Rev. Rul. 57-120

Advice has been requested whether a soil conservation district organized and operated pursuant to chapter 40, Minnesota Statutes, 1953, is a political subdivision of the State for Federal employment tax purposes.

The N soil conservation district was organized for the purpose of carrying out a state soil conservation program in cooperation with the Soil Conservation Service of the United States Department of Agriculture. The Minnesota statutes declare that the conservation of the soil and soil resources of the State is for the public welfare, health, and safety of the people of Minnesota and provide for the establishment of soil conservation districts for carrying out such purposes. Under the law each conservation district so organized is declared to constitute a government subdivision of the State, and a public body, corporate and politic, exercising such public powers as are granted to it by statute. The membership of the N soil conservation district is composed of occupiers of lands located within its boundaries. The district is governed by a board of five supervisors, elected or appointed in accordance with the provisions of the law. The Soil Conservation Service of the United States Department of Agriculture furnished the district with certain technical and clerical personnel. The disbursements of the district are made from fees collected from members for services rendered, from funds allocated by the United States Department of Agriculture and from State appropriations. The disbursements of such funds is subject to State audit. In the event of dissolution, all funds and the proceeds from the sale of all property belonging to the district will be covered into the State treasury.

Section 3121(b) of the Federal Insurance Contributions Act (chapter 21, subtitle C, Internal Revenue Code of 1954), excepts from the term `employment,' as that term is defined in the Act:

(7) service * * * performed in the employ of a State, or any political subdivision thereof, or any instrumentality of any one or more of the foregoing which is wholly owned by one or more States or political subdivisions; * * *

Section 3306(c)(7) of the Federal Unemployment Tax Act (chapter 24, subtitle C, Code of 1954) contains a similar provision.

In view of the foregoing, it is concluded that the N soil conservation district is a political subdivision of the State of Minnesota. Services performed in its employ are excepted from `employment' by sections 3121(b)(7) and 3306(c)(7) of the Federal Insurance Contributions Act and the Federal Unemployment Tax Act, respectively, and the taxes imposed by these Acts are not applicable to the remuneration for such services. However, under chapter 24, subtitle C, 1954 Code (Collection of Income Tax at Source on Wages), the district is responsible for withholding income tax from wages paid its employees.

It is further concluded that the individuals furnished the district by the Soil Conservation Service of the United States Department of Agriculture are employees of such Service. No liability is incurred by the N soil conservation district for the payment of Federal Insurance Contributions Act and Federal Unemployment Tax Act taxes with respect to the services of such individuals.

See Rev. Rul. 55-319, C.B. 1955-1, 119, relative to coverage of state employees under the Social Security Act.