On June 3, 2014, the Internal Revenue Service issued Revenue Procedure 2014-35, which provides final guidance on the application of the general welfare exclusion to Indian tribal government programs. The guidance offers a series of safe harbors applicable to specific types of tribal programs under which the IRS will presume that the "individual or family need" requirement of the exclusion is met. If the requirements of the Revenue Procedure are satisfied, the IRS also will not assert that members of a tribe and "qualified nonmembers" (spouses, dependents, domestic partners, ancestors and descendents) must include the value of governmental program benefits in their gross income, or that the benefits are subject to information reporting by the tribe.

Under the general welfare doctrine, benefits provided to members by tribal governments (like those provided by other governments) typically qualify for exclusion from gross income if they are:

made according to a governmental program
for the promotion of general welfare (based on individual or family need, and uniquely in the case of programs of tribal governments, to help establish Indian-owned businesses on or near a reservation)
not compensation for services

In audits, however, the IRS frequently has refused to apply the general welfare exclusion to tribal programs where the benefits are disbursed on a basis that do not appear to the IRS to be based on need. After a lengthy consultation process with tribal leaders and others, the IRS issued Notice 2012-75 (the "notice"), which contained proposed guidance on the general welfare exclusion. The Treasury and IRS solicited tribal comments on the general welfare exclusion during an extended period and received more than 120 written comments from Indian tribal governments and other individuals and groups. The final guidance incorporated many of these comments by clarifying the safe harbors and broadening their scope.