, 47.

            Tax                Exemption     Applicable regulations

                             sec. of Code

(1) Retailers...............  Sec. 4055.... Regs. 51, Sec. 320.20.

                                            Regs. 119, Sec. 324.30.

(2) Manufacturers...........  Sec. 4224.... Regs. 44, Sec. 314.24.

                                            Regs. 46, Sec. 316.24.

(3) Communications..........  Sec. 4292.... Regs. 42, Sec. 130.44.

(4) Transportation of

      persons...............  Sec. 4292.... Sec. 42.4292-1 of the

                                              Facilities and Services

                                              Excise Tax Regulations.

(5) Transportation of

      property..............  Sec. 4292.... Regs. 113, Sec. 143.24.

It is held that the Connecticut River Valley Flood Control Commission is an instrumentality of the participating States and, therefore, comes within the scope of the exemptions set forth above.