Professor Lindsay Robertson's Senate Testimony Helps Shape Tribal Tax Bill
WASHINGTON D.C. - Tribal tax issues discussed by OU Law Professor Lindsay Robertson during his testimony at a May 2012 Senate Finance Committee hearing and in follow-up communications – specifically the General Welfare Exclusion, the Indian Employment Tax Credit and the provision for Accelerated Depreciation for Business Property on an Indian Reservation – helped shape sections 204 and 213 of the Baucus bill, included in the “fiscal cliff” bill passed Jan. 1, and IRS policy.
Senator Max Baucus, Chairman of the Senate Finance Committee, noted Professor Robertson’s testimony and the outcomes of the May 2012 hearing in an article posted on Indianz.com:
One of the most important honors I have is making sure the federal government upholds its obligations to our tribes. Some years ago, I began hearing disturbing stories of theInternal Revenue Serviceauditing tribes over funds they had given money to tribal members so they could attend powwows or funerals or pay for college tuition or books. In one instance, I heard theIRSwas auditing a meals for elders program. The problem was that the IRS’ efforts were not being applied fairly, evenly or with any predictability for tribes. It boils down to something called the General Welfare Exclusion Doctrine and whether tribal members should be taxed on the funding they received from their tribe to attend funerals, pay for college or travel to powwows.
To get to the bottom of the issue, I held a Senate Finance Committee hearing in May of 2012and asked witnesses to testify about their experiences. The IRS reached out for written comments from tribes and held a consultation session at the White House Tribal Nations Conference in 2011 and a consultation session hosted by the National congress of American Indians in 2012.
One witness at the hearing held in May of 2012, a professor of Indian Law at the University of Oklahoma College of Law testified that tribal governments provide benefits to their members for health, education, cultural, and language education as part of their cultural existence. The professor also noted that tribes were being audited at a disproportionately high rate. He testified that “where services are provided to make up for deficiencies resulting from adverse conditions not of the tribes’ making or, indeed, to further federal policy objectives, taxing and auditing them appears to me inconsistent with the requirements of the federal trust responsibility.”
Following the hearing, the IRS responded to our call and published Notice 2012-75 on December 5, 2012 outlining the parameters of the Doctrine. The IRS clarified the general welfare exclusion. For tribes it means benefits provided under tribal governmental programs will not be taxed as income. That means tribes will no longer be disproportionately targeted for auditing for providing assistance to tribal families for things like mortgage or rent assistance, housing rehab, assistance for utility bills, and educational benefits such as transportation to and from school, tutors, supplies and tuition payments.
Elders will now be able to participate in meals programs such as home-delivered meals, assistance with preparing meals, local transportation assistance and travel expenses for doctor appointments, and transportation to attend social and cultural events would qualify as well as improvements in their homes such as grab bars and ramps would qualify.
Other qualifying assistance programs include transportation fees from the reservations to medical facilities and grocery stores, transportation and lodging costs while families receive medical care away from home as well as food, clothing, shelter, and transportation when tribal members have to leave home due to exigent circumstances such as victims of abuse or when a home is destroyed by fire or natural disaster.
Finally, costs for travel expenses, food, and lodging to attend cultural events such as powwows, and ceremonies qualify as well as pay or reimburse funeral and burial expenses. Now, when tribal members receive monies for these and the foregoing items they can receive them knowing they will not have to pay taxes and the tribe will not have to issue 1099’s to satisfy anIRSrequirement. What should have been the rule all along will now be the standard operating procedure.