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The Smithsonian Institution is a trust instrumentality of the United States, lawfully created by Congress in 1846 to exercise the authority of the United States in carrying out the responsibilities Congress undertook when it accepted the bequest of James Smithson "to found at Washington, under the name of the Smithsonian Institution, an establishment for the increase and diffusion of knowledge among men." Congress delegated the authority and responsibilities of the United States to the Smithsonian Board of Regents, initially comprised of fifteen members. The Board of Regents now has seventeen members: the Chief Justice, the Vice President, three members of the Senate, three members of the House of Representatives, and nine citizen members appointed by Joint Resolution of Congress.
The Smithsonian Institution is considered unique in the Federal establishment. The Smithsonian is not an executive branch agency and does not exercise regulatory powers, except over its own buildings and grounds. Thus, courts have held that the Smithsonian is not an agency or authority of the Government as those terms are used in certain laws applicable to executive branch agencies such as the Privacy Act, the Administrative Procedure Act, the Freedom of Information Act, and the Federal Advisory Committee Act. However, the U.S. Attorney General has concluded that the Smithsonian is so "closely connected" to the federal government that it shares the immunity of the United States from state and local regulation. In accordance with this doctrine, local zoning regulations, ABC licensing provisions, sales and use taxes, and real estate taxes are not applicable to the Smithsonian absent a specific federal statute. (There are several instances in which Congress has required federal entities to comply with state and local laws, so questions about the applicability of specific state and local laws to the Smithsonian should be directed to the Office of General Counsel.)
Courts have also held that the Smithsonian enjoys the immunity of the United States from lawsuits, unless such suits are authorized by Congress under specific statutes, such as the Federal Torts Claim Act (torts), the U.S. Copyright Act (copyright infringement), the Tucker Act (contracts), and Title VII the Civil Rights Act (discrimination).
Unlike most federal agencies, the Smithsonian is authorized to accept gifts and to generate revenue outside of the federal appropriations process. The Smithsonian is recognized by the Internal Revenue Service as a 501(c)(3) tax-exempt educational organization. Thus, the Smithsonian complies with IRS regulations and practices applicable to tax-exempt organizations, which it implements through policies and practices, including directives on Philanthropic Financial Support and Use of Facilities for Special Events. The Smithsonian files an IRS Form 990, the IRS information return for tax-exempt organizations.
The Smithsonian has two sources of funding - federal appropriations and income generated from gifts, revenue-generating activities, and investments (referred to as Smithsonian "trust funds"). The Smithsonian also has two different categories of employees, "federal" and "trust," as determined by the source of funds used to pay an employeeâ€™s salary However, the Smithsonian is one legal entity. The various museums and operating units within the Smithsonian have been created in different ways, some by Congress, some by the Board of Regents, but the museums and units (including Smithsonian Enterprises) have no separate, independent legal status: they are all part of the same legal "whole," the Smithsonian Institution.