Is the Savings Bank Life Insurance Fund a New York State agency or instrumentality exempt from sales and use tax?

Plain-English summary

The Savings Bank Life Insurance Fund asked whether it is an agency, instrumentality, or public corporation of New York State exempt from sales and compensating use tax under Tax Law § 1116(a)(1). The Fund provides technical and administrative services for New York savings banks that sell savings bank life insurance, and its operations are regulated by the State Banking and Insurance Departments.

The Department said yes, it's exempt, based on how it was created and governed:

• Created by statute as a state body corporate. The Fund was created by an Act of the New York Legislature (L.1940, ch. 449, § 5), codified at Banking Law § 270, which establishes "in the banking department a body corporate to be known as savings banks life insurance fund."
• An outgrowth of a state agency. Chapter 449 transferred to the Fund the duties formerly performed by the Insurance Department's Division of Savings Bank Life Insurance; the Fund is "merely an outgrowth of an agency" of the State Banking and Insurance Departments.
• State-controlled governance. Vacancies among the Fund's trustees are filled by the Superintendent with the Governor's consent, and the State Ethics Commission (Aug. 16, 1990) held the Fund to be a State agency under Public Officers Law § 73(1)(g).
• Result. The Fund is an agency, instrumentality, or public corporation of New York State and is therefore exempt from sales and compensating use tax under § 1116(a)(1).

What this means for you

The § 1116(a)(1) exemption is for entities that ARE the State

New York exempts the State, its agencies, instrumentalities, public corporations, and political subdivisions when they purchase, use, or consume. The question is whether the entity is genuinely part of the State's governmental apparatus.

"Created by statute" plus state control is the strong case

What carried the day here was that the Fund was created by legislation as a body corporate within a state department, took over a former state division's duties, and is governed with the Governor's/Superintendent's involvement — and was separately treated as a State agency by the Ethics Commission. That's a much stronger showing than an entity merely authorized or regulated by the State.

Contrast with entities that are only authorized or regulated

Being regulated by the State, or federally tax-exempt (here, IRC § 501(c)(6)), doesn't by itself make an organization a governmental entity. Entities that are only authorized by statute, or incorporated by private members, generally don't qualify for § 1116(a)(1) — the line is whether the State actually created and controls the entity.

Common questions

Q: Is the Savings Bank Life Insurance Fund exempt from New York sales tax?
A: Yes. It's an agency/instrumentality/public corporation of New York State, exempt under § 1116(a)(1).

Q: What made it a state entity rather than a private one?
A: It was created by statute as a body corporate within the banking department, grew out of a state Insurance Department division, and is governed with state control (trustee vacancies filled by the Superintendent with the Governor's consent).

Q: Does being federally tax-exempt (501(c)(6)) matter?
A: Not for this question. The § 1116(a)(1) exemption turns on being a governmental entity of New York State, not on federal tax status.

Q: Would an entity merely "authorized" or regulated by the State qualify?
A: Generally no. The exemption is for entities the State actually created and controls, not those merely authorized or regulated.

Citations and references

Statutes, regulations, and authorities:

• Tax Law § 1116(a)(1) (exemption for New York State and its agencies, instrumentalities, public corporations, and political subdivisions)
• Banking Law § 270 (Savings Bank Life Insurance Fund established as a body corporate in the banking department)
• L.1940, ch. 449 (creating the Fund and transferring the Insurance Department's Savings Bank Life Insurance division duties to it)
• Public Officers Law § 73(1)(g) (State Ethics Commission Advisory Opinion, Aug. 16, 1990, treating the Fund as a State agency)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1991.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a91_62s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-91 (62)S
Sales Tax
September 23, 1991

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S910604B

On June 4, 1991, a Petition for Advisory Opinion was received from Savings Bank Life
Insurance Fund, 460 West 34th Street, New York, New York 10001.
The issue raised by Petitioner, Savings Bank Life Insurance Fund, is whether it is an agency,
instrumentality or public corporation of the State of New York exempt from the payment of sales
and compensating use taxes within the meaning of Section 1116(a)(1) of the Tax Law.
Petitioner was created by an Act of the New York State Legislature (L.1940, c.449, §5,
codified at Section 270 of the Banking Law). Petitioner provides technical and administrative
services for savings banks located in New York State that sell savings bank life insurance. Petitioner
qualified as an exempt organization for Federal tax purposes under Section 501(c)(6) of the Internal
Revenue Code. Petitioner's activities and business operations are regulated by the Banking and
Insurance Departments of the State of New York.
Chapter 449 of the Laws of 1940 transferred the duties previously performed by a division
within the Insurance Department of the State of New York, the Division of Savings Bank Life
Insurance, to Petitioner. Petitioner is merely an outgrowth of an agency of the New York State
Banking and Insurance Departments. Petitioner was created to continue the existing program of
providing low cost life insurance to low and moderate income families who live or work in New
York. Petitioner has functioned in this capacity since its inception.
Section 1116(a)(1) of the Tax Law exempts from sales and compensating use tax:
The state of New York, or any of its agencies, instrumentalities, public
corporations (including a public corporation created pursuant to agreement or
compact with another state or Canada) or political subdivisions where it is the
purchaser, user or consumer, or where it is a vendor of services or property of a kind
not ordinarily sold by private persons.
Section 270 of the Banking Law provides, in part, as follows:
There shall be in the banking department a body corporate to be known as
savings banks life insurance fund with the powers specifically provided in this article
and with such other general corporate powers as are necessary or appropriate to the
conduct of its business and the conduct of the business of the life insurance
departments of the savings and insurance banks.

-2­
TSB-A-91 (62)S
Sales Tax
September 23, 1991

*

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Vacancies in office of the fund trustees may be filled by the superintendent
with the consent of the governor for the duration of the unexpired term.
Moreover, the State Ethics Commission held in its Advisory Opinion, dated August 16, 1990,
that the Petitioner is considered a State agency under Section 73(1)(g) of the Public Officers Law.
Accordingly, pursuant to Section 270 of the Banking Law and Section 73(1)(g) of the Public
Officers Law Petitioner is an agency, instrumentality or public corporation of the State of New York
and is, therefore, exempt from the payment of sales and compensating use tax pursuant to Section
1116(a)(1) of the Tax Law.

DATED: September 23, 1991

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.