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Rev. Rul. 75-486 1975-2 C.B. 441

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Revenue Ruling 75-486

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Headnote

Exemptions; Connecticut River Valley Flood Control Commission. The Connecticut River Valley Flood Control Commission is an instrumentality of the States of Connecticut, Massachusetts, New Hampshire, and Vermont for purposes of the exemption from retailers, manufacturers, and communications taxes; Rev. Rul. 58-61 superseded.

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PURPOSE

The purpose of this Revenue Ruling is to update and restate under current statutes the conclusions set forth in Rev. Rul. 58-61, 1958-1 C.B. 456. The issue in that Revenue Ruling is whether the Connecticut River Valley Flood Control Commission comes within the scope of the exemptions for States and other local governmental units from certain excise taxes provided by sections 4055, 4221(a)(4), and 4292 of the Internal Revenue Code of 1954.

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FACTS

The Connecticut River Valley Flood Control Commission was created and is operated under the Connecticut River Flood Control Compact, General Statutes of Connecticut, Volume 12, section 25-99, 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.

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LAW AND ANALYSIS

Section 4055 of the Code provides that, under regulations prescribed by the Secretary of the Treasury or his delegate, the retailers 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 any of the foregoing, or the District of Columbia, or with respect to the use by any of the foregoing of any liquid as a fuel. Section 4221(a)(4) of the Code provides that, under regulations prescribed by the Secretary or his delegate, the manufacturers excise taxes will not apply to the sale by the manufacturer of an article to a State or local government for the exclusive use of a State or local government. Section 4292 of the Code provides that, under regulations prescribed by the Secretary or his delegate, no tax shall be imposed under section 4251 upon any payment received for communication services or facilities furnished to the Government of any State, Territory of the United States, or any political subdivision of the foregoing, or the District of Columbia. Section 205(a)(2) of the Airport and Airway Revenue Act of 1970, Pub. L. 91-258, 1970-1 C.B. 361, 363, removed the State and local governmental exemption relating to the air transportation of persons tax, effective July 1, 1970. The Connecticut River Valley Flood Control Commission described above is a governmental body created by the States involved to carry out the public purposes for which it was created. Therefore, the commission is an instrumentality of the States and comes within the scope of the Federal excise tax exemptions relating to States and political subdivisions thereof.

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HOLDING

Accordingly, where taxable articles are sold or communication services and facilities are furnished to the commission for its exclusive use, the excise tax exemptions provided by sections 4055, 4221(a)(4), and 4292 of the Code apply, provided the requirements of the law and applicable regulations with respect to the particular exemption are met. The Federal excise tax exemptions provided for States and other local governmental units no longer apply to the taxes on amounts paid for transportation by air that began after June 30, 1970. Therefore, the Connecticut River Valley Flood Control Commission is subject to the taxes under sections 4261 and 4271 of the Code on amounts paid for transportation of persons or property beginning after that date.

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EFFECT ON OTHER DOCUMENTS

Rev. Rul. 58-61 is superseded because the position set forth therein is restated under current law in this Revenue Ruling.