Some South Dakota rural water associations are private nonprofit tax-exempt organizations. Can they qualify as 'public or quasi-public agencies' eligible to receive federal surplus property under federal regulations?

Plain-English summary

Some rural water associations organized as private nonprofit tax-exempt entities wanted to obtain federal surplus property. S. J. Axtman, South Dakota's Director of Central Services, asked whether state law made them public or quasi-public agencies eligible to receive it.

S. J. Axtman, the Director of Central Services, posed the question to AG Mark Meierhenry. The threshold legal hurdle was the federal regulations governing eligibility, specifically 41 CFR § 101-44.207. That regulation listed the categories of state-level recipients eligible to receive federal surplus property:

• States and their departments, agencies, or instrumentalities
• Political subdivisions of states, including local governments and economic development districts
• Instrumentalities created by interstate compact
• Multijurisdictional substate districts established by or pursuant to state law
• Indian tribes, bands, groups, pueblos, or communities on state reservations

Meierhenry's analysis was direct. The private nonprofit tax-exempt rural water associations described were neither state instrumentalities nor established by or pursuant to state law. The quoted federal eligibility list did not include them.

Without meeting one of the regulation's listed categories, the rural water associations could not receive federal surplus property. The answer was no.

The opinion addressed only the direct eligibility of the described private nonprofit associations. It did not decide whether a differently organized water entity might qualify.

Currency note

This opinion was issued in 1982. Subsequent federal regulatory amendments, court decisions, and AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. The federal property management regulations cited here (the 1982 Federal Property Management Regulations at 41 CFR § 101-44.207) may have been restructured or recodified since 1982, and South Dakota's law on rural water system organization may have changed as well. Verify the current federal regulations and state law before relying on this opinion.

What the opinion meant at the time

For private nonprofit rural water associations fitting the facts presented, the opinion said they could not obtain federal surplus property under the cited regulation.

For Central Services, the opinion identified why the associations described in the request did not qualify: they were not state instrumentalities or entities established by or pursuant to state law.

Common questions

Q: What is a rural water association?
A: The opinion did not define the term. It addressed rural water associations organized as private nonprofit tax-exempt organizations.

Q: Why isn't a 501(c)(3) status enough?
A: The opinion referred to private nonprofit tax-exempt status but did not identify a particular tax-code section. Meierhenry concluded that the associations described were neither state instrumentalities nor established by or pursuant to state law.

Q: Could a county acquire surplus property and donate it to a rural water association?
A: The opinion did not address a county acquisition or a later transfer. It answered only whether the private nonprofit associations themselves could obtain the property.

Q: What about rural water districts organized under state statute?
A: The opinion did not decide that question. The quoted federal regulation includes political subdivisions and substate districts established by or pursuant to state law. Eligibility of any specific district would require examining how it was established.

Q: Did the AG analyze whether to encourage a legislative fix?
A: No. The opinion did not discuss legislation. The quoted federal regulation included entities established by or pursuant to state law, but Meierhenry did not assess any possible change to South Dakota law.

Q: Could the rural water associations seek other federal help instead?
A: That was outside the opinion's scope. The opinion answered only the surplus property eligibility question; it did not catalog the other federal or state funding pathways that might be available to rural water systems.

Background and statutory framework

Meierhenry quoted the General Services Administration's federal surplus-property eligibility categories at Section 101-44.207. His answer turned on whether the associations in the request fit those categories.

The quoted list includes state departments and instrumentalities, political subdivisions and their departments or instrumentalities, instrumentalities created by interstate or intergovernmental agreement, substate districts established by or pursuant to state law, and the listed tribal entities. The opinion did not apply each category to a particular South Dakota water district.

For the private nonprofit tax-exempt rural water associations described, Meierhenry found no state-instrumentality or state-law basis for eligibility and concluded that they could not obtain federal surplus property.

Citations and references

Federal regulations:

• 41 CFR § 101-44.207 (1982) (federal surplus property eligibility categories)

Source

• Landing page: https://atg.sd.gov/OurOffice/OfficialOpinions/opinionhtml.aspx?id=825

Original opinion text

April 6, 1982

Mr. S. J. Axtman

Director

Central Services

Bureau of Administration

State Capitol

Pierre, South Dakota 57501

Rural water associations obtaining federal surplus property

Official Opinion No. 82-20

Dear Mr. Axtman:

You have requested an official opinion from this office based on the following factual situation:

FACTS:

Some rural water associations, organized as private nonprofit tax exempt organizations, wish to obtain federal surplus property.

In view of the foregoing facts, you have asked the following question:

QUESTION:

Under state law, can private nonprofit rural water associations be considered public or quasi-public agencies eligible to obtain federal surplus property?

In Section 101-44.207 of the Federal Property Management Regulations of the General Services Administration, the following entities are eligible to receive surplus federal property:

(i) State or department, agency, or instrumentality thereof;

(ii) Political subdivision of the State, including any writ of local government or economic development district, or any department, agency, or instrumentality thereof;

(iii) Instrumentality created by compact or other agreement between States or political subdivisions;

(iv) Multijudicial substate districts established by or pursuant to State law; and

(v) Indian tribe, band, group, pueblo, or community located on a State reservation.

Section 101-44.207(b)(1). See also Section 101-44.207(b)(2)(V); Section 101-44.207(d).

Insofar as rural water associations, organized as private nonprofit tax exempt organizations, are not state instrumentalities nor established by or pursuant to State law, it is my opinion that they may not obtain federal surplus property.

Respectfully submitted,

Mark V. Meierhenry

Attorney General