TRIBAL TAX ISSUES FOR TAX REFORM

Transcription

1 TRIBAL TAX ISSUES FOR TAX REFORM April 24, 2017

2 GENERAL WELFARE EXCLUSION ACT Codified Tribal General Welfare Doctrine Establishes Tribal Advisory Committee Ron Allen, Jamestown S'Klallam Tribe Sharon Edenfield, Confederated Tribes of Siletz Lacey Horn, Cherokee Nation Patricia King, Oneida Tribe of Wisconsin Eugene Magnuson, Pokagon Potawatomi Lynn Malerba, Mohegan Tribe Nomination by Senator Hatch of Utah pending Issues arising with income eligibility for programs like SSI and SNAP

3 TRUST PER CAPITA ACT IRS Notice clear guidance that distributions of tribal trust income are not taxable May 26, Interim Guidance -- Direct Pay Leases New Question: What about HEARTH Act leases? (lease is not approved by Interior) Seminole of Florida is seeking additional guidance Treasury seeking views from other tribes NCAI Midyear Resolution? 3

4 DUAL TAXATION ON TRIBAL LANDS Tribe may tax virtually anything on tribal lands. (Colville) But this is difficult when: 1)For products without reservation generated value, states tax products received by non-natives. (Moe, Colville) 2) States impose severance taxes on energy resources extracted by non-native businesses (Cotton Petroleum) 3) States are imposing taxes on property owned by non- Natives on tribal land. (Improvements, Wind Power) 4) State may not collect tax when product received on tribal land by tribal member. (Central Machinery) But, doing it anyway w/ internet sales.

5 Dual Taxation is a Major Barrier for Tribal Development Steady revenue: the missing piece of Tribal Self- Determination Policy States extract revenue from reservation economy Tribal tax authority is rendered ineffective Tribes receive few services from states Tribes suffer inadequate services and infrastructure Tribal economy funds services for non-indians offreservation 5

6 LEASING REGULATIONS CFR What taxes apply to leases approved under this part? a) Subject only to applicable Federal law, permanent improvements on the leased land, without regard to ownership of those improvements, are not subject to any fee, tax, assessment, levy, or other charge imposed by any State or political subdivision of a State. Improvements may be subject to taxation by the Indian tribe with jurisdiction. 6

7 RIGHT OF WAY REGULATIONS What taxes apply to rights-of-way approved under this part? (a) Subject only to applicable Federal law: (1) Permanent improvements in a right-of-way, without regard to ownership of those improvements, are not subject to any fee, tax, assessment, levy, or other charge imposed by any State or political subdivision of a State; 7

8 WASHINGTON v. TULALIP TRIBES June 2015, Tulalip filed suit against Washington State seeking relief from state taxes at Quil Ceda Village, asserting tribal sovereignty, the Indian Trader Laws, and the Indian Commerce Clause. August 2015, Interior intervenes, asserting federal interest as trustee to protect the Tulalip Tribes from the harmful effects of dual state taxation, citing the Indian Trader Laws. 8

9 25 U.S.C. 262 Any person desiring to trade with the Indians on any Indian reservation shall be permitted to do so under such rules and regulations as the Commissioner of Indian Affairs may prescribe for the protection of said Indians. 9

10 INDIAN TRADER REGULATIONS 25 CFR 140 Regulations not updated since Old fashioned rules for licensing of traders dating to Are not used on most reservations Prohibition on gaming, unbelievably outdated Attempt in 1980 to modernize regulations, but never finalized December of 2016 Advanced Notice of Proposed Rulmaking 10

11 PROPOSAL TO AMEND 25 CFR 140 1) Recognize Tribal laws as regulating business activity on tribal land Defer to Tribal business licensing or registration 2) Consent to tribal court jurisdiction Would answer many questions from Dollar General v. Mississippi Choctaw 3) Pre-empt state taxation Reaffirm tribal tax authority General pre-emption of all state taxes 11

12 Advanced Notice of Proposed Rulemaking on Trader Regulations 25 CFR 140 Interior started a rulemaking process at the end of Obama Administration Trump Administration has continued holding consultation meetings and collecting comments Comments were due on April 10 Continue to Communicate! New Assistant Secretary and Solicitor will be critical when nominated and confirmed 12

13 TAX REFORM PROPOSALS Simplify tax brackets and reduce rates Reduce or eliminate standard and itemized deductions Reduce corporate tax rate and limit deductions Border Adjustment Tax Intended to raise revenue and make U.S. products more competitive with imports 13

14 Principles of Tax Parity for Tribal Governments Tribal governments must be treated with parity in all areas of tax policy Constitution recognizes tribal governments; treaty and trust obligations Tribes have responsibility to regulate conduct on Indian lands. Tribes operate a broad range of governmental services. Like states and local governments, tribal revenues are not taxable but are governmental revenues of a distinct sovereign. Tribal governments need respect for authority: to raise tax revenue free from overlapping state taxation to create incentives for business and jobs to access to government financing tools to make decisions regarding citizens needs to promote certainty of jurisdiction, certainty to the capital markets, and certainty in tax policy to sustain economic growth. 14

15 TAX INCENTIVES IN INDIAN COUNTRY Accelerated Depreciation Indian Employment Tax Credit What if Congress eliminates all deductions and credits? Alternative: reduction in payroll tax rate in Indian Country 15

16 TRIBAL TAXATION DISPARITIES Tribes are treated the same as states for most income tax purposes under Indian Tribal Governmental Tax Status Act of 1982 But they are treated less favorably than state and local governments under specific Tax Code provisions Differential Treatment and Unjust Treatment typically results in tribal governments being denied federal tax benefits and economic development incentives that state and local governments enjoy

17 TRIBAL TAX AND INVESTMENT REFORM ACT Co- sponsors: Rep. Ron Kind (D-WI) Lynn Jenkins (R-KS) Ready to be re-introduced this year Need Co-Sponsors in House Need Lead Co-Sponsors in Senate

18 TRIBAL TAX INVESTMENT AND REFORM ACT: WHAT IS COVERED? 1. Tax Exempt Bonds and 2. Excise Tax Exemptions elimination of the essential governmental function test 3. Pension & Health Plans elimination of commercial vs. governmental distinction 4. Tribal Charities classified as public charities like state-funded charities 5. Access to National Parent Locator and Child Support enforcement 6. Adoption Tax Credit

19 TREATMENT OF INDIAN TRIBES AS STATES Tax Exempt Bonds -no tax on interest earned by lender due to borrower s government status Current law: tribes subject to restrictive rule Bill repeals the restrictive essential governmental function test under 26 USC 7871 Also repeals essential governmental function test on excise tax exemptions for special fuels, manufacturers excise taxes, communications excise tax, and use of certain highway vehicles 19

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21 EXAMPLE: Tax exempt rate: 5% Taxable rate: 7% Loan Amount: $100 million Term: 120 months Loan Amount: $100 million Term: 120 months Monthly payment: $1,060,655 Monthly payment: $1,161,084 Interest cost: $27,278,618 Interest cost: $39,330,175 Reduction in fixed costs = greater ability to withstand seasonal business fluctuations, increased viability of development projects. 21

22 PENSION BENEFIT PLANS In 2006, Pension Protection Act imposed an essential governmental function test on tribal pension plans. For ten years no IRS guidance Department of Labor recently decided to enforce Impossible to administer in practice Police officer also does guard duty at casino, or timber employees manages conservation. Forced to administer two separate plans, with much higher costs. Employees wind up with two separate pension & health plans.

23 TREATMENT OF PENSION AND EMPLOYEE BENEFIT PLANS MAINTAINED BY TRIBAL GOVERNMENTS. Removing the Essential Government Function and Commercial Activity tests that apply to tribes Adding the same distribution rights for tribal and state public safety employees Confirming that pension plans may honor tribal domestic relations orders 23

24 CHILD SUPPORT ENFORCEMENT Subsection (a) Allows tribes access to the same parent locator database available to state child support agencies Subsection (b) Allows tribal child support enforcement agencies to offset tax refunds for past due payments 24

25 ADOPTION TAX CREDIT Allows adopting parents to receive the Adoption Tax Credit where a tribe has made a determination that a child eligible for adoption has special needs. Tribes have jurisdiction over Indian adoptions. Currently, only state government agency s determinations of special needs in adoptions are considered. 25

26 TRIBAL TAX INVESTMENT AND REFORM ACT 1. Tax Exempt Bonds and 2. Excise Tax Exemptions elimination of the essential governmental function test 3. Pension & Health Plans elimination of commercial vs. governmental distinction 4. Tribal Charities classified as public charities like state-funded charities 5. Access to National Parent Locator and Child Support enforcement 6. Adoption Tax Credit

27 OTHER TAX ISSUES New Markets Tax Credit Low Income Housing Tax Credit IHS Doctor Loan Repayment Exemption Kiddie Tax Penalty on Tribal Funds Tribal Empowerment Zones Social Security Eligibility for Tribal Leaders Promote Return of Sacred Objects from Private Collectors Alternative Energy Transferrable Tax Credits 27

28 HOW CAN YOU GET INVOLVED? Co-sponsors are needed Reach out to your Members of Congress Sample letters Seeking lead co-sponsors for Senate Companion Bill 28