Answer:
There are actually two uses of those phrases. One relates to checks drawn by units of government that are not drawn on or payable at a bank. Some states (California comes to mind) issue warrants that act as checks, except that the instruments are payable at the office of the state treasurer, not at a bank. Nonetheless, those warrants are considered checks for the purpose of the regulation.
The phrases are also germane to the question of whether a check must receive next-day availability when deposited in a transaction account (under Section 229.10(c)(1)(iv)). Checks issued by a unit of state government or a unit of general local government, if deposited in a transaction account in a bank office located in the same state as the issuer, are considered next-day items when deposited by a payee of the check in person with an employee of the bank, and with, when required, a special deposit ticket. The actual definition of a "unit of general local government" is found in Section 229.2(kk): "...any city, county, parish, town, township, village, or other general purpose political subdivision of a state. The term does not include special purpose units of government, such as school districts or water districts."
First published on BankersOnline.com 7/26/10
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