GENERAL COUNSEL OF THE
UNITED STATES DEPARTMENT OF COMMERCE
Washington, D.C. 20230

DEC 14 1989

This is in response to your request for general legal guidance on whether the Department of Commerce should pay state fees for registering Underground Storage Tanks (USTs). You specifically request an opinion on how the National Weather Service (NWS) should respond to correspondence from the Pennsylvania Department of Environmental Resources concerning the registration of NWS USTs and the corresponding fees that are due. As explained in more detail below, the Federal Government is subject to the substantive and procedural requirements of states concerning USTs, including reasonable service charges. 42 U.S.C. § 6991f. It is our opinion that the Department should scrutinize the state fees and charges to verify that the charges are reasonably based on services rendered and benefits received, and are not impermissible assessments or taxes by the state on the Federal Government.

It is a long-standing rule of constitutional law that the Supremacy Clause (Art. VI, cl. 2) and the Doctrine of Sovereign Immunity prohibit a state from taxing the Federal Government. McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819). In the absence of an express waiver for the payment of tax assessments, federal agencies are only obligated to pay for charges based on the quantum of services. See 29 Comp. Gen. 120 (1949); 39 Comp. Gen. 363 (1959); see also 58 Comp. Gen. 244 (1979). In an April 1, 1989 memorandum (copy attached), we provided a detailed analysis for determining whether water and sewer connection charges were permissible service fees or prohibitive taxes. It is our opinion that the analysis in that memorandum is generally applicable to the UST tax/fee question. Although there is a federal waiver of sovereign immunity for USTs, that waiver does not specifically allow for tax assessments.

Under the Solid Waste Disposal Act (SWDA), as amended by the Resource Conservation and Recovery Act (RCRA), Section 9007 provides that "the Federal Government having jurisdiction over any underground storage tank shall be subject to and comply with all Federal, State, interstate, and local requirements, applicable to such tank, both substantive and procedural, in the same manner, and to the same extent, as any other person is subject to such requirements, including the payment of reasonable service charges. 42 U.S.C. § 6991f. 1/

Under Hancock v. Train, 426 U.S. 167 (1976), in order for the Federal Government to be subject to state and local regulation there must be a clear and unambiguous waiver of sovereign immunity. 2/ It is our opinion that this would require specific reference to such taxes or at a minimum make reference to assessments or other terms associated with state and local taxes. 3/ The waivers under the current enactment of the SWDA do not clearly and unambiguously refer to taxes or assessments, but do specifically refer to "reasonable service charges." 42 U.S.C. §§ 6961, 6991f. It is therefore our opinion that the traditional analysis for fee/tax questions applies. 4/

The traditional analysis has been applied buy the Supreme Court in Massachusetts v. Maryland, 435 U.S. 444, 456 (1978), and is set forth in a useful three-prong test. First, is the charge imposed in a manner which does not discriminate between government and private entities? Second, is the charge a fair approximation of the cost of the benefits the using sovereign receives from the sovereign issuing charges? Third, is the charge structured to produce revenues that will not exceed the total cost to the [State] of the benefits and services to be supplied? 5/

Attached is a copy of a suggested form response to states setting forth the aforementioned concerns and requesting the information necessary for determining whether the charge is a permissible fee or prohibitive tax. This office will continue to assist in making these determinations.

Attachments

1/ In addition to this specific waiver on USTs under RCRA Section 9007, there is a general waiver of sovereign immunity on Section 6001 making federal facilities subject to state and local solid waste or hazardous waste disposal requirements. 42 U.S.C. § 6961.

2/ In Hancock v. Train, the Supreme Court interpreted the 1970 amendments to the Clean Air Act and determined that in the absence of more specific language, the Congressional waiver subjecting the Federal Government to "local requirements" concerning the control and abatement of air pollution only required substantive compliance with local air standards and was not a waiver with respect to the procedural requirements, i.e., permits. Hancock v. Train, and its companion case on the Clean Water Act, EPA v. California, 426 U.S. 200 (1976), are the leading environmental cases on analyzing federal waivers of sovereign immunity.

3/ Congress knows how to craft language to clearly waive sovereign immunity with respect to taxes. See Low-Level Radioactive Waste Policy Act, 42 U.S.C. § 2021d(b) (1) (B) (1986).

4/ An alternative view could result if the courts interpreted local "requirements" to include environmental taxes and assessments under SWDA or other environmental statutes with similar waiver provisions, e.g., the Clean Air Act and the Clean Water Act. However, our research indicates no such cases exist. There is currently a bill in the U.S. Congress [H.R.1056] which would amend the federal waiver provision in SWDA. While H.R. 1056 would allow for the imposition of civil penalties and administrative orders against federal agencies, it is our opinion that H.R. 1056, in its current form, would not subject the Federal Government to taxes.

5/ Although the analysis is the same, this Supreme Court case was not cited in the water/sewer connection memorandum because it is a case involving the Federal Government's taxation of a state and is therefore not, as a matter of law, technically applicable to the state taxation of the Federal Government. However, since it is a Supreme Court decision on the taxation by one sovereign of another the analysis is the same. In addition, we have discovered other federal agencies use this case in discussions with states on this issue and agree that uniformity in federal agency treatment of the issue is best for all parties involved. The water/sewer connection memorandum goes into detail on how to apply this general analysis to specific statutes, regulations and facts which may be presented in determining this issue.

[State Agency]
[Address]

Re: UST Fees

To Whom It May Concern:

This is in response to your letter of [date] concerning the registration of underground storage tank[s] (USTs) at the National Weather Service (NWS) office in [Address]. Enclosed are the completed forms containing the information requested. While the NWS recognizes its obligation to register its USTs and otherwise comply with state requirements under the Resource Conservation and Recovery Act (RCRA) (42 U.S.C. § 6961), as a federal agency it is legally prohibited from paying taxes. See McCulloch v. Maryland, 17 U.S. (4 wheat) 316 (1819).

In accordance with advice from the Commerce Department's Environmental Compliance Division and the General Counsel's Office, NWS must delay payment of the registration fee until it can be determined that all or part of the charges are permissible because they are based on services and benefits received by NWS. The Department of Commerce will make this determination in accordance with the three-prong test of the United States Supreme Court in Massachusetts v. United States, 435 U.S. 444, 456 (1978) as follows:

(1) Is the fee imposed in a manner which does not discriminate between government and private entities?

(2) Is the fee a "fair approximation of the cost of the benefits" received by NWS from [the state agency]?

(3) Is the fee structured to produce revenues that will not exceed the total cost to the [state agency] of the benefits and services to be supplied; i.e., does it demonstrably support only the cost to the [state] for administering the program, or does it produce net revenues for potentially unrelated uses?

In order to make this determination, the Department of Commerce requests that it be provided with copies of the applicable portions of statutes, regulations, legislative histories and other information which sets forth the authority and purpose for establishing the fee, how the fee figure was calculated, the cost basis for the fee, how the fee receipts will be used, and other information you believe relevant for our counsel's determination whether this is a permissible fee or a prohibitive tax. This information should be forwarded to the Assistant General Counsel for Administration, Department of Commerce, Room 5882, 14th Street and Constitution Avenue, Washington D.C. 20230.

The Commerce Department and NWS intend to make every effort to fully comply with [the state's] environmental requirements and we thank you in advance for cooperating with us in resolving the fee payment issue. If you have any questions or comments please feel free to contact Ole Varmer in the Office of the Assistant General Counsel for Administration at (202) 377-5391.

Sincerely.

[Agency Official]

Enclosure

cc: Assistant General Counsel for Administration

**Note: This form letter suggests a prudent procedure which would require a legal review of the state's justification for its charges prior to payment. However, in cases where the fee for registration is low, for instance $50, and presumably is based on reasonable service charges, we would not object to the client paying the fee under protest, provided that OGC approval is obtained prior to such payment and that legal review of the justification is still conducted.