Court Opinion

ID: 826158
Source: CourtListenerOpinion
Date Created: 2013-03-01 19:54:56.208647+00
Date Added: 2024-06-11T15:36:35.257256
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS
             FOR THE FOURTH CIRCUIT

MUNICIPAL ASSOCIATION OF SOUTH        
CAROLINA,
                Plaintiff-Appellee,
               v.                        No. 11-2220
USAA GENERAL INDEMNITY
COMPANY,
             Defendant-Appellant.
                                      

MUNICIPAL ASSOCIATION OF SOUTH        
CAROLINA,
                Plaintiff-Appellee,
               v.                        No. 11-2221
NATIONWIDE MUTUAL FIRE
INSURANCE COMPANY, INC.,
             Defendant-Appellant.
                                      
2    MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY

MUNICIPAL ASSOCIATION OF SOUTH        
CAROLINA,
                Plaintiff-Appellee,
               v.                          No. 11-2222
HARTFORD FIRE INSURANCE
COMPANY,
              Defendant-Appellant.
                                      

MUNICIPAL ASSOCIATION OF SOUTH        
CAROLINA,
                Plaintiff-Appellee,
               v.                          No. 11-2223

SERVICE INSURANCE COMPANY, INC.,
             Defendant-Appellant.
                                      
       Appeals from the United States District Court
      for the District of South Carolina, at Columbia.
            Margaret B. Seymour, District Judge.
        (3:08-cv-03073-MBS; 3:08-cv-03879-MBS;
        3:08-cv-03611-MBS; 3:08-cv-03072-MBS)

                 Argued: January 31, 2013

                  Decided: March 1, 2013

      Before NIEMEYER, GREGORY, and DAVIS,
                   Circuit Judges.
      MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY         3
Reversed by published opinion. Judge Gregory wrote the
opinion, in which Judge Niemeyer and Judge Davis joined.

                         COUNSEL

ARGUED: Robert H. Jordan, NELSON MULLINS RILEY
& SCARBOROUGH, LLP, Charleston, South Carolina;
Molly Hughes Cherry, NEXSEN PRUET, LLC, Charleston,
South Carolina, for Appellants. Robert E. Tyson, Jr.,
SOWELL, GRAY, STEPP & LAFFITTE, LLC, Columbia,
South Carolina, for Appellee. ON BRIEF: John C. von Lehe,
Jr., Merritt G. Abney, NELSON MULLINS RILEY & SCAR-
BOROUGH, LLP, Charleston, South Carolina, for Appellants
USAA General Indemnity Company and Nationwide Mutual
Fire Insurance Company, Inc.; Bradish J. Waring, NEXSEN
PRUET, LLC, Charleston, South Carolina, for Appellants
Hartford Fire Insurance Company and Service Insurance
Company, Inc. Robert E. Stepp, Bess J. DuRant, SOWELL,
GRAY, STEPP & LAFFITTE, LLC, Columbia, South Caro-
lina; Leroy F. Laney, Damon C. Wlodarczyk, RILEY POPE
& LANEY, LLC, Columbia, South Carolina, for Appellee.

                          OPINION

GREGORY, Circuit Judge:

   The Municipal Association of South Carolina ("MASC")
filed an action in the district court seeking a declaration that
South Carolina municipalities are entitled to assess municipal
business license taxes based on, or measured by, the total
flood insurance premiums collected in the particular munici-
pality by insurance companies under an arrangement with the
Federal Emergency Management Agency ("FEMA"). The
insurance companies moved for summary judgment on
grounds of preemption and sovereign immunity, but the dis-
4       MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY
trict court denied the motions. Because we find that the taxes
imposed by the South Carolina municipalities contravene the
principles of sovereign immunity, we reverse the decision of
the district court.

                                   I.

                          A.    The Parties

   MASC is a non-profit organization and its membership
consists of almost all the municipalities in the State of South
Carolina. On behalf of 262 of its 270 member-municipalities,
MASC administers the Insurance Tax Collection Program
("ITCP") through which it imposes and collects business
license taxes from insurance companies that conduct business
within the participating municipalities. With one exception,
the tax amount for each insurance company is two percent of
the gross premiums received by the insurance company in the
prior calendar year in a particular municipality.1

   The four Appellants in this consolidated appeal are Hart-
ford Fire Insurance Company ("Hartford"), Nationwide
Mutual Fire Insurance, Service Insurance Company, Inc., and
USAA General Indemnity Company. Appellants are insur-
ance companies that write and sell insurance policies in South
Carolina. Of particular relevance to this appeal, under an
arrangement with FEMA, Appellants offer and collect premi-
ums on Standard Flood Insurance Policies ("SFIPs") pursuant
to the National Flood Insurance Program (the "NFIP").

           B.   The NFIP’s Purpose and Framework

   The NFIP was created by the National Flood Insurance Act
of 1968, 42 U.S.C. §§ 4001-4129, ("NFIA"), in part to make
"federally subsidized flood insurance available in flood-prone
    1
  The tax rate for the City of Greenville is 2.75 percent of gross premi-
ums collected within its boundaries.
      MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY         5
areas," Studio Frames Ltd. v. Standard Fire Ins. Co., 483 F.3d
239, 243 (4th Cir. 2007), and reduce the burden on the nation
for unforeseen disaster relief, 42 U.S.C. § 4001(a)-(e). Prior
to its enactment, flood insurance was generally unavailable
from private insurance companies as those companies were
unwilling to underwrite and bear flood risks due to the cata-
strophic nature of floods. 42 U.S.C. § 4001(b); H.R. Rep. No.
90-1585 (1968), reprinted in 1968 U.S.C.C.A.N. 2873, 2965-
73. "To the extent possible, the NFIP is designed to pay oper-
ating expenses and flood insurance claims with premiums col-
lected on flood insurance policies rather than with tax
dollars." Studio Frames, 483 F.3d at 243 (quotation marks
and citation omitted).

   Because premiums are subsidized, the NFIP is not self-
sustaining, and "cannot accumulate sufficient reserves to
cover catastrophic flood losses." Id. at 244. The NFIP relies
on a "statutory line of credit at the U.S. Treasury to pay
claims arising from catastrophic losses." Id. Nonetheless, the
NFIP’s providence has "reduced the amount of flood disaster
relief needed from the federal government." Id.

   The NFIA provides two alternative avenues for implement-
ing the NFIP—a privately operated flood insurance program
with federal assistance ("Part A"); or a federally operated pro-
gram with private insurers’ assistance ("Part B"). See 42
U.S.C. §§ 4041, 4051-4057, 4071-4072. Prior to 1978, the
NFIP was implemented under Part A as a private industry
program with federal assistance. Flick v. Liberty Mut. Fire
Ins. Co., 205 F.3d 386, 388 (9th Cir. 2000). Under this imple-
mentation, the federal government incorporated a private
insurance pool called the National Flood Insurer’s Associa-
tion, which marketed, issued, serviced, and handled claims
adjustments of flood insurance policies. In re Estate of Lee,
812 F.2d 253, 255 (5th Cir. 1987). The federal government’s
role was to prescribe the requirements for insurance compa-
nies’ participation in the pool, to compensate insurance com-
panies for policies in which the premiums were set below
6        MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY
established rates, and to provide reinsurance to cover flood
losses that exceeded the insurance risk assumed by the indus-
try pool. 42 U.S.C. §§ 4051, 4054, 4055.

   Since 1978, the NFIP has been implemented under Part B
as a federally operated program with private insurers’ assis-
tance.2 Flick, 205 F.3d at 389. Under Part B, the director of
FEMA is authorized to execute the NFIP "through the facili-
ties of the Federal Government, utilizing . . . either"

        (1)   insurance companies and other insurers, insur-
              ance agents and brokers, and insurance adjust-
              ment organizations, as fiscal agents of the
              United States,

        (2)   such other officers and employees of any exec-
              utive agency . . . as the Administrator and the
              head of any such agency may from time to
              time, agree upon, on a reimbursement or other
              basis, or

        (3)   both the alternatives specified in paragraphs (1)
              and (2).

42 U.S.C. § 4071(a). From 1978 to 1983, all federal flood
insurance policies under the NFIP were issued directly by the
federal government. Flick, 205 F.3d at 389. In 1983, however,
FEMA promulgated regulations establishing the Write-Your-
Own ("WYO") Program, which enabled FEMA to use partici-
pating private insurance companies ("WYO Companies") to
provide, under their own names as insurers, flood insurance
policies (SFIPs) to the public. Id. Approximately 95 percent
    2
   In 1976, disagreement arose over the terms of the annual contract
between the federal government and the insurance companies. This dis-
agreement led the federal government to assume control of the NFIP under
Part B. See Downey v. State Farm Fire & Cas. Co., 266 F.3d 675, 678-79
(7th Cir. 2001).
      MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY                 7
of flood insurance policies under the NFIP are written through
the WYO Program.3 U.S. Dep’t of Homeland Security,
Privacy Impact Assessment for the National Flood Insurance
Programs Appeals Procedure, 2 (Feb. 9, 2006), http://
www.dhs.gov/xlibrary/assets/privacy/privacy_pia_fema_nfip
appeals.pdf.

                   C.   The WYO Arrangement

   In 1985, by promulgated regulations, FEMA established
the standardized terms of the arrangement between FEMA
and WYO Companies (the "Arrangement"). Financial Assis-
tance/Subsidy Arrangement, 50 Fed. Reg. 16236 (Apr. 25,
1985) (codified at 44 C.F.R. pt. 62, app. A); see 42 U.S.C.
§ 4128(a) (FEMA has authority to "issue such regulations as
may be necessary to carry out the purpose of the [NFIP].").
The Arrangement is essentially a contract between FEMA and
private insurance companies. See 44 C.F.R. pt. 62, app. A.
FEMA sets the terms of the Arrangement and has the sole
authority to amend it. See id. When it amends the terms of the
Arrangement, however, FEMA considers comments from pri-
vate insurance companies and other participants in the NFIP.
See, e.g., 61 Fed. Reg. 37687 (July 19, 1996) (addressing and
amending the Arrangement based on comments raised by two
WYO Companies).

   FEMA codified the policy forms for the SFIPs and the
forms cannot be "altered, varied, or waived other than by the
express written consent of the Federal Insurance Administra-
tor." 44 C.F.R. § 61.13(a), (d). FEMA establishes the terms
and conditions of the SFIPs offered to customers. 42 U.S.C.
§ 4013. FEMA issues written manuals specifying how WYO
Companies must handle flood insurance premiums, and settle,
pay, or defend flood claims. 44 C.F.R. pt. 62, app. A.
  3
   FEMA directly sells and services Group Flood Insurance Policies writ-
ten through the NFIP.
8     MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY
   FEMA sets guidelines for companies that choose to partici-
pate in, and to remain in the WYO Program. 44 C.F.R.
§§ 62.23, 62.24. For instance, the Arrangement requires that
WYO Companies must be licensed under the state laws in
which they practice. 44 C.F.R. pt. 62, app. A, art. II(D)(4). As
is relevant to this appeal, under South Carolina law, to be a
licensed insurer one must "pay[ ] all taxes and perform[ ] all
duties required by law." S.C. Code Ann. § 38-5-90(c). In
addition to South Carolina state-imposed license fees and
taxes on insurers, see S.C. Code Ann. §§ 38-7-10, 38-7-20,
South Carolina municipalities may also levy license fees or
taxes, see S.C. Code Ann. § 38-7-160.

   Under the Arrangement, when a WYO Company collects
flood premiums, it is required to remit the premiums, less
expenses (as explained below), to FEMA for deposit in the
National Flood Insurance Fund in the U.S. Treasury. 42
U.S.C. § 4017; 44 C.F.R. pt. 62, app. A, arts. II(E), VII(B).
Because the Arrangement forbids comingling of funds, if the
WYO Company receives premiums in cash or check, it depos-
its the cash or check into a restricted account it maintains on
behalf of the federal government ("Restricted Account"). See
44 C.F.R. pt. 62, app. A, arts. II(E), III(E). Where the cus-
tomer pays the premium by credit card, however, the pay-
ments are made directly to the U.S. Treasury via a website
established by the federal government. WYO Companies pay
flood insurance claims from monies in the Restricted
Account, or from their operating accounts and then are subse-
quently reimbursed from the Restricted Account. To the
extent the amount in the Restricted Account is insufficient to
cover the claims, the WYO Company draws upon a letter of
credit from FEMA to meet the expenditures. Id. arts. II(E),
IV(A), VII(A).

  WYO Companies are liable for "operating, administrative
and production expenses"

    including any State premium taxes, dividends,
    agents’ commissions or any other expense of what-
       MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY         9
    ever nature incurred by the Company in the perfor-
    mance of its obligations under this Arrangement but
    excluding other taxes or fees, such as surcharges on
    flood insurance premium and guaranty fund assess-
    ments.

Id. art. III(A) (emphasis added). Thus, the Arrangement per-
mits WYO Companies to retain a scheduled amount as reim-
bursement for these expenses ("Expense Allowance"). Id. art.
III(B). Though the Expense Allowance fluctuates yearly, on
average it is 30 percent of the WYO Company’s written pre-
miums. See id. Once the claims, Expense Allowance, and any
additional reimbursement a WYO Company may be entitled
to have been deducted, the WYO Company must remit any
balance in the Restricted Account in excess of $5,000 to
FEMA. See 44 C.F.R. pt. 62, app. A, art. VII(B); Appellants’
Br. at 13-14. Appellants contend that they profit only when
their actual administrative expenses in connection with the
NFIP are less than the Expense Allowance.

  D.    The Omaha Property Decision and the 2008 FEMA
                      Memorandum

   In 2006, MASC filed an action in state court against a
WYO Company, Omaha Property and Casualty Insurance Co.
("OPCI"), to collect approximately $200,000 in unpaid
municipal taxes and penalties for 2003 and 2004. OPCI
removed the action to the U.S. District Court for the District
of South Carolina. Municipal Ass’n of S.C. v. Omaha Prop.
& Cas. Ins. Co., No. 3:06-CV-467 (D.S.C. Feb. 16, 2006).
Thereafter, MASC filed a motion for partial summary judg-
ment, and OPCI filed a motion for summary judgment. OPCI
argued that any taxes based upon flood insurance premiums
were impermissible taxes on the federal government and were
preempted. The district court disagreed and denied OPCI’s
motion. OPCI moved for reconsideration, but before a final
disposition of the action, the parties settled and the action was
10    MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY
dismissed. OPCI subsequently dropped out of the WYO Pro-
gram in South Carolina.

   Following the district court’s decision in Omaha Property,
FEMA issued a memorandum ("2008 FEMA Memo") direct-
ing WYO Companies not to pay the tax imposed by South
Carolina municipalities. The 2008 FEMA Memo states, "pre-
miums collected as payment for coverage under [the SFIPs]
are Federal dollars, and as such, are not subject to State or
local taxation." It explains that FEMA "consented to a single
exception to this legal principle" by agreeing to "voluntarily
pay State premium taxes on NFIP premiums in recognition of
the service provided by State insurance departments in over-
seeing the solvency and conduct of WYO Companies, as well
as the conduct and qualifications of agents and adjusters who
work on behalf of the NFIP." The 2008 FEMA Memo
expounds that in carving out this exception, FEMA did not
"invalidate the Federal government’s exemption from any
taxes or assessments levied by any other level of govern-
ment." Quoting language from the Arrangement, the 2008
FEMA Memo concludes that because the WYO Companies
are "fiscal agents of the Federal government," they "are not
liable for or authorized to pay any taxes and assessments lev-
ied on Federal flood insurance premiums not provided for
under the Arrangement."

   Since the 2008 FEMA Memo, WYO Companies doing
business in South Carolina have varied in their treatment of
the municipal tax—some willingly pay the tax, some pay
under protest, and others simply refuse to pay the tax. Appel-
lants fall in the latter two groups.

               E.   District Court Proceedings

   MASC filed this action in the district court seeking a decla-
ration that South Carolina municipalities are entitled to
impose and collect municipal taxes from Appellants. In
response, Appellants raised several affirmative defenses and
       MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY                  11
then moved to dismiss the declaratory judgment action on
grounds that FEMA was a necessary and indispensable party
under Federal Rule of Civil Procedure 19(b) that could not be
joined because of its sovereign immunity. The district court
agreed that FEMA was a necessary party, but held that the
court could proceed in good faith without FEMA, so it denied
the motion to dismiss.

   Subsequently, Appellants moved for summary judgment
asserting defenses of federal preemption and sovereign immu-
nity. MASC also moved for partial summary judgment that
the defense of preemption did not apply. The district court
agreed with MASC, granted MASC’s motion for partial sum-
mary judgment,4 and denied Appellants’ motion for summary
judgment. Thereafter, Appellants moved the district court to
certify this matter for interlocutory appeal, and the district
court granted the certification. We accepted the appeal, and
thus, we have jurisdiction pursuant to 28 U.S.C. § 1292(b).

                                    II.

   Appellants raise three issues on appeal. First, they argue
that FEMA regulations, the Arrangement, and the 2008
FEMA Memo instruct them not to pay the municipal tax, and
thus, federal law preempts the tax. Second, they argue in the
alternative, even if federal law did not preempt the tax, in
their operation of the WYO Program, Appellants are "fiscal
agents" of the federal government, and the municipal tax is an
impermissible, unconsented-to tax on the federal government
and federal property, in violation of federal sovereign immu-
nity. Third, Appellants contend Rule 19(b) required the dis-
  4
    In Appellants’ answer to MASC’s complaint, Appellants pled, inter
alia, defenses of collateral estoppel, lack of standing, failure to exhaust
administrative remedies, and lack of due process. Following the grant of
partial summary judgment to MASC, Appellants abandoned all defenses
not raised at the motion to dismiss or summary judgment stages. As such,
beyond this appeal, no disputed issues remain.
12    MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY
missal of these actions for failure to join FEMA because
MASC’s real dispute is with FEMA, Appellants are merely
FEMA’s fiscal agents, and FEMA’s sovereign immunity pre-
cludes it from being compelled to join these actions. We
resolve this appeal by applying the basic tenets of sovereign
immunity. Thus, we need not reach the preemption issue and
the question of FEMA’s indispensability is moot.

                              III.

   We review the grant or denial of a motion for summary
judgment de novo. Okoli v. City of Balt., 648 F.3d 216, 220
(4th Cir. 2011). Issues pertaining to sovereign immunity are
questions of law which we review de novo. See S.C. Wildlife
Fed’n v. Limehouse, 549 F.3d 324, 332 (4th Cir. 2008) (citing
Franks v. Ross, 313 F.3d 184, 192 (4th Cir. 2002)).

   It is well established that, pursuant to the Supremacy
Clause of the U.S. Constitution, the federal government has
absolute immunity from state regulation, including taxation.
Mayo v. United States, 319 U.S. 441, 445, 446 (1943);
McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819). This
immunity from tax applies when the levy falls on the federal
government itself, its property, or "on an agency or instru-
mentality so closely connected to the Government that the
two cannot realistically be viewed as separate entities, at least
insofar as the activity being taxed is concerned." United
States v. New Mexico, 455 U.S. 720, 735 (1982); see also Van
Brocklin v. Tennessee, 117 U.S. 151, 158 (1886). "It lies
within Congressional power to authorize regulation, including
taxation, by the state." Mayo, 319 U.S. at 446; see United
States v. City of Detroit, 355 U.S. 466, 469 (1958). In the
absence of congressional consent, a state or local tax on the
federal government, its property, or its instrumentality is
invalid. City of Detroit, 355 U.S. at 469.

   These tax immunity principles present three questions in
this appeal—whether: (1) the flood insurance premiums col-
      MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY       13
lected by WYO Companies are federal property; (2) WYO
Companies, in their participation in and operation of the
WYO Program, are instrumentalities of the federal govern-
ment; and (3) the federal government has consented to the
municipal tax. We discuss each issue in turn.

                              A.

   We first consider whether the flood insurance premiums are
federal property. We have previously stated, "premiums col-
lected on policies written by WYO Companies do not belong
to those companies." Battle v. Seibels Bruce Ins. Co., 288
F.3d 596, 600 (4th Cir. 2002) (citing Newton v. Capital
Assurance Co., 245 F.3d 1306, 1311 (11th Cir. 2001)).
Instead, the premiums belong to the federal government, and
absent the federal government’s consent, these funds may not
be taxed.

   MASC contends otherwise, and roots its contention in the
fact that the premiums pass through the WYO Companies.
MASC argues that the premiums are not federal funds until
they reach the U.S. Treasury. This argument is untenable for
several reasons.

   First, the NFIA states that premiums collected under Part
B by facilities of the federal government are credits to the
National Flood Insurance Fund. 42 U.S.C. § 4017(a), (b)(2),
(b)(6). The NFIA further states that those funds are "available
for all purposes," including paying claims and "applicable
operating costs." 42 U.S.C. § 4017(d). The NFIA allows such
payments to be made "in advance or by way of reimburse-
ment." 42 U.S.C. § 4123. It is of no moment that WYO Com-
panies collect the premiums or that the premiums are held in
a Restricted Account prior to remittance to the U.S. Treasury.

   Additionally, the regulations refer to the premiums as "fed-
eral funds" and make no distinction as to the ownership of the
premiums based on whether the WYO Companies retain or
14    MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY
use the funds, or remit them to the federal government. In the
recitals section of the Arrangement, the contract contemplates
that "participating private insurance companies act in a fidu-
ciary capacity utilizing Federal funds to sell and administer
the [SFIPs]." 44 C.F.R. pt. 62, app. A, art. I (emphasis added).
In Article II, the Arrangement requires WYO Companies to
"separate Federal flood insurance funds from all other Com-
pany accounts, at a bank or banks of its choosing for the col-
lection, retention and disbursement of Federal funds relating
to its obligation under this Arrangement, less the Company’s
expenses." Id. art. II(E) (emphasis added). In Article III of the
Arrangement, WYO Companies are to make "[l]oss payments
under policies of flood insurance . . . from Federal funds
retained in the bank account(s) established under Article II."
Id. art. III(D)(1) (emphasis added). That the premiums pass
through the WYO Companies does not alter their very nature
as federal funds.

   Further, the 2008 FEMA Memo states that "the premiums
collected as payment for coverage under the[ ] [SFIPs] are
Federal dollars." (J.A. 102 (emphasis added)). An agency’s
interpretation of its own regulations is entitled to "controlling
weight unless it is plainly erroneous or inconsistent with the
regulation it interprets." Stinson v. United States, 508 U.S. 36,
45 (1993) (quotation marks and citation omitted), accord
Auer v. Robbins, 519 U.S. 452, 461 (1997). FEMA’s interpre-
tation in the 2008 Memo does not appear plainly erroneous or
inconsistent with 44 C.F.R. pt. 62. Thus, the interpretation
that the premiums collected by the WYO Companies are fed-
eral funds is entitled to substantial deference.

   In sum, the premiums collected by WYO Companies are
federal funds and cannot be taxed by a state without the fed-
eral government’s consent.

                               B.

  We next consider whether WYO Companies are, in their
participation in and operation of the WYO Program, non-
      MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY        15
taxable instrumentalities of the federal government. A taxed
entity is closely connected to the federal government if taxa-
tion of the entity would be a "direct interference with the
functions of government itself." New Mexico, 455 U.S. at 736
(citation and internal quotation marks omitted). "[A] finding
of constitutional tax immunity requires something more than
the invocation of traditional agency notions: to resist [a]
State’s taxing power, a private taxpayer must actually ‘stand
in the Government’s shoes.’" Id. (citation omitted).

   Under the NFIA’s statutory framework, when the NFIP is
implemented under Part B, as is currently the case, it is a fed-
erally operated program with private participation, as opposed
to Part A’s privately operated program with federal assis-
tance. Compare 42 U.S.C. §§ 4071-72, with 42 U.S.C.
§§ 4051-57. Under Part B, FEMA is required to carry out the
NFIP "through the facilities of the Federal Government" uti-
lizing either federal employees or insurance companies "as
fiscal agents of the United States." 42 U.S.C. § 4071(a).

   Appellants contend that in participating in the NFIP, WYO
Companies may be likened to reserve banks, which are pri-
vate corporations that hold funds belonging to the U.S. Trea-
sury. The Banking Code refers to reserve banks as "fiscal
agents," 12 U.S.C. § 391, and at least one court has held that
notwithstanding their independence, reserve banks are federal
instrumentalities immune from state and local taxation, unless
consented to by Congress. See Fed. Reserve Bank v. Metro-
centre Improvement Dist., 657 F.2d 183, 186-87 (8th Cir.
1981), aff’d, 455 U.S. 995 (1982).

  Appellants’ analogy to reserve banks is not farfetched.
Although the term "fiscal agent" is not defined in the United
States Code, the dictionary defines the term as "[a] bank or
other financial institution that collects and disburses money
and services as a depository of private and public funds on
another’s behalf." Black’s Law Dictionary 73 (9th ed. 2009).
This definition encompasses several tasks of the WYO Com-
16    MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY
panies—they collect premiums on behalf of the federal gov-
ernment, remit the funds to the U.S. Treasury, and administer
claim payments. It appears, as Appellants argue, in using the
term "fiscal agent," Congress contemplated a close relation-
ship between the federal government and WYO Companies,
one akin to its relationship with reserve banks.

   MASC contends that the close relationship between the
federal government and the Federal Reserve banks is not like
the relationship between the WYO Companies and the federal
government. MASC points to several functions of Federal
Reserve banks—for example, that they supervise and main-
tain the nation’s banking system, clear checks and deposits,
issue and maintain legal tender; that they are not profit-
seeking and are not private businesses—and argues that the
reserve banks "are more than fiscal agents." Appellee’s Br. 36
(citing Fasano v. Fed. Reserve Bank of N.Y., 457 F.3d 274,
277, 278, 283 (3d Cir. 2006)). Conversely, MASC argues,
Appellants are private businesses, operate as for-profit enter-
prises, and have policies not governed by the United States.

   MASC’s arguments are weakened by our prior decision in
Studio Frames, where we treated a WYO Company as an
instrumentality of the federal government for interest pur-
poses. 483 F.3d at 252. In part, Studio Frames considered
whether an SFIP holder was entitled to pre- and post-
judgment interest from a WYO Company for breach of the
flood insurance contract. Id. Upon considering the framework
of the NFIP, we reasoned, "the NFIP is not a commercial
enterprise," because it did not engage in the business of flood
insurance with the intent to make profit. Id. at 253. We further
reasoned, "a suit against a WYO company is essentially a suit
against FEMA. Likewise, a money judgment against a WYO
company is essentially a judgment against the government."
Id. at 252. The Studio Frames Court thus determined that
because the NFIP is not a commercial enterprise, unless other-
wise consented to, interest could not be recovered from the
      MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY         17
WYO Company without contravening the principles of sover-
eign immunity.

   Studio Frames informs us that WYO Companies "stand in
the Government’s shoes" when they administer the NFIP.
Thus, because we have found that WYO Companies have
sovereign immunity for interest purposes under the NFIP, we
consistently conclude that in collecting premiums, WYO
Companies are so closely connected to the federal govern-
ment that a tax on a WYO Company based on the premiums
collected is a tax on the federal government, and absent con-
sent, they are immune from taxation.

                               C.

   We next consider whether the federal government con-
sented to this tax of its property or instrumentalities. "Waivers
of the Government’s sovereign immunity, to be effective,
must be unequivocally expressed." United States v. Nordic
Vill. Inc., 503 U.S. 30, 33 (1992) (internal quotation marks
and citations omitted). On occasion, waiver would also be
found where the narrowly construed broad language of a stat-
ute is consistent with Congress’ clear intent to waive sover-
eign immunity. Id. at 34 (providing as an example the
"‘sweeping language’ of the Federal Tort Claims Act" (cita-
tions omitted)). Nonetheless, the federal government’s waiver
of sovereign immunity must be "construed strictly in favor of
the [federal government]." Id. at 34.

   No provision of the NFIA or the Arrangement meets this
"unequivocal expression" requirement with respect to the
municipal tax. Neither is there clear Congressional intent to
consent to the municipal tax on its property or instrumentali-
ties. Instead, what is clear is FEMA has waived sovereign
immunity as to "State premium taxes" but no "other taxes." 44
C.F.R. pt. 62 app. A, art. III(A). Municipal taxes are not State
premium taxes and therefore, are not within the waiver of
immunity. This conclusion is consistent with the 2008 FEMA
18    MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY
Memo—FEMA’s own interpretation of its regulation, which
is entitled to controlling weight. See Auer, 519 U.S. at 461.

   MASC attempts to evade this result by arguing the tax is
not on the federal premiums themselves. Instead, they argue,
the premiums are merely a measure for determining how
much license taxes should be imposed on insurance compa-
nies doing business within their locale. MASC further con-
tends that it does not require that Appellants satisfy the
municipal tax by expending federal funds, and "it makes no
difference to MASC where the funds used to pay the tax orig-
inate." These arguments are unavailing.

   If WYO Companies fail to collect flood insurance premi-
ums, notwithstanding their advertisements and other business
activities within the municipalities, the municipal tax could
not be imposed as the tax is based on gross premiums col-
lected. Moreover, regardless of the delineation of the tax,
whether it is a municipal license or premium tax does not
invalidate the basic principle that the federal government has
not consented to the tax and thus, it is invalid.

   Because the tax is levied on the federal government’s prop-
erty and its instrumentality, without consent, the tax is imper-
missible and the district court erred in granting partial
summary judgment to MASC and denying Appellants’
motion.

                              IV.

   The district court erred in concluding the doctrine of sover-
eign immunity did not bar the municipal tax. The flood insur-
ance premiums are federal property that cannot be taxed and
the WYO Companies, in their operation of and participation
with the NFIP, are federal instrumentalities so closely con-
nected with the federal government that they are immune
from taxation. The federal government did not consent to this
tax, and it is therefore invalid. Accordingly, we reverse the
     MUNICIPAL ASSOCIATION v. USAA GENERAL INDEMNITY   19
district court’s grant of partial summary judgment to MASC
and denial of summary judgment to Appellants.

                                              REVERSED