Internal Revenue Service tribal consultation policy

E.S. Dempsey
5/30/03

WASHINGTON - The Internal Revenue Service met with tribal leaders recently in Sacramento, Calif., and Seattle, to discuss how the IRS should develop a consultation policy with Indian country. Christie Jacobs, head of the IRS Office of Indian Tribal Governments, was pleased by the turnout. Approximately 40 people came to the Sacramento meeting, and 20 attended in Seattle.

"It really made me happy, that people are willing to come and sit with people from the IRS and talk for three hours, and share their ideas and experience with us."

The Office of Indian Tribal Governments, which was established three years ago, is one of several new leaves turned over by the federal tax agency in response to public and Congressional dissatisfaction with its methods. The IRS reorganized itself into four divisions focused on types of groups with which it interacts. Tribes fall within the tax exempt and government Entities section. The consultation meetings are an expression of a new attitude to accompany the new structure, one that emphasizes outreach.

Indian tribal governments are not subject to U.S. income tax, so why should the IRS develop a policy with them? Eric Facer, a Washington lawyer who specializes in Indian business law, says tribes have not gotten a lot of attention from the IRS over the years, but the success of Indian gaming has caused that to change.

"Although Indian nations don't pay income taxes, they work with people who do and employ people who do. And the IRS wants to work out a cooperative relationship with them that will allow it to discharge its responsibilities, while at the same time respecting the autonomy and sovereignty of Indian nations."

Here's an example of when tribes would interact with the IRS: All casinos, including those tribally owned, have to file Currency Transaction Reports for cash transactions of $10,000 or more. And if an outside developer is co-owner of a gaming tribe's casino, then federal income taxes are involved.

Indian Country Today asked Jacobs if tribal leaders at the meetings expressed suspicion or mistrust of the IRS.

"Most of the people who come have had experience with us, one-on-one, so there is a trust they have built with our employees," Jacobs says. "But when it comes to figuring out what ought to be in a consultation policy, people have expressed concern about what is the motivation for that."

Jacobs says tribes have seen the results of consultation done by other federal agencies, which left them wondering if the IRS really wants their input or if decisions have been already made.

Facer thinks the Office of Indian Tribal Governments is a shining example of the agency's new face.

"They do not fit the stereotype of the IRS agent who sees the world in one perspective, to balance the federal budget deficit come hell or high water. Their mindset is to work cooperatively with the tribes, and see if they can accomplish on a government-to-government level what they really can't accomplish if they try to use force or threats or intimidation."

Given the agency's good intent, what suggestions should tribes be giving to the IRS? Facer says tribes have an opportunity to change IRS policy on rules and notices that affect Indian country. There have been several rulings over the past 40 years that apply to Indian tribes. A recent example is one regarding minors' trusts. For tribal members under the age of 18, many gaming tribes put their per capita distributions into trust accounts. The ruling clarified the circumstances regarding the tax treatment of those trusts.

If tribes were able to convince the IRS to solicit written input on proposed revenue rulings targeted at Indian country, even before those rulings were published in the Federal Register, which would be a first.

"Historically the IRS has not done this," Facer says. "They don't do it with anybody as a general rule. Their attitude is, we're the IRS, we're the ones who make the rules. After we publish our rule, if you've got a problem, then you let us know."

Jacobs says the consultation policy they hope to develop would have a mechanism to involve input from tribes before, not after, rules are written.

"A point that everyone has made at every meeting is, 'Don't bring us in after you've started the process of drafting something. Bring us in when you are thinking about it, so we can help with the drafting.'"

After the listening meetings are completed, the next step will be to write a consultation policy based on the ideas put forth. Jacobs says it has to be decided if the IRS people will write the draft, or if the agency will hand the task over to an outside group of tribal leaders.

She says she has gotten requests to post on the IRS Web site what they are hearing as they hear it.

"We're going to work on doing that when we get back. Nothing is identified by person, just the thoughts as we are hearing them so people can see what others are saying. And provide their reaction to that. It should be up fairly soon, certainly by the summer."

The west coast listening meetings were the third and fourth in a series of 12 sessions scheduled this year. The next meetings will be August 12 and 14 in Pierre, S.D., and Billings, Mont. Check the IRS Web site for more information: www.irs.gov/tribes.

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