Municipal Association of SC v. USAA General Indemnity Company, 709 F.3d 276

MASC seeks a declaration that SC municipalities may impose a two-percent ITCP on NFIP flood insurance premiums collected in their municipalities.
Appellants Hartford, Nationwide, Service Insurance, and USAA write NFIP policies under FEMA’s NFIP Part B/WYO program; FEMA controls the Arrangement and forms.
Under the WYO Arrangement, premiums are collected by WYOs, held in a restricted account, and remitted to FEMA with a recurring Expense Allowance to WYOs.
2008 FEMA Memo states premiums are Federal dollars and not subject to state or local taxation, with a narrow exception for state premium taxes; this memo contends FEMA did not consent to taxes on Federal premiums beyond those state premium taxes.
District court denied summary judgment for MASC; the parties cross-appealed, and the district court’s decision was certified for interlocutory appeal under 28 U.S.C. § 1292(b) and later reversed with respect to sovereign immunity.
The central issue on appeal is whether the municipal tax is preempted by federal law or barred by sovereign immunity, which the court ultimately resolves on immunity grounds.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Are NFIP premiums federal property immune from taxation?	MASC contends premiums are not federal funds and may be taxed locally.	Appellants argue premiums are not federal property until credited to the U.S. Treasury and may be taxed by states.	Yes; premiums are federal funds and cannot be taxed without federal consent.
Are WYOs instrumentalities of the federal government for sovereign-immunity purposes?	WYO Companies stand in the Government’s shoes; tax on WYOs taxes the Federal Government.	WYOs are private entities; taxation on WYOs is taxation on private property.	Yes; WYOs are federal instrumentalities closely connected to the government, immune from taxation.
Has the federal government consented to the municipal tax on its property or instrumentalities?	No unequivocal consent to tax the flood insurance premiums or WYOs.	Consent is not present beyond waivers for state premium taxes; the broader tax is not contemplated.	No consent; the tax is impermissible and invalid.

Mayo v. United States, 319 U.S. 441 (1943) (federal immunity from state taxation under Supremacy Clause)
McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819) (federal tax immunity for national government and its instrumentalities)
City of Detroit v. United States, 355 U.S. 466 (1958) (tax immunity where no congressional consent)
Studio Frames Ltd. v. Standard Fire Ins. Co., 483 F.3d 239 (4th Cir. 2007) (NFIP not a commercial enterprise; suit against a WYO is essentially against the government)
Battle v. Seibels Bruce Ins. Co., 288 F.3d 596 (4th Cir. 2002) (premiums on WYO programs treated as federal funds)
U.S. v. New Mexico, 455 U.S. 720 (1982) (three-pronged framework for federal immunity vs. state taxation of federal entities)