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Ask a Water Lawyer: Acequias Opening Bank Accounts

By Enrique Romero, NM Legal Aid
 
NMAA and NMLA have fielded a number of technical assistance requests dealing with the issue of what sort of documentation banks should be requesting from acequias when opening a bank account. Typically, the bank is confused about an acequia's status and may request documentation ranging from Employer Identification Number (EIN) verification letters (an acceptable request) to articles of incorporation (an unacceptable request).
 
As most of you know, an acequia is a political subdivision of the state of New Mexico. Section 73-2-28 of the acequia statutes states this fact unambiguously. We also know from reading the preceding section that ditches are acequias or community ditches as long as they are not private (have at least three owners) and are not incorporated under state law. However, anyone familiar with the "Blue Book" also knows that state law describes acequias and community ditches as "corporations or bodies corporate, with power to sue or to be sued as such." This does not mean that acequias are corporations the way Wal-Mart (for-profit) or the Red Cross (non-profit) are corporations, or even the way in some places a city or township may be described as a municipal corporation. Rather, acequias are a hybrid. The New Mexico Supreme Court held in
Wilson v. Denver that "a statutory ditch association is a hybrid between a corporation and a public body…[having] a nominal public character but 'remain essentially business enterprises."Informing the Court's decision is the fact that an acequia is a governmental entity created primarily for limited purposes and exercising narrow functions. This "special purpose" entity, therefore, is relieved from certain requirements that apply to general purpose local governments like counties and municipalities. The bottom line is that acequias, by statute, are a form of local government and corporation, making unnecessary – and not in an acequia's interest – the filing articles of incorporation with the Secretary of State.
 
Most banks are not going to know about the complexity of acequia law. What they are going to know is their standard operating procedure, and unfortunately, banks in New Mexico do not include a page from their playbook dedicated to assisting acequias. In any event, an acequia officer charged with the task of opening up an account should unhesitatingly state that the acequia is political subdivision of the state. Take your Blue Book with you to reference the statute, along with a copy of your signed bylaws, and be prepared to make specific individuals (other officers) signatories on the account. You may need to provide copies of the minutes from the election meeting at which the officers were elected. And finally, it is within the bounds of reason – and I'm guessing a requirement of federal law – that an acequia provide the bank with its EIN. Although acequias rarely have employees, and would therefore not consider themselves employers, the EIN is routinely issued by the IRS and an application can be done quickly and easily online. It should not be necessary to confirm the acequia's tax-exempt status for the purposes of opening an account. If the bank insists on some documentation regarding tax-exempt status, the acequia may provide the bank with the Governmental Information Letter from the IRS (accessible on the IRS' website) concluding that generally political subdivisions of the state are not subject to federal income tax.