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Native Sun News: Tribes take on IRS and win battle over taxation





The following story was written and reported by Brandon Ecoffey, Native Sun News Managing Editor. All content © Native Sun News.


Rep. David Nunes (R-California) was the lead sponsor of H.R.3043, the Tribal General Welfare Exclusion Act. Photo from Facebook

Tribes lay whooping on IRS
By Brandon Ecoffey
Native Sun News Managing Editor

WASHINGTON — If there is an arm of the federal government that postures itself as the bully on the block: it is the IRS. However, when the IRS came to Indian Country and attempted to trample on the rights of tribes, they ended up taking a whooping from tribes and their friends in Congress.

Last week the United States House of Representatives passed a much celebrated bill that was years in the making that will allow for tribes to escape the illegal harassment of tribal governments by the Internal Revenue Service. H.R.3043 better known as the Tribal General Welfare Exclusion Act passed the House by a vote of 277-141 and is being praised by tribal leaders and law makers alike.

“This bill means that the IRS has to respect the sovereignty of our tribal nations and the treaties that our past leaders secured for this generation and others to come,” said Oglala Sioux Tribal President Bryan Brewer. “If we are trying to take care of our people the IRS will no longer be able to interfere with our programs or services. It is a measure of respect of our treaties. If there is any ambiguity in the statute the IRS will be forced to side with tribes. It is a great step forward for sovereignty and the Oglala and the plains tribes have led it.”

The bill had been in the works for years and came about in response to attempts by the Internal Revenue Service to individually tax tribes and tribal members for benefits they received from tribal government programs. When one tribal-leader from Standing Rock attempted to inform the IRS that tribal nations had certain rights and exemptions guaranteed by treaty law, he was told by an IRS field agent that “ you can read your treaty in jail.”

IRS field agents had first stumbled in to Indian Country looking to tax individual per cap gaming revenue. Shortly after gaining a foothold in Indian Country, the much maligned bureaucracy, first attempted to tax tribally administered healthcare services and the insurance policies of tribal members, but was forced to stop after lawmakers created an exemption for healthcare.

At the time lobbyists for tribes wanted to include an exemption that would have also freed tribal programs that addressed culturally specific needs as determined by individual tribes, but the political climate at the time was unfavorable to the inclusion despite the efforts of the late Sen. Daniel Inouye (D-HI) and testimony from former Oglala Sioux president John Steele.

At the time the IRS had continued to look in to the internal workings of tribal programs and begun to put in to motion attempts to tax services that tribal governments were providing to tribal members. In one instance the distribution of backpacks and school supplies to families were targeted for taxation and trips made by elderly tribal members to workshops and cultural events were also viewed as taxable items by field agents of the IRS.

"Field agent decision-making has been at best inconsistent and arbitrary," Rep. Tom Cole (R-Oklahoma), a member of the Chickasaw Nation, said in a statement that was inserted into the Congressional Record. "Activities allowed in one audit have been challenged in another. Field agents have conversely given wide deference to federal and state government programs that provide for the general welfare of their citizens."

While tribal leaders attempted to create a permanent fix to the problem through legislation the IRS created a set of guidelines that would guide their agents in how to deal with Indian Country. A move supported by the National Congress of American Indians. Tribes on the northern plains however refused to settle for a potentially temporary change in the institution’s policy and demanded that Congress create a law that would solidify these protections and tax exemptions for services provided by sovereign tribal governments to their citizens.

“It was nice that they set up the guidelines but whenever you create a list of what another sovereign government can do it is inherently limiting,” said Mark Van Norman, a member of the Cheyenne River Sioux tribe and a former director under former Attorney General Janet Reno.

“As a general rule one nation does not place limits or taxes on the revenue of another. We wanted something that would provide protections across the board and direct IRS agents to respect tribal sovereignty,” he added.

In addition to the strong legal standing that tribes stood on due to treaties, advocates for the bill say that there are guarantees that tribal members possess due to their status as duel citizens of the United States and their individual indigenous nation. According to lobbyists dual-citizenship protects tribal members from having their rights as citizens of their indigenous nation infringed upon as a result of also being an American citizen. The attempted taxation of individual tribal members by the federal government did just that according to the lobbyist.

In statements made in the official congressional record, Rep. Lynn Jenkins (R-KA) said: “Under what is known as the general welfare doctrine, the IRS excludes a broad array of government services for purposes such as education, public safety, health, housing and culture from taxation. However, this is not always the case for tribal nations… Recently the IRS has challenged tribal general welfare programs despite many of these being nearly identical to tax exempt programs provided by federal, state and local governments.”

She said, “This bicameral and bipartisan legislation will positively affect many Native Americans and is an important step in bringing IRS treatment of the tribes in line with how they currently treat States.”

In August the bill was introduced with strong bipartisan support by Rep. Devin Nunes (R-CA) and 14 other cosponsors from both sides of the aisle. Eventually 40 lawmakers signed on as cosponsors of the House bill and Sen. Heidi Heitikamp (D-ND) introduced an accompanying bill in to the Senate.

The bill amends the Internal revenue code so that agents of the IRS are directed by the law to “exclude from gross income, for income tax purposed, the value of an Indian general welfare benefit,” according to Sisseton Wahpeton President Robert Shepherd in a piece he wrote for The Hill newspaper.

According to current law an “Indian General Welfare Benefit” is any payment or service that is allocated to a tribal member of tribal government that “is administered under specified guidelines and does not discriminate in favor of the governing body of the Indian Tribe…the program benefits are available to any tribal member, are for the promotion of general welfare, are not lavish of extravagant, and are not compensation for services.”

The bill also establishes a Tribal Advisory Committee to advise the Secretary on the taxation of Indians, requires training and education for IRS field agents on federal Indian law and the implementation of this Act, suspends audits and examinations of Indian tribal governments and members of Indian tribes and waives any interest or tax penalties related to the exclusion from gross income of Indian general welfare benefits.

Although some feel that the bill could potentially give tribal councils full authority to run ransack through limited tribal funds advocates of the bill say that the Native American advisory committee will provide proper advice to the IRS on how to prevent that.

(Contact Brandon Ecoffey at staffwriter2@nsweekly.com)

Copyright permission Native Sun News

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