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An excerpt:
III. TRIBAL FINANCING
Indian tribes and wholly-owned tribal corporations chartered under Federal law are not subject to Federal income taxes. In contrast, a corporation owned by a tribe or tribal members and organized under State law is subject to Federal income tax on income earned from commercial activities conducted on or off the tribe’s reservation. Generally, tribal members are subject to Federal income taxes except for certain income. For example, income earned from the exercise of certain fishing rights is excluded from income.
Tribes are often depressed economic communities with high unemployment. From 2007 to 2010, the American Indian unemployment rate increased from 7.5% to 15.2%. The unemployment rate for Alaska Natives was even higher—21.3% in 2010. The tax code contains several provisions to boost economic activity within and on tribal lands. Tribes are also allowed to issue tax-exempt bonds; however, such bonds are limited to “essential government functions”, a requirement that does not apply to states.
1. Modify tribal tax-exempt bonds
a. Modify tax-exempt bonds for tribal governments (FY14 Administration Budget Proposal; estimated in 2013 to cost less than $1 billion over 10 years; Joint Committee on Taxation, JCX-19-05R, 2005)
i. Repeal the essential governmental function requirement so that eligibility standards are the same for tribal governments and state and local governments (Testimony of Dr. Lindsay Robertson before the Finance Committee, May 15, 2012; Department of the Treasury, “Report and Recommendations to Congress Regarding Tribal Economic Development Bond Provision under Section 7871 of the Internal Revenue Code,” 2011)
ii. Conform private activity bond standard to those of state and local governments
1. Could restrict project location to reservations
2. Could prohibit issue or use of bonds for gambling facilities
2. Exempt certain tribal activities from taxation
a. Create a ten-year, tax-free zone for selected areas of Indian country in which economic activity would not be subject to any federal, state, or local income, sales, or excise taxes (Testimony of President Robert Odawi Porter before the Finance Committee, May 15, 2012; Lummi Indian Business Council comments to Committee on Ways and Means working group on Charitable/Exempt organizations, submitted April 15, 2013)
3. Clarify the general welfare exclusion doctrine for certain benefits provided by tribes to members (Various Tribal comments to Committee on Ways and Means working group on Charitable/Exempt organizations, submitted April 15, 2013)
a. Codify the income exclusion for government benefits provided by Indian tribes under the general welfare exclusion doctrine
b. Adopt a moratorium on audits relating to the general welfare exclusion doctrine while implementing Notice 2012-75
4. Make permanent or expand temporary provisions
a. Make permanent the Indian employment credit and accelerated depreciation on Indian reservations (Choctaw Nation of Oklahoma comments to Committee on Ways and Means working group on Charitable/Exempt organizations, submitted April 15, 2013)
b. Expand the Indian employment tax credit to more closely resemble the Work Opportunity Tax Credit (Testimony of Donald Laverdure before the Finance Committee, July 22, 2008)
5. Conform the definition of Indian and reservation for tax purposes (Testimony of Director D’Shane Barnett before the House Appropriations Subcommittee on the Interior, Environment, and Related Agencies, March 19, 2013)
6. Modify the adoption tax credit to allow Tribal Governments to determine whether a child has special needs (FY14 Administration Budget Proposal; estimated in 2013 to cost less than $1 billion over 10 years)
Turtle Talk 