This course looks at the various factors to consider when determining whether an entity is governmental or non-governmental. Remember, Section 218 Agreements can only cover positions of the States, political subdivisions and interstate instrumentalities.
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- What is the definition of a governmental entity?
- What is the definition of a non-governmental or private entity?
- What is a political subdivision?
- What are examples of typical political subdivisions?
- Who makes the determination as to whether or not an entity is governmental or non-governmental?
- Who is responsible for negotiating the legal status with an entity?
- If necessary, how do I make an individual determination of an entity’s status?
- What is Section 501(c) of the Internal Revenue Code (IRC)?
- How do I determine if Federal or State Laws apply?
A governmental entity is that which is closely affiliated, generally by government ownership or control, with State and local governments.
A non-governmental entity is that which is not affiliated, through ownership or control, with State and local governments.
A political subdivision is a separate legal entity of a State which usually has specific governmental functions. The term ordinarily includes a county, city, town, village, or school district, and, in many States, a sanitation, utility, reclamation, drainage, flood control, or similar district.” A political subdivision’s legal status is governmental.
“Political subdivision” ordinarily includes counties, cities, townships, villages, schools, sanitation, utility, irrigation, drainage and flood-control districts, and similar governmental entities.
Generally, the State determines the legal status of an entity of the State. Therefore, if an entity or entity type is not defined in statute and legislation then, in consideration of the State’s authority to specify who or what its political subdivisions are, it is strongly encouraged that the Attorney General, at the request of the state administrator, opine on the legal status of an entity
Negotiations between a State and entities of the State in connection with coverage under the State's Agreement are generally intrastate matters. The State determines for whom and whether and when to extend Section 218 coverage subject to the requirements of Section 218 of the Act. However, if a State needs assistance from SSA regarding an entity and its relative status to the Section 218 Agreement or modification then the State should contact the RO.
If the State is unable or unwilling to make a determination on an entity’s status then SSA will make an entity by entity determination as we review, approve, deny and execute coverage through modifications. When making an Individual determination the following should be considered.
State statute and legislation
- Statute may or may not specify that entities are governments of the State.
- There may be language distinguishing an entity as governmental for some purposes (i.e., open disclosure and public meetings), but that should be expected from any entity that provides any degree of public service; therefore, it should not necessarily be used as the sole consideration for determining an entity’s legal status.
Research Attorney General Opinions
An Attorney General Opinion generally consists of a written interpretation of an existing State law. Opinions are not rules of law; however, Attorney General Opinions are given substantial weight and are presumed to be correct interpretations of State law unless the opinion is modified by legislative or judicial means.
Use the six characteristics that may qualify an entity as an instrumentality of government.
- Is the entity used for a governmental purposes?
- Is the performance of its function on behalf of the state or a political subdivision/instrumentality of government?
- Are there private interests involved or does the state or political subdivision involved have the powers and interests of an owner?
- Is the control and supervision of the organization vested in the public authority?
- Is express or implied statutory or other authority necessary for the creation and use of such an instrumentality, and whether such authority exists?
- What is the degree of financial autonomy and the source of its operating expenses?
In addition to the above, IRS private letter rulings can also serve as indicators of the entity’s legal status. However, IRS determinations should only be used is a factor of consideration not as an absolute.
The section 501 category of the IRC relates to tax-exempt organizations. According to the IRS, in order for an organization to qualify as a tax-exempt organization it must be organized to operate according to guidelines set forth in section 501(c)(3) of the IRC and must not benefit any one individual.
“The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and the preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.”
Important: The term “tax exempt” refers to Federal Income Tax and not Social Security. 501(c)(3) determinations are not factors for consideration in Social Security and Section 218 determinations and should not be considered.
Federal law governs determinations involving coverage of State and local government employees. These determinations may be based on decisions regarding specific issues to which Federal law is applied and other issues to which State law is applied. It is important to know whether Federal or State law is applied in making a determination on a specific issue.
The chart below can serve as a first-step approach to determining whether an issue lies within the authority of the Federal or State governments. It is important to remember though, when establishing the authority under which determinations are to be made, you should assess the situation independent of prior determinations.
Does an employer or employee relationship exist?
What is the identity of the employer?
Are earnings reported as Social Security wages?
What are emergency services?
What are student services?
Who is an officer of a State or political subdivision?
Is an entity a political subdivision?
What is the legal status of a new entity?
Is a function governmental or proprietary?
Is a position under a retirement system?
Which employees are eligible for membership in a retirement system?
Who is an employee for purposes of retirement system participation?
What is the definition of a police officer or firefighter position?