Tribal Sovereignty Supported in Latest Tax Reform Bill

Gale Courey Toensing


A California congressman has introduced a far-reaching tax reform bill clarifying that sovereign tribal nations are as tax exempt as states and other nations.

RELATED: IRS Harassing Tribes Audits Threatening Sovereignty

On August 2, Rep. Devin Nunes (R-CA.) introduced the "Tribal General Welfare Exclusion Act of 2013" – H.R. 3043 into Congress. The bill will stop the Internal Revenue Service from imposing federal income taxes on benefits tribal members receive from a wide range of tribal government programs and services, such as education scholarships, funds to attend and participate in cultural events, housing benefits, bereavement stipends, and many others. In addition, it will put an end to IRS agents showing up unannounced on reservations to conduct audits of tribal governments’ expenditures that have not been and never should be subject to taxation.

“By excessively taxing critical programs and services provided by American Indian tribes to their members, the IRS is discouraging the tribes’ self-reliance and fostering dependence on the federal government,” Nunes told Indian Country Today Media Network in an e-mail. “This bill will rectify the situation by allowing tribes more leeway to administer programs at an effective, local level.”

The bill “answer[s] the call of tribal leaders,” Ernie Stevens Jr, chairman of the National Indian Gaming Association (NIGA), said in an August 13 regulatory alert e-mail blast to the association’s members.

Tribal leaders and organizations have pushed Congress to codify and broaden the General Welfare Exclusion (GWE) as it applies to Indian tribes through an amendment to the Internal Revenue Code. Over the past year the major national organizations – NIGA, United South and Eastern Tribes, the National Congress of American Indians (NCAI), and the Native American Finance Officers Association and others produced “white papers” on tax reform proposals. At the NCAI mid-year conference in June, the proposals came together in a resolution called “Support for Legislation to Amend the Internal Revenue Code to Respect the Sovereignty of Indian Nations to Govern and Promote the General Welfare of Tribal Citizens and to Protect Our Homelands. The resolution began by recalling the constitutional recognition of Indian nations as sovereigns with rights of self-determination and self-government over tribal citizens and tribal territory and tribal nation citizens as “Indians not taxed.”

Nunes’ bill excludes most tribal government programs and services from federal income taxation. It requires the Secretary of the Treasury Department to develop a mandatory education and training program for IRS field agents to learn about federal Indian law and the unique federal treaty and trust obligations. IRS examinations and audits will be suspended until the IRS is adequately trained.

Other provisions include:

-- A definition of “Indian general welfare benefits” as "any payment made or services provided" by a tribal government to tribal citizens (or any spouse or dependent) under a tribal program with "specified guideline." The benefits must be available to any tribal member that meets the guidelines; must promote the general welfare; and cannot be "lavish or extravagant."

-- For ceremonial activities, any items of cultural significance, reimbursement of costs, or cash honorarium for participation in cultural or ceremonial activities for the transmission of tribal culture will not be treated subject to federal income tax.

-- The bill does not address per capita payments so per capita payments made pursuant to the Indian Gaming Regulatory Act will continue to be subject to taxation.

-- Any ambiguities in the new law will be resolved in favor of tribal governments and deference shall be given to tribal government decisions to promote the general welfare of Indian communities.

-- The bill authorizes the Treasury Secretary to waive penalties and interest imposed on tribal general welfare payments under past policies and practices of the IRS.

The bill has broad bipartisan support with 14 original co-sponsors including representatives Lynn Jenkins (R-KS), Ron Kind (D-WI), Jim Gerlach (R-PA), Dave Reichart (R-WA), Charles Boustany (R-LA), Tom Cole (R-OK), Gwen Moore (D-WI), Suzan DelBene (D-WA), Tony Cardenas (D-CA), Derek Kilmer (D-WA), David Valadao (R-CA), Betty McCollum (D-MN), Markwayne Mullin (R-OK), and Paul Gosar (R-AZ).

The National Indian Gaming Association urged its members to support Nunes’ proposal with letters to their congressional representatives. “The bill also includes a number of provisions that provide deference to local tribal government decision-making authority and generally fosters the policy supporting Indian self-determination and respect for tribal culture,” Stevens said.