August 9, 1978

78-44 MEMORANDUM OPINION FOR THE GENERAL

COUNSEL, UNITED STATES WATER

RESOURCES COUNCIL

Status of the Pacific Northwest River Basin

Commission Under the Federal Unemployment Tax

Act

This responds to your request for our opinion concerning the status of the 

Pacific Northwest River Basin Commission (PNWRBC) under the Federal 

Unemployment Tax Act (FUTA), 26 U.S.C. § 3301 et seq. We understand the 

situation to be as follows: Pub. L. No. 94-566, 26 U.S.C. § 3309, requires that 

States provide unemployment compensation for State and local government 

employees in order to qualify for Federal benefits under FUTA. It also 

authorizes them to tax local governmental units for this purpose. The State of 

Washington has passed conforming legislation and contends that the PNWRBC 

is a taxable local governmental unit under State law. The Water Resources 

Council, on the contrary, contends that the PNWRBC is a “ wholly or partially 

owned” Federal instrumentality exempt from State unemployment taxes under

26 U.S.C. § 3306(c)(6)(A).

Whether the PNWBRC is exempted from State taxation under that provision 

depends on whether its employees are eligible for unemployment compensation 

under the Unemployment Compensation for Federal Employees Program 

(UCFE), 5 U.S.C. §§ 8501 etseq'.^Pub. L. No. 94-566 was intended to extend 

unemployment compensation to State and local government employees.2 Its 

proponents understood that employees of the United States and wholly or 

partially owned Federal instrumentalities were already covered by UCFE; the

'UCFE provides for payment of unemployment compensation, at Federal expense, to “ federal 

em ployees” as if their “ federal service” has been employment covered by the unemployment 

compensation law of the State of an em ployee’s last duty station. See 5 U .S.C . §§ 8502-8504. A 

“ federal em ployee” includes, with exceptions not relevant here, a person “ in the employ of the 

United States or an instrumentality which is wholly or partially owned by the United States.” 5 

U .S.C . § 8501(1), (3). The language is identical to that in 26 U .S.C . § 3306(c)(6)(A).

2See S. Rept. 94-1265, 94th C ong., 2d sess., at 7-8; H. Conf. Rept. 94-1745, 94th C ong., 2d 

sess., at 11.

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bill was meant to provide equivalent treatment for State and local employees.3 

Therefore, if PNWRBC employees are eligible for Federal benefits under 

UCFE, the State has no obligation under 26 U.S.C. § 3309 to provide 

unemployment compensation for them and has no collateral authority to collect 

an unemployment tax from the Commission.

The UCFE program is administered by the Department of Labor (Labor). We 

requested Labor’s opinion on whether employees of the PNWRBC are eligible 

for UCFE benefits. Labor has informed us that the PNWRBC “ is covered by 

the UCFE program as a partially-owned federal instrumentality.” Having 

reviewed Labor’s ruling, we concur in its view of the status of the PNWRBC. 

Accordingly, it is our opinion that the Commission is exempted from the State 

of Washington’s unemployment tax.

L e o n U l m a n

Deputy Assistant Attorney General

Office o f Legal Counsel

>See 122 Cong. Rec. H. 7411-12 (July 20, 1976).

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