Temp. Reg. § 53-4958-2T(a)(1)-Definition of “governmental entity”
The preamble to the temporary regulations notes that comments on the proposed regulations requested that the status of "section 115 governmental entities" be clarified. The preamble further notes that "[i]n response to these comments, the temporary regulations provide that any governmental entity that is exempt from (or not subject to) taxation without regard to section 501(a) is not an applicable tax-exempt organization for purposes of section 4958. The last sentence of Temp. Reg. § 53-4958-2T(a)(1) provides that "[a] governmental entity that is exempt from (or not subject to) taxation without regard to section 501(a) is not an applicable tax-exempt organization for section 4958 purposes." (emphasis supplied)

Section 115 exempts from taxation income of organizations that accrues to the benefit of states or political subdivisions in situations where the organization might not itself be a "governmental unit" referred to in sections 170(b)(1)(A)(v) and 170(c)(1) or otherwise commonly regarded as a "governmental entity." To avoid any possible confusion about the intent of the regulation, we suggest that the sentence quoted above be modified to add, after the phrase "governmental entity," the phrase "(including an entity that is not subject to taxation as a result of section 115)."