IRS official questioned about taxation of per capita payments

Wednesday, September 19, 2012  

The House Subcommittee on Indian and Alaska Native Affairs held a hearing last Friday to discuss taxation of per capita payments.

Prior to the hearing, the Internal Revenue Service issued a notice, Per Capita Payments from Proceeds of Settlements of Indian Tribal Trust Cases, that said per capita payments from recent tribal trust fund settlements are not taxable. Christy Jacobs, the director of the agency's Office of Indian Tribal Governments, reiterated that position at the hearing.

However, Jacobs would not directly answer questions about taxes on per capita payments from other tribal trust resources, such as timber. She also would not confirm or deny that the IRS is auditing or otherwise investigating tribes that have made such payments to their members.

"This is a reversal of nearly 60 years of IRS practice," Ron Suppah, the vice chairman of the Confederated Tribes of the Warm Springs Reservation of Oregon, told the subcommittee.

Suppah said the IRS has asked the tribe for names and addresses of all tribal members in order to determine whether they paid taxes on recent per capita payments. "Of course, we have refused to provide this information," he testified.

Jacobs said the IRS plans to consult tribes for a potential notice about the issue. But the Yakama Nation has been refused a meeting with the agency because the tribe and its members are being audited, a tribal official said.

"My trust resources are not taxable," Athena Sanchey Yallup, the tribe's secretary, told lawmakers.

Jacobs said the notice was issued to offer more guidance to tribes. However, she was unable to explain why the IRS web site has contained conflicting information about taxation of per capita payments -- a key page has been modified in just the past few months without explanation.

Get the Story:
Tribes Say IRS Moves to Tax Tribal Per Capita Payments; Congress Investigates (Indian Country Today 9/19)

Committee Notice:
Oversight Hearing on "Per Capita Act and Federal Treatment of Trust Per Capita Distributions" (September 14, 2012)

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OST urges Indian beneficiaries to read IRS notice on per caps (9/12)
Subcommittee on Indian and Alaska Native Affairs sets hearing (9/7)
IRS affirms per capita payouts from trust settlements not taxable (9/6)
Social Security Administration issues ruling on trust payouts (08/23)