United States Department of the Interior OFFICE OF HEARINGS AND APPEALS

Interior Board of Land Appeals 801 N. Quincy St. Suite 300

Arlington, VA 22203

703 235 3750 703 235 8349 (fax) January 8, 2015

IBLA 2013-129 Mesa County 2012 Payment

BOARD OF COUNTY COMMISSIONERS OF MESA COUNTY, COLORADO

Payment of Taxes

Decision Affirmed

ORDER

The Board of County Commissioners of Mesa County, Colorado, a political subdivision of the State of Colorado (hereinafter, County), has appealed from a February 26, 2013, decision of the Office of Budget, Office of the Secretary, denying its protest of the Office of Budget's computation of the Payment In-Lieu of Taxes (PILT) payment to be made to the County for the 2012 fiscal year, i.e., October 1, 2011, through September 30, 2012.

Because the County has failed to establish any error of fact or law in the Office of Budget's computation of its PILT payment for the 2012 fiscal year, we affirm the Office of Budget's decision.

Under the PILT program, which was established by the Payments in Lieu of Taxes Act (Act), 31 §§ 6901-6907 (2006), and its implementing regulations, 43 C.F.R. Part 44, the Secretary of the Interior is authorized to make payments to the County in order to offset the County's inability to collect taxes on Federal lands, totaling 1,552,338 acres, within its jurisdiction, and to cover the County's costs of providing services related to such lands. See Prairie County, Montana, 178 IBLA 20, 21 (2009) (citing Lawrence County v. Lead-Deadwood School District No. 40-1, 469 U.S. 256, 258 (1985); and Greenlee County, Arizona v. United States, 487 F.3d 871, 873-74 (Fed. Cir. 2007), denied, 552 U.S. 1142 (2008)).

The Secretary is specifically directed by 31 U.S.C. § 6902(a)(1) (2006) to "make a payment for each fiscal year to each unit of general local government in which entitlement land is located," which payment may be used "for any

Background

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governmental purpose."1 She is further directed by 31 U.S.C. § 6903(b)(1) (2006), to make a PILT payment, pursuant to 31 U.S.C. § 6902 (2006), for any fiscal year according to the "greater" of two amounts, calculated by two different formulae: (1) under subsection (A), the payment is calculated by first multiplying the total number of acres of Federal land in the County by a higher per acre value ($1.65 adjusted for inflation to $2.48 in fiscal year 2012), and then deducting any Federal mineral lease (FML) and other payments made to the County during the prior fiscal year; or (2) under subsection (B), the payment is calculated by first multiplying the total number of acres of Federal land in the County by a lower per acre value ($0.22 adjusted for inflation to $0.34 in fiscal year 2012), but not deducting any FML and other payments made to the County during the prior fiscal year.2 See Prairie County, Montana, 178 IBLA at 21 .

Critical to our adjudication is the statutory directive in 31 U.S.C. § 6903(b)(1)(A) (2006) that the subsection (A) PILT payment amount be "reduced (but not below 0) by amounts the unit [of general local government] received in the prior fiscal year under a payment law[ . ] " (Emphasis added.) Thus, for the purposes of determining the appropriate 2012 fiscal year PILT payment for the County, we are eminently concerned wi th whether the County received FML and other payments during the fiscal year.

For the 2012 fiscal year, the Office of Budget calculated that the higher payment under 31 U.S.C. § 6903(b)(1) (2006) was computed under subsection (A)

The Act defines "entitlement land" as "land owned by the United States Government," and a "unit of general local government" is defined to include "a county" that is "within the class . . . of such political subdivision in a State that the Secretary of the Interior, in his discretion, determines to be the principal provider . . . of governmental services within the State," that "is a unit of general 31 U.S.C. § 6901 (2006). services" include, but are not limited to, "those services that relate to public safety, the environment, housing, social services, transportation, and governmental administration." Id. There is no dispute as to the County's status as a unit of general local government within the meaning of 31 U.S.C § 6901 (2006).

Whether computed under subsection (A) (before reduction based on prior fiscal year payments) or subsection (B), the initial PILT payment amount cannot exceed a specified "limitation" amount calculated pursuant to 31 U.S.C. § 6903(c) (2006), which amount is determined by multiplying the population of the County by a specified dollar amount.

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($1,578,211), not subsection (B) ($527,795).3 In computing the payment under subsection (A), the Office of Budget deducted the FML payments, totaling $1,623,107, made by the United States (through the State) to the County Federal Mineral Lease District (FMLD or District) during the fiscal year. It also deducted an additional $121,612, in accordance wi th 31 U.S.C. § 6903 (2006). 4

On appeal, the County explains that the Board of County Commissioners established the FMLD by adoption of Resolution on June 20, pursuant to section 1 of the Federal Mineral Lease District Act (FMLD Act), codified at Colo. Rev. Stat. §§ 30-20-1301 through 30-20-1307 (2011). See Statement of Reasons for Appeal (SOR) at 5. The Board of County Commissioners appointed a Board of Directors to the FMLD composed of three members (including one of the County Commissioners), by adoption of Resolution on June 27, 2011. id.

On August 24, 2011, the Board of Directors adopted a series of resolutions for electing officers (Resolution adopting by-laws (Resolution

proposing a service plan (Resolution and adopting an intergovernmental agreement between the FMLD and the County Finance Department (Resolution See SOR at 6. On August 29, 2011, the Board of County Commissioners adopted Resolution (approving the service plan), and Resolution (ratifying the intergovernmental agreement). id.

The approved service plan provided that the FMLD would generally distribute its PILT payment to areas socially or economically impacted by the development, processing, or energy conversion of fuels and minerals leased under the Federal mineral leasing act, in accordance wi th Colo. Rev. Stat. § 30-20-1307(1) (2011), and specifically to projects of eligible entities. It also provided, inter alia, that the FMLD could enter into intergovernmental agreements wi th other districts, conduct an annual independent audit of its financial activity and adopt a budget, and contract wi th other entities for administrative support and other services.

3

In the present case, the PILT payment computed under subsection (A) ($3,834,275) exceeded the "limitations" amount (50,000 x In addition, the payment was proportionally reduced (multiplying the calculated PILT payment ($1,579,781) by 0.9990060120), in accordance wi th 31 U.S.C. § 6906 (2006), in order to account for the fact that Congress had not, for fiscal year 2012, appropriated sufficient funds to make the full PILT payment. See Prairie County, Montana, IBLA at 22.

Only the FML payment deduction is at issue here.

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The County states that on February 22, 2012, the FMLD adopted Resolution approving the award of a grant, totaling $1.6 million, to the Colorado Mesa University (University). The County describes the University as "a subdivision and instrumentality of the state of Colorado," for the purpose of partially funding two endowments "designed to help lead our community towards becoming an epicenter of energy innovation by encouraging the development of new and emerging technologies," through applied research, workforce development, and curriculum enhancement, in the form of the newly-created Unconventional Energy Center, within the University's Redifer Research Institute. SOR at 6-7.

At issue in the present case is the Office of Budget's determination to deduct the FML payments made by the United States to the County FMLD during the fiscal year from the 2012 fiscal year PILT payment to the County. The Office of Budget concluded that the County FMLD was not an entity politically and financially independent of the County, and that the Office of Budget was entitled, under the Act, its implementing regulations, and pertinent Comptroller General Opinions, to deduct the FML payments from the 2012 fiscal year PILT payment. It determined that the County FMLD was not politically and financially independent of the County by looking at the applicable Colorado State statute in effect at the time of the fiscal year FML payments, Colo. Rev. Stat. §§ 30-20-1301 to 30-20-1307 (2011), which had authorized creation of the District, concluding that the payments received by the District constituted, in effect, payments received by the County.

On or about December 19, 2012, the County protested the Office of Budget's 2012 fiscal year PILT payment determination, pursuant to 43 C.F.R. §§ 44.55 and 44.56. In its February 2013 decision, the Office of Budget denied the protest, upholding its earlier determination of the County's fiscal year PILT payment.

The County appealed timely from the Office of Budget's February 2013 decision pursuant to 43 C.F.R. §§ 4.410 and 44.57.

The County's Arguments

County contends that the authority delegated to the FMLD and the manner in which the FMLD exercised that authority demonstrates that the FMLD was politically and financially independent of the County.

First, the County argues that FMLDs are under State law, as "distinct, independent entities, apart from the county in which they are located." SOR at 9. The County emphasizes that each FMLD is appointed by the board of county commissioners and is governed by a board of directors (the majority of which directors cannot be county commissioners), elects its own officers and adopts its own

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by-laws, is charged wi th adopting a service plan designed to govern the distribution of FML payments, and conducts its own business. SOR at 9.

Second, the County argues that none of the FML payments made to the FMLD benefited the County:

The FML funds [paid to the FMLD] . . . [were] distributed . . . through a grant program which did not benefit the local county-government and was not spent on local county government projects. . . . This district provides services, the cost of which are not otherwise borne by the local government's tax revenues. The []FMLD does not fulfill a county responsibility . . . .

. . . The authorized a project did not benefit its local county government by relieving it of county responsibilities.

SOR at 3 (emphasis added).

The County concludes that the Office of Budget failed to take into account the State law requirement that the County FMLD act independently of the County, and that i t so acted in receiving and distributing the FML payments. According to the County, the Office of Budget's determination to deduct those payments from the County's PILT payment was arbitrary and capricious since i t "entirely failed to consider an important aspect of the problem" at hand.5 SOR at 11 (citing Motor Vehicle Manufacturers Association of United States, Inc. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43 (1983)).

In addition, the County asserts that the Office of Budget's determination should be overturned because i t is "not supported by substantial evidence," which constitutes "'such relevant evidence as a reasonable mind might accept as adequate to support a

SOR at 11 Foust v. Lujan, 942 F.2d 712, 714 (10th Cir. 1991), denied, 503 U.S. 984 (1992)). The standard of proof to which the County refers

is not applicable in the Board's review of agency decisions, but rather governs judicial review of Board decisions. See Beau Hickory, 160 IBLA 166, 176 (2003) (citing, e.g., U.S. Fish & Wildlife Service, 72 IBLA 218, 220-21 (1983)).

The County claims that i t has been "deprived . . . of procedural due process in this matter." SOR at 11. However, by virtue of the Office of Budget's adjudication of its protest, and, moreover, by virtue of the Board's adjudication of this appeal, the County has been afforded ample procedural due process of law. See Christopher L . Mullikin, 180 IBLA 60, 73-74 (2010), and cases cited.

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Discussion

Under 31 U.S.C. § 6903(b)(1) (2006), the Office of Budget is required to determine the proper PILT payment to the County according to the higher figure calculated under two different formulae, as described supra. The County does not challenge the Office of Budget's calculation of the payment owed under Subsection (B) of the section, or the fact that, absent any change in the payment calculated under Subsection (A) of the section, the subsection (A) payment is higher. However, the County does challenge the Office of Budget's calculation of the payment owed under subsection (A), contesting the Office of Budget's deduction of FML payments made to the County FMLD in the fiscal year. The Office of Budget concluded that because the FMLD is not politically and financially independent of the County, the FML payments to the FMLD are properly deductible from payments to the County. The County contends, on the other hand, that the FMLD is politically and financially independent, and that the Office of Budget was precluded from deducting the FML payments made to the FMLD, since those payments were not received by the County.

It is well established that FML payments made to a county are deemed to be payments to the county for § 6903(b)(1)(A) deduction purposes, except where it can be demonstrated that they are passed along to a "politically and financially independent school or single-purpose [ ] " that is "alone responsible for providing the services in question"; in that situation, the county has not "meaningfully received" the FML monies. 65 Gen. 849, 851 (1986), 1986 WL 60553, at *3 (emphasis added) (citing 58 Comp. Gen. 19 (1978), 1978 WL 13317). However, even where the payments are passed along, " i f a county receives [FML] funds for carrying out functions or activities that it would otherwise provide and pay for with county revenues, then, . . . the mineral lease funds must be deducted from the county's PILT funds." Id. (emphasis added). In that situation, the county has "meaningfully received" the FML monies.

The sole issue presented for decision by the Board is whether, at the time of the fiscal year FML payments to the FMLD, the FMLD was politically and financially independent of the County, and accordingly, whether the FML payments should have been deducted from the fiscal year PILT payment to the County.

Whether a particular county district is properly considered politically and financially independent of the county is not defined by the Act or its implementing regulations. However, in a series of opinions, the Controller General has explained how to determine whether a political entity is politically and financially independent of a county. 58 Comp. Gen. 19 (1978); see SOR at 7-8 (citing 61 Gen. 365 (1982), 1982 WL 26617; Comp. Gen. Opinion (1984), 1984 WL 46577;

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and 65 Comp. Gen. 849 (1986)). The County notes that, in terms of the actions of the county district in distributing the payments received, the determinative factor is whether the payments are used to provide services that would otherwise be provided and paid for by the county. See id.

We agree with the County that the basic principle flowing from the Comptroller General Opinions is that, " [ i ] f Mineral Lease funds provided to a county are used to assist i t in carrying out functions or activities that i t would otherwise provide and pay for wi th county funds, then they must be deducted from the county's PILT receipts." Id. at 8. Thus, the initial question is whether the FML payments to the County FMLD are, in fact, used to carry out a function or activity that the County "would otherwise provide and pay for wi th county Id.

At the outset, we accept the County's assertion that the County "do[es] not actually or directly receive FML funds, nor are FML funds available to [the] [C]ount[y]." Id. at 4. Indeed, the Office of Budget's determination to deduct the FML payments from the PILT payment was made on the basis that, although the lease payments went to the FMLD, they in effect were received by the County. Further, i t is not disputed that the United States, through the State, made FML payments totaling close to $1.6 million to the FMLD in fiscal year which were then deducted by the Office of Budget in computing the County's 2012 fiscal year PILT payment. The impact of this deduction was to significantly reduce the PILT payment to the County. See id. at 5.

Nor is i t disputed that, were the lease payments to have been made to the County, the Office of Budget was entitled, under 31 U.S.C. § 6903(b)(1)(A) (2006), to deduct such payments from the PILT payment computed under that subsection. See SOR at 7 ("31 U.S.C. § 6903(b)(1)(A) provides that a unit of general local government's PILT is to be '. . . reduced (but not below 0) by amounts the unit received in the prior fiscal year under a payment law . . . .' Among the payment laws specified in 31 U.S.C. [§] 6903(a) is [section 35 of] the Mineral Lands Leasing Act, 30 U.S.C. § 191."). However, whether such payments were effectively made to the County is precisely the matter that is now at issue.

We start wi th the County's assertion that the FML payments received by the FMLD were distributed in such a way that they did not substitute for monies that otherwise would have been provided by the County, and that their distribution did not benefit the County by saving the County from having to make such expenditures. The County's fundamental premise is that the FML payments funded projects that were not "local county government projects." SOR at 3. It refers simply to the fact that the payments received by the FMLD were, in turn, granted to the University for

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the purpose of partially funding two endowments designed to promote alternative energy sources. See id. at 6-7.

The record does not establish whether partially funding two endowments designed to promote alternative energy sources is something that would normally be undertaken and funded by the County, or, ultimately, whether i t fulfills a County responsibility. At the same time, we cannot conclude that the payments have not gone to fund a project that might otherwise have been supported by the County. While the University is a subdivision and instrumentality of the State, i t is situated in Mesa County, Colorado, and, in the words of the County, the two endowments are specifically designed "to help lead our community towards becoming an epicenter of energy SOR at 6-7 (emphasis added); see University Resolution 12-001, dated Jan. 26, 2012, at unpaginated 1 ("[T]he Mesa County [FMLD] solicited grant applications . . . that meet the . . . objectives of the [FMLD] Act as well as the goals and objectives set forth in the Mesa County economic development plan," whose "number one goal identified for economic development in Mesa County is to position the community as an epicenter of energy innovation.").

We find no indication that the Office of Budget, in finding the FMLD is not politically and financially independent, relied on the fact that the FML payments made to the FMLD were used to fund local county government projects, or otherwise benefited the County by substituting for local government monies. Rather, the Office of Budget's decision appears to rest entirely on its assessment of the legislative authority under which the FMLD was created and operated during the relevant time period.

In its decision denying the County's protest, the Office of Budget stated that i t had relied on its earlier review of the proposed State legislation that created the FMLD. In an October letter to Colorado Counties, Inc. (October Letter), the Office of Budget concluded that FMLDs created pursuant to the legislation would not be considered politically and financially independent for PILT payment purposes. It particularly noted that "Colorado's . . appears to lack sufficient language that would establish real independence." October 19 Letter at 1. The legislation acknowledged the "sole purpose of the proposed law is to avoid PILT deductions," and "goes to great lengths to establish that the [F]MLDs and their Boards of Directors wi l l be heavily influenced by the counties and their commissioners." Id. The Office of Budget further noted that, following receipt of the October 19, 2011, letter, the State enacted legislation "revising the [statutory] language to meet the criteria for independence outlined in our October letter." Decision at 1. The Office of Budget states that i t reviewed this revised legislation in a December 21, 2012, letter (December 21 Letter) to the Colorado Department of Local

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Affairs, and concluded that i t "can now declare the [F]MLDs financially and politically independent" for PILT payment purposes. Id.

The County, however, argues that the Office of Budget improperly relied on its earlier review of the proposed State legislation, since such review did not constitute "a formal decision based upon the legislation that was actually adopted[.]" SOR at 3.

It is true that the Office of Budget's October 19, letter addressed the proposed legislation.6 See October 19 Letter at 1 ("You asked us to review a 2011 bill from the State of Colorado that proposes the creation of '[F]ederal mineral leasing districts' in order to the amount of Payments in Lieu of Taxes funding Colorado (Emphasis added)).7 However, the County overlooks the fact that the proposed legislation was enacted on May 9, 2011, and was in effect when the fiscal year FML payments were made to the County FMLD.

Further, the County fails to identify any aspect of the proposed legislation that differed, in material respect, from the legislation actually adopted, or, most importantly, establish that the Office of Budget was incorrect in its assessment that an FMLD created in accordance with the legislation would not be politically and financially independent. The County did not establish any error in the Office of Budget's reliance on its earlier October 19, letter to conclude that the County FMLD was not, when it received the FML payments for fiscal year 2011, politically

Colorado Counties, Inc., had requested the Office of Budget's review of the proposed legislation, by e-mail dated Feb. 9, right after its introduction in the State legislature. It informed the Office of Budget that the State legislative session lasted from January to May. However, the Office of Budget's response was not issued until after the end of the legislative session that enacted the proposed legislation on May 9, without the benefit of the Office of Budget's input.

We note that, when enacted, the State legislation specifically declared that, "in order to maximize the amount of payment in lieu of taxes funding Colorado receives, county [F]ederal mineral lease payments must be protected from the new [F]ederal prior-year payment method," whereby FML payments in a prior fiscal year are, in accordance wi th 31 U.S.C. § 6903(b)(1) (2006), used to reduce PILT payments to counties for the current fiscal year. (Emphasis added.) Colo. Rev. Stat. § 30-20-1302(3) (2011). When the State amended the 2011 FMLD Act, i t eliminated any reference to avoiding the reduction of PILT payments attributable to FML payments, referring instead "to the long-term benefit of funding derived from [F]ederal mineral leasing [to communities in the State impacted by the development of natural resources on Federal land] [ . ] " Colo. Rev. Stat. § 30-20-1302(2) (2012) (emphasis added).

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and financially independent of the County. In addition, the opinion expressed in the October 19, letter was that of the Director, Office of Budget. Thus, it would seem that the letter constituted, in effect, a "formal decision based upon the legislation that was actually adopted[.]" 3.

Moreover, we agree wi th the determination of the Office of Budget expressed in the October 19, letter. The Office of Budget correctly points out that, by stating that the legislation is designed to the PILT funding that the State receives, the legislation "acknowledg[es] that the sole purpose of the . . . law is to avoid PILT October 19 Letter at 1. However, that intent alone would not undermine the political and financial independence of the FMLD. Indeed, were the legislation to render the FMLD politically and financially independent, i t would not matter that i t was designed for that very purpose, since the State is

to establish entities independent of the County. Such independence was evidently achieved wi th enactment of the 2012 amendment to the 2011 legislation, which had, as understood both by the State legislature and the Office of Budget, the avowed purpose of receiving FML payments in a manner that does not impact the County's PILT payment.8 See December 21 Letter at 1 ("We have reviewed [the amendment] . . . that proposes the creation of '[F]ederal mineral leasing districts' and find that the districts contemplated by the bill would be sufficiently politically and financially independent to avoid a deduction for prior year resource-based revenues under the Payment in Lieu of Taxes (PILT) program.").

However, in the October Letter, the Office of Budget relies foremost on its opinion that the State legislation "lacked sufficient language that would establish real independence," further stating:

[The legislation] goes to great lengths to establish that the and their Boards of Directors will be heavily influenced by the counties and their commissioners. Not only wi l l the county commissioners have the authority to determine whether the [F]MLD wi l l exist beyond the initial two years, but the commissioners must approve or disapprove the [F]MLD service plan, and at least one member of the board of directors for each [F]MLD must be a county commissioner. The county

We note that the 2012 amendment deleted the original language explicitly defining the FMLD Act's purpose as maximizing the PILT payment by avoiding the deduction of FML payments, focusing instead on the purpose sought to be achieved wi th the FML payments, which is "to maximize the long-term benefit of funding derived from Federal mineral leasing," for the benefit of "those communities designated as impacted by the development of natural resources covered by the Federal [mineral leasing] act." Colo. Rev. Stat. § 30-20-1302(2) and (3) (2012).

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commissioners wi l l also possess the authority to remove any member of the [F]MLD board of directors by vote.

October Letter at 1 (emphasis added). The Office of Budget properly concluded that, on [its] informal review, these factors do not appear to establish sufficient independence" to render FMLDs created under the legislation politically and financially independent. Id.

The Office of Budget's view that the FMLD was not politically and financially independent under the legislation was the basis for its fiscal year PILT computation and subsequent February 2013 decision. See Decision ("Because of th[e] determination [in the October 19 Letter], the $1.6 million payment distributed by the State of Colorado to the Mesa County Federal Mineral Lease District was correctly deducted from the 2012 PILT payment."). The County does not dispute the Office of Budget's identification of particular aspects of the legislation that militate against a finding of political and financial independence, which is borne out by a review of the FMLD Act, as enacted. See Colo. Rev. Stat. §§ 30-20-1304(2) (County commissioners create FMLD), 30-20-1304(5) (County commissioners must reauthorize FMLD after initial 2 years), 30-20-1305 (County commissioners must approve service plan), 30-20-1306(1) (County commissioners appoint the FMLD's board of directors (commissioners may never be a majority of the board, but at least one member of the board must be a commissioner)), and 30-20-1306(2) (County commissioners may remove any member of the FMLD's board of directors without cause) Nor has the County offered any argument or supporting evidence

The Office of Budget also enumerated "factors" that i t [d] . . . could be viewed as providing the necessary evidence of independence." October 19 Letter at 1. These included the status of the FMLD ("Special Service District (SSD) that is a body corporate and politic wi th perpetual succession, separate and distinct from the county . . . that creates i t" and "a quasi-municipal corporation"), the structure of the FMLD (Members of the board of directors are "not appointed by, removable by, or hold a position wi th the associated county"), and the function of the FMLD (SSD "may sue and be sued," "enter into contract wi th government agencies to carry out its functions," "acquire real or personal property," "sell, convey, lease, exchange, transfer, or otherwise dispose . . [its] property," "accept a grant or loan," "borrow money and incur indebtedness," "adopt an official seal," and provide a service "to an area outside of its boundary"). Id. at 2. While not expressly stated, the Office of Budget indicated that these factors were not present in the case of FMLDs created pursuant to the legislation.

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demonstrating that these aspects of the legislation do not undermine its assertion that the FMLD is politically and financially independent.10

Thereafter, during consideration of what became the 2012 amendment of the legislation, the Office of Budget concluded, in the December 21 Letter, that the

amendment would render an FMLD created pursuant to the amendment politically and financially independent of a county. It noted that i t made its determination based on the extent to which such an FMLD satisfied the factors outlined in the October Letter. However, the Office of Budget did not specify whether or to what extent such an FMLD would satisfy these factors. In a November 27, Note to Reviewer (November 27 Note), the Office of Budget reported that the amendment "met 10 of the indicators without any issue." However, the Office of Budget noted, in the November 27 Note and December Letter, that i t was concerned with whether the amendment satisfied the factor of having members of the board of directors who could not be appointed by, removed by, or hold a position wi th the county. It concluded that, under the amendment, the County commissioners could continue to appoint the board of directors of such an FMLD. This authority would not necessarily be disqualifying, because the majority of the board could never be composed of County commissioners; the FMLD could only act by a majority vote of the board of directors; and no member of the board of directors could overrule a majority vote of the board.1 1 See December 21 Letter at 1-2; Colo. Rev. Stat. § § 30-20-1306(1) and 30-20-1307(1) (2012).

Furthermore, the 2012 amendment eliminated the limitation of the initial term of an FMLD to 2 years, subject to reauthorization for a second 2-year term by the County commissioners. In effect, i t provided for "perpetual succession," allowing only the FMLD's board of directors to dissolve the FMLD. October 19 Letter at 2; see Colo. Rev. Stat. § 30-20-1304(5) (2012). The amendment also eliminated the

Indeed, were the County commissioners so inclined, they could indirectly dictate the actions of the FMLD by threatening to not reauthorize the FMLD after the initial 2-year term or, during the initial 2-year term, to remove any and all members of the FMLD board of directors who are not commissioners, unless the directors acceded to the views of the commissioners, and, even i f that failed, they could disapprove any service plan not in agreement wi th their views, and thus fundamentally affect the manner in which the FMLD distributed the FML payments. While none of this might ever occur, the fact of the matter is that the existence of this overriding authority in the County commissioners rendered the FMLD politically and financially dependent on the County.

The 2012 amendment retained the ability of the County commissioners to appoint the FMLD's board of directors, but afforded them the option of providing for an election of board members. See Colo. Rev. Stat. § 30-20-1306(1) (2012).

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provision for approval of the service plan by the County commissioners in its entirety, thus repealing § 30-20-1305, and instead provided, in a new § 30-20-1305.5, that the FMLD was an "independent public body politic and corporate," which "is not an agency of county or State government and is not subject to administrative direction by any department, commission, board, or agency of a county or the State." Colo. Rev. Stat. § 30-20-1305.5(1) (2012) (emphasis added). The new § 30-20-1305.5 also provided that the FMLD may sue and be sued, enter into contracts, acquire real or personal property, sell, convey, lease, exchange, transfer, or otherwise dispose of its property, accept a grant or loan, borrow money, adopt an official seal, distribute funding outside its boundary, and provide services. See Colo. Rev. Stat. § 30-20-1305.5(d)(2) (2012). Finally, the 2012 amendment eliminated the provision allowing the County commissioners to remove any member of the FMLD's board of directors without cause, and instead provided that each member would hold office until his appointed term expires or a successor is appointed and may be removed only for official misconduct, incompetence, neglect of duty, or other good cause, after notice and an opportunity for a public hearing. See Colo. Rev. Stat. § 30-20-1306(2) (2012). Thus, in amending the 2011 legislation, the State legislature eliminated the ability of the County commissioners to directly or indirectly affect the activities of the FMLD.

Finally, the County argues that the County FMLD should be considered analogous to a county health department, which was held by the Colorado Supreme Court, in Johnson v. Jefferson County Board of Health (Johnson), 662 P.2d 463 (Colo. 1983), and Jefferson County Health Services Association, Inc. v. Feeney (Feeney), 974 P.2d 1001 (Colo. 1998), to be a "distinct, independent entit[y], apart from the county in which [i t is] located." SOR at 9. The County notes that the court reached this conclusion despite the fact that, under State law, the board of county commissioners creates the health department, appoints its board of directors, and, i f necessary or appropriate, can dissolve the department, and that the court rejected the view that the board of county commissioners is the ultimate governing body concerning the functions of the health department. See id. at

The State court rulings are not binding on the Board since they did not adjudicate the independence of the County FMLD for the purpose of determining the deductibility of FML payments under 31 U.S.C. § 6903(b)(1) (2006), and, even if they were binding, they would have decided a matter arising under Federal law in a case where the United States was not a party to the proceeding. See, e.g., Gas Development Corp., 177 IBLA 201, 207-08 (2009).

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Upon review, we do not find the State court rulings in the Johnson and Feeney14 cases to be instructive. The State court not rule in those cases that the county health department was politically and financially independent of the county within the meaning of the Comptroller General opinions. Rather, the court established, and then essentially reaffirmed, that the county health department was, as a matter of applicable State law, "a legal entity, separate and distinct from the board of county commissioners." Feeney, 974 P.2d at 1004.

The court, more so in Feeney than in Johnson, expressly recognized that the county health department exercised its own State statutory mandate, and that, even though the department existed and continues to exist by virtue of the board of county commissioners, the department functioned under State law as a political subdivision separate from the county. See Feeney, 974 P.2d at 1006 ("Based upon the structure of a [county] . . . [h]ealth department as aligned wi th the state rather than the county, the particular governing duties of a board of health viewed in light of the purposes of the [applicable State law], and the fact that only one entity may be designated properly as a governing body, we conclude that the board of health is the governing body of a health department."). While the court rulings are instructive concerning whether a county entity operates as a separate legal entity, they do not answer the question of whether the County FMLD is politically and functionally independent of the County under 31 U.S.C. § 6903(b)(1) (2006).

The court Johnson applied 2 Colo. Rev. Stat. § 25-1-505(1) (1978) in addressing the question of whether the county health department was a distinct, independent entity apart from the county in which it was located. The case arose in the context of a lawsuit against the county board of health, which oversees the county health department, by a discharged employee seeking reinstatement, back pay, and damages because of a wrongful discharge and other unlawful conduct. The court held, inter alia, that the county board of health could discharge the employee without cause or formal procedure, in accordance wi th applicable State law, even where this conflicted wi th personnel rules of the county, since the board was a separate political subdivision of the State, and thus separately charged wi th following State law. See Johnson, 662 P.2d at 470-71.

Feeney involved a lawsuit against the county health department by a pedestrian who sought damages for injuries sustained outside a county medical clinic. Construing 7 Colo. Rev. Stat. § 24-10-109(3) (1998), the court held, inter alia, that, although the board of county commissioners had been notified, the county board of health, not the board of county commissioners, was entitled to notice of the original claim filed by the pedestrian against the county health department, since i t was, in accordance wi th applicable State law, the governing body of the health department. See Feeney, 974 P.2d at 1003-06.

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We conclude that the ability of the Board of County Commissioners to disapprove of the service plan and remove individual members of the board of directors without cause, along wi th the other factors, fundamentally affects the operation of the County FMLD, distinguishing it from the county health department involved in Johnson and Feeney. For our present purposes, i t is the retention of authority by the County to establish the County FMLD and effectively determine its subsequent actions that precludes the FMLD from being considered politically and functionally independent of the County under 31 U.S.C. § 6903(b)(1) (2006).

We, therefore, conclude that the Office of Budget properly denied the County's protest challenging the deduction of FML payments to the FMLD from the County's 2012 PILT payment, pursuant to 31 U.S.C. § 6903(b)(1) (2006).

Accordingly, pursuant to the authority delegated to the Board of Land Appeals by the Secretary of the Interior, 43 C.F.R. § 4 .1 , the decision appealed from is affirmed.

I concur:

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