PLR 200514024: Tribal police contributions qualify for a state governmental pension plan

Plain-English summary

A federally recognized tribe's police department sought to enroll its officers in a state pension plan for peace officers and firefighters. State law gave the department state law enforcement powers subject to licensing, insurance, data practice, and coordination requirements. Its officers worked under state and county procedures when enforcing state law. The IRS concluded that contributions the department made for officers licensed by the state board were treated as contributions by a state agency or instrumentality for purposes of IRC § 414(d). Their participation would not harm the pension plan's status as a governmental plan. The ruling assumes the pension plan is qualified under § 401(a) and its trust is exempt under § 501(a).

Ruling snapshot

• Question: Would contributions for the tribal department's state-licensed officers preserve the state plan's governmental status?
• Outcome: Approved for the described officers and contributions, subject to the plan qualification assumptions.
• Key authorities: IRC §§ 414(d), 401(a), 501(a); Rev. Rul. 89-49.

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
WASHINGTON, D.C. 20224

TAX EXEMPT AND
GOVERNMENT ENTITIES
DIVISION

JAN 11 2005
200514024

SE:T:EP:RA:T1

Uniform Issue List: 414.07-00

Attention:

Legend:

Employer A =

Organization B =
Council C =
County D =
City E =

State M =

Agreement G =

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Statute N =
Statute O =
Statute P =
Statute Q =

Plan X =

Dear

This is in response to your request for a ruling dated March 22, 2004, submitted by your authorized representative, requesting rulings under section 414(d) of the Internal Revenue Code (the "Code"). The following facts and representations were submitted in connection with your request.

Organization B, a federally recognized Indian tribe (“tribe”), is located in County D within State M. The governing body of Organization B is Council C. Employer A is the law enforcement agency for Organization B. Employer A exercises the powers of a State M law enforcement agency pursuant to Statute N.

Council C created Employer A, a tribal police department, in [redacted]. The police department’s responsibilities include the enforcement of tribal and state law within the geographic boundaries of Organization B (the Organization B reservation). Organization B funds its tribal police department and pays the salaries for its employees out of tribal governmental appropriations.

In order to promote the ability of a tribe and State M to provide effective and efficient law enforcement services on the tribe’s reservation, State M passed legislation (Statutes N and O) treating tribal police departments as state law enforcement agencies and treating their police officers as state peace officers, provided certain requirements are met.

Statute N authorized Employer A to exercise the powers of a State M law enforcement agency, to appoint state licensed peace officers, and to grant those officers the same powers as peace officers employed by local units of government. This legislative authorization to

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exercise state police powers was predicated on Employer A meeting the following four statutory requirements: 1) agreeing to be subject to liability for its torts and those of its peace officers and other employees acting within the scope of their employment or duties arising out of the law enforcement agency function to the same extent as any other State M municipal law enforcement agency; 2) filing with State M’s board of peace officer standards and training (the “Board’’) a bond or certificate of insurance for liability coverage with the statutory maximum single occurrence amounts and an annual cap for all occurrences within a year of three times the single occurrence amount (requirements similar to those imposed on municipalities); 3) filing with the Board a certificate of insurance for liability of its law enforcement officers, employees, and agents for lawsuits under the United States Constitution; and 4) agreeing to be subject to State M laws relating to data practices of law enforcement agencies.

Employer A has exercised the powers of a State M law enforcement agency since meeting these statutory requirements in [redacted]. These are the full powers of arrest and to charge a person with the duties of preventing and detecting crime and enforcing the general criminal laws of State M. These are the same powers the Legislature of State M has granted law enforcement agencies of State M and its local units of government.

Employer A’s peace officers are required to meet the same licensure and training standards as peace officers appointed by other law enforcement agencies of State M and its local units of government. Statute O defines a peace officer as: 1) an employee or an elected or appointed official of a political subdivision or law enforcement agency who is licensed by the Board, charged with the prevention and detection of crime and the enforcement of the

general criminal laws of the state and who has the full powers of arrest; and 2) a peace officer who is employed by a law enforcement agency of a federally recognized tribe and who is licensed by the Board. Like every other law enforcement agency in State M and its local units of government, Employer A can only appoint peace officers licensed by the Board.

State M regulates the training, education, and standards of conduct relating to Employer A’s peace officers through the licensing process. The State M Legislature created the Board to set training and licensing standards for peace officers in State M. The Board is mandated by Statute O to promulgate rules governing peace officers. Relying upon this statutory mandate, the Board has promulgated extensive rules governing the education, licensure, and continuing education of peace officers. Included are rules governing the certification of schools delivering peace officer training and the minimum educational requirements for peace officer license applicants and rules governing the licensure examination itself, including the eligibility requirements for sitting for the exam.

Also included are the specific rules setting forth the requirements for maintaining a peace officer license. To receive a renewal of their license, officers must certify that they have

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completed a certain minimum number of hours of continuing education classes approved and accredited by the Board during a three year period. In addition, officers must uphold the specific standards of conduct promulgated by the Board. Failure to meet these standards of conduct may result in the suspension or revocation of an officer’s license by the Board. If the police officers of Employer A, therefore, fail to maintain their State M peace officer licenses, they no longer qualify under the definition of peace officer in Statute O, and the provisions of Statute N, granting them police powers under state law, no longer apply.

Statute N provides that in order to coordinate, define, and regulate the provision of law enforcement services on reservation lands, governmental units and the tribe shall enter into agreements pursuant to Statute P. For the purposes of entering into these agreements, the: tribe shall be considered a governmental unit as that term is defined in Statute P. Statute P defines “governmental unit,” in general, to include every city, county, town, school district, other political subdivision of State M or another state, or another state, and any agency of State M or the United States, and includes any instrumentality of a governmental unit. For purposes of Statute P, an instrumentality of a governmental unit means an instrumentality having independent policy making and appropriating authority.

Statute N, therefore, requires Organization B to enter into mutual aid cooperative agreements, pursuant to Statute P, with County D and City E to define, coordinate, and regulate the provision of law enforcement services on that part of the Organization B reservation that lies within County D and City E. For matters arising within the boundaries of City E, the City E Police Department will be the law enforcement agency with which Employer A coordinates its efforts. For matters arising outside of the boundaries of City E, the County D Sheriff’s Department will be the law enforcement agency with which Employer A coordinates its efforts.

Organization B has entered into Agreement G with County D and City E. The agreement provides that Organization B’s police officers will operate according to County D procedures when exercising state authority; that Organization B’s officers will coordinate activities with the City E Police Department and the Sheriff of County D; that Organization B’s officers will transfer arrested individuals to the County D jail to be processed by the County D Sheriff pursuant to state procedures; that persons arrested by Organization B’s officers under state law will be prosecuted by the County D Attorney pursuant to state procedures; that Organization B’s officers will participate in the radio dispatch system of County D pursuant to County D’s procedures; that Organization B’s officers will prepare investigative reports in accordance with County D and City E procedures; and that Organization B’s officers will be obligated to attend hearings in state court as necessary. In practice, when enforcing state laws, Organization B’s officers will be under the supervision of the County D Sheriff and County D Attorney, and the Sheriff and County Attorney will have ultimate authority over crime scenes and criminal investigations.

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In light of Organization B’s compliance with Statute N and its agreement with County D and City E, Employer A is treated by the state legislature as a law enforcement agency of State M. Employer A’s licensed police officers are recognized by the legislature of State M as state peace officers, and as such are entitled to enforce state laws within the geographic boundaries of the Organization B reservation.

Plan X provides retirement, disability, and surviving spouse benefits to certain peace officers and firefighters in State M. These benefits are authorized and governed by Statute Q. Plan X is a contributory defined benefit plan. The State M Legislature authorized Employer A’s peace officers to become members of Plan X contingent on the Internal Revenue Service ruling that Employer A is an agency or instrumentality of State M for purposes of enforcing state law and that contributions made by Employer A to Plan X on behalf of its peace officers are contributions to a governmental plan within the meaning of Code section 414(d).

Based on the foregoing, you request the following rulings:

1) that Employer A is an agency or instrumentality of State M for purposes of enforcing state law, and

2) that contributions made by Organization B to Plan X on behalf of its Board licensed police officers are contributions to a governmental plan within the meaning of Code section 414(d).

Section 414(d) of the Code provides that a "governmental plan" means a plan established and maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing.

Revenue Ruling 89-49, 1989-1 C.B. 117, provides that a plan will not be considered a governmental plan within the meaning of Code section 414(d) merely because the sponsoring organization has a relationship with a governmental unit or some quasi-governmental power. One of the most important factors to be considered in determining whether an organization is an agency or instrumentality of the United States or any state or political subdivision thereof is the degree of control that a governmental entity or entities exercise over the organization's everyday operations. Other factors include: (1) whether there is specific legislation creating the organization, (2) the source of funds for the organization, (3) the manner in which the organization's trustees or operating board are selected, and (4) whether the applicable governmental unit considers the employees of the organization to be employees of the applicable governmental unit. Although all of the above factors are considered in

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determining whether an organization is an agency or instrumentality of a government, the mere satisfaction of one or all of the factors is not necessarily determinative.

In this case, Employer A performs the functions of preventing and detecting crime and enforcing State M’s general criminal laws on behalf of State M and County D, a political subdivision of State M. Employer A operates in coordination with the County D Sheriff's Department and the City E Police Department pursuant to a joint powers agreement in this regard.

State M exercises considerable control over the everyday activities and actions of Employer A. Extensive state standards govern the qualifications of police officers, because by definition a peace officer of Employer A must be licensed by the Board in order to be considered a state peace officer. Employer A police officers who are licensed by the Board are licensed under State M law, which means that they must comply with the continuing education and licensing requirements of State M. If Employer A’s police officers fail to maintain their state peace officer licenses, they would no longer qualify under the definition of peace officer under Statute O and would no longer be authorized to exercise State M police powers.

There are situations where Employer A police officers may be placed under the direct control of local state law enforcement officers, and when Employer A police officers are exercising state authority they operate under state and county procedures. State M law also governs the duties, liabilities, and data practices of the Employer A police officers. The day-to-day results of law enforcement activity within the geographic boundaries of the Organization B reservation are largely controlled by State M procedures and institutions. When an Employer A police officer arrests someone for a violation of state law, that person is taken to a jail run by County D. Whether or not a suspect apprehended by an Employer A police officer is prosecuted is a decision made by the County D Attorney’s Office, not any Organization B prosecuting authority.

Employer A’s authority to exercise the powers of a State M law enforcement agency has been granted by Statute N. The exercise of that power is subject to conditions imposed by statute. State M has the authority to revoke Employer A’s ability to act as a state law enforcement agency at any time. The laws being enforced are those of State M. State M has the power to, and does, heavily regulate the training, education, licensure, and standards of conduct of Employer A’s peace officers.

Under the express provisions of Statutes N and P, State M treats Council C of Organization B as a state governmental unit for purposes of law enforcement activities. Council C of Organization B is treated as a unit of state government for the purpose of entering into cooperative agreements with other State M law enforcement agencies.

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Accordingly, based on the above facts and representations, we conclude with respect to your ruling requests that contributions made by Employer A to Plan X on behalf of its peace officers who are licensed by the Board are considered contributions by an agency or instrumentality of State M, or political subdivision thereof, for purposes of Code section 414(d), and participation in Plan X by such peace officers of Employer A will not adversely affect the status of Plan X as a governmental plan within the meaning of section 414(d).

No opinion is expressed as to the federal tax consequences of the transaction described above under any other provisions of the Code.

The above rulings are based on the assumption that Plan X is qualified under section 401(a) of the Code and its related trust exempt under section 501(a) at all relevant times.

This letter ruling is directed only to the taxpayer that requested it. Section 6110(k)(3) of the Code provides that it may not be used or cited by others as precedent.

A copy of this letter is being sent to your authorized representative in accordance with a

power of attorney on file in this office. If you have any questions, please call [redacted], SE:T:EP:RA:T1 [redacted] at [redacted].

Sincerely,

Carlton A. Watkins

Manager
Employee Plans Technical Group 1

Enclosures:
Notice of Intention to Disclose
Deleted Copy of Ruling

cc: