The U.S. Department of the Treasury and the Internal Revenue Service announced that two tribal tax regulations have been finalized, which tribal leaders say removes barriers to economic development and self-governance in Indian Country.
Tribal Business News reported the rules address the treatment of tribal general welfare programs and the federal income tax status of business entities wholly owned by tribes.
The first rule implements the Tribal General Welfare Exclusion Act of 2014, confirming that benefits provided by tribal governments to their citizens may be excluded from federal income tax. Treasury officials said the final rule defers to tribal determinations of what constitutes general welfare under tribal laws, customs and traditions, rather than imposing rigid federal definitions.
Under the rule, tribes may fund general welfare programs using any revenue source, including gaming revenue, and may provide assistance ranging from housing and utilities to education support, emergency aid and small-business grants without triggering federal income tax for recipients.
The second rule clarifies the tax treatment of business entities wholly owned by tribes and chartered under tribal law, confirming that those entities are treated as part of the tribal government and are not subject to federal income tax.
Treasury officials acknowledged that decades of uncertainty around the tax status of tribally owned corporations had impeded access to capital, raised financing costs and constrained investment opportunities for tribal enterprises that generate revenue for government services.
