Rev. Rul. 77-143

The Port of Oswego Authority was created as a body corporate and politic by an act of the Legislature of the State of New York in 1955, Article 6, Title 2, of the Public Authorities Law, as amended. Pursuant to the powers conferred upon it by the Act, the Authority is authorized and empowered, among other things, to lease, erect, construct, make, equip, and maintain port facilities in the Oswego Port District and, for any such purpose, to acquire in the name of the Authority by purchase, grant, gift or condemnation, real property, including easements therein, lands under water and riparian rights. The Authority is also empowered to operate and maintain all port facilities owned by it, to issue negotiable bonds within the limitations of the Act, and to fix fees, rates, rentals and other charges for the purpose of all port facilities owned by the Authority.

The Act provides that the Authority is regarded as performing a governmental function and is not required to pay State or local taxes or assessments on any of the properties within its jurisdiction. In addition, the accounts of the Authority are subject to examination by the state comptroller. The members of the Authority are appointed by the governor by and with the advice and consent of the Senate. They serve without compensation but are entitled to reimbursement of their actual expenses incurred in the performance of their official duties.

Section 4041(g)(2) of the Internal Revenue Code of 1954 exempts from the taxes on special fuels imposed by section 4041 sales for the exclusive use of any State, political subdivision of a State, or The District of Columbia. Comparable exemption from the manufacturers excise taxes and the tax on communications is provided by sections 4221(a)(4) and 4253(i), respectively.

The term "political subdivision" is not defined by sections 4041(g)(2), 4221(a)(4), or 4253(i) of the Code or the regulations promulgated thereunder. However, the term political subdivision has been defined consistently for all Federal tax purposes as denoting either a division of a State or local government that is a municipal corporation or a division of such State or local government that has been delegated the right to exercise sovereign power. In 38 O.A.G. 563,565 (1937), it was pointed out that for Federal excise tax purposes the term political subdivision "may designate a true governmental subdivision *** or *** it may have a broader meaning denoting any subdivision of the State created for a public purpose although authorized to exercise a portion of the sovereign power of the State only to a limited degree."

Held, the Port of Oswego Authority is a political subdivision of a State and comes within the scope of the Federal excise tax exemptions relating to States and political subdivisions thereof. Accordingly, where taxable articles are sold to the Authority for its exclusive use, or where communication services or facilities are furnished to the Authority, the excise tax exemptions provided by sections 4041(g)(2), 4221(a)(4) and 4253(i) of the Code apply, provided the requirements of the law and the applicable regulations with respect to the particular exemption are met.

However, as a result of the Airport and Airway Revenue Act of 1970, 1970-1 C.B. 361, the Port of Oswego Authority is not exempt from the transportation of persons and property taxes imposed by sections 4261 and 4271 of the Code on transportation beginning on or after July 1, 1970, the effective date of the Act, or the tax on civil aircraft imposed by section 4491 effective July 1, 1970.

Rev. Rul. 56-410, 1956-2 C.B. 884, is amplified and modified and, as amplified and modified, superseded since the position set forth therein with respect to the Authority's exemption from the services and facilities excise taxes is restated under current law in this Revenue Ruling.