TREATMENT OF TRIBAL MEMBER INCOME UNDER MEDICAID FOR FAMILIES AND CHILDREN AND CHIP

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1 OF TRIBAL MEMBER INCOME UNDER MEDICAID FOR FAMILIES AND CHILDREN AND CHIP TYPE OF INCOME/SOURCE Any funds distributed per capita to or held in trust for members of any Indian tribe, except for per capita funds distributed from Indian gaming enterprises. Excluded 45 C.F.R Taxable unless: (1) Excludable under the General Welfare Doctrine (GWD). (2) Postponed because administered through per capita gaming trust for minor meeting certain requirements. (3) Excluded pursuant to Indian Tribal Judgment Funds Use or Distribution Act. Generally: 26 U.S.C. 61(a); Revenue Ruling (1) GWD (common law); Revenue Ruling ; Notice (2) Revenue Proc ; clarified, modified and superseded by Res. Proc (3) 25 U.S.C (4) The funds are held in trust by the Secretary of the Interior for an Indian tribe (including interest and investment income accrued while such funds are so held in trust) and distributed per capita to a household or member of an Indian tribe, including initial purchases made with such funds. (4) 25 U.S.C. 171b(a) (5) Excluded pursuant to specific legislation. (5) Terms of specific legislation Receipts distributed from Trust Lands to members of all federally-recognized Indian tribes which are referred to in 25 U.S.C. 459d. Excluded 25 U.S.C. 459e Not subject to Federal income tax. 25 U.S.C. 459e Student financial assistance provided under the Bureau of Indian Affairs education programs. Student financial assistance provided under programs in title IV of the Higher Education At of 1965, as amended. Excluded 45 C.F.R. 233 This is a facts and circumstances analysis. A scholarship may be exempt from income tax if it is expended for qualified tuition and related expenses and is given to a candidate seeking a degree at a qualifying educational institution. Section 117 of the Internal Revenue Code Revenue Ruling

2 Indian judgment funds that are held in trust by the Secretary of the Interior (including interest and investment income accrued while such funds are so held in trust), or distributed per capita to a household or member of an Indian tribe pursuant to a plan prepared by the Secretary of the Interior and not disapproved by a joint resolution of the Congress. Excluded Section 7 of Public Law , as amended by section 4 of Public Law Not subject to Federal income tax. 25 U.S.C Distributions made to a household, an individual Native, or a descendant of a Native by a Native Corporation established pursuant to the Alaska Native Claims Settlement Act (ANCSA). Cash distributions (including cash dividends on stock from a Native Corporation) received by an individual. Stock (including stock issued or distributed by a Native Corporation as a dividend or distribution on stock). Excluded (1) Distributions from Alaska Native fund are exempt from federal tax (43 U.S.C. 1620(a)). Income from investment of distribution is taxable. (2) Stock from Region or Village Corporations are exempt from federal income tax (43 U.S.C. 1620(b)). (3) Partnership interest is taxable unless in the form of a distribution from an Alaska Native Fund. 43 U.S.C A partnership interest. Land or an interest in land (including land or an interest in land received from a Native Corporation as a dividend or distribution on stock). (4) Land itself is not taxable, and interest in land such as rents, royalties, profits, and other revenues or proceeds derived from such property interests are taxable to the same extent as such revenues or proceeds are taxable when received by a non-native individual or corporation subject to a 20-year exemption period for certain land (42 U.S.C. 1620(d). Distributions from any of the above property. (5) Interest in Settlement trust beneficiaries will only be taxed, in general, to the extent the trust s income is actually distributed to them each year. 2

3 Distribution from Individual Indian Money Accounts (IIM) held in trust by or under the supervision of the Secretary of Interior, whether restricted or unrestricted. Excluded Public Law (1) Monies accruing to Indian individuals as a result of payments related to trust assets (including trust lands) or restricted fee lands are not taxable. (2) Interest or other investment earnings on collected trust income are taxable. (3) Monies from mineral headright accounts accruing to competent Osage tribal members are taxable. Such monies accruing to noncompetent Osage tribal members and administered through an IIM account are not taxable. (4) Monies received from other federal agencies and deposited in IIM accounts of adults under legal disability or Indian minors for whom no legal guardian or fiduciary has been appointed as provided in 47 Stat. 907 and 25 U.S.C. 14 are generally taxable unless exempt under non-ai/an law. Noncompetent Indian is a term mentioned in Revenue Ruling This term means that the land is not assignable by the individual. In context, it is not being used as a pejorative reference to the mental status of the individual Indian. This is an archaic reference that is directly drawn from the language of the Squire case. (1) Squire v. Capoeman, 351 U.S. 1 (1956) (2) Superintendent of Five Civilized Tribes v. Comm r, 295 U.S. 418 (1935) (3) 26 U.S.C. 61; 25 C.F.R ; 25 C.F.R ; 25 C.F.R (4) Squire v. Capoeman, 351 U.S. 1 (1956); Revenue Ruling , 26 U.S.C. 61 3

4 Payments or distributions from ownership interests and usage rights to items that have unique religious, spiritual, traditional or cultural significance or rights that support subsistence or a traditional lifestyle according to applicable tribal law or custom. Property sold for use in healing or spiritual ceremonies, such as sage or sweetgrass. Sales of artwork, pottery or jewelry with cultural or religious significance, such as traditional American Indian and Alaska Native crafts. Excluded Generally taxable unless a specific exclusion or the General Welfare Doctrine applies. 26 U.S.C. 61 Revenue Ruling Notice Handicrafts made by Alaska Natives from fish and wildlife resources taken for personal or family consumption. Proceeds of sales of subsistence fish and game. 4

5 Distributions or payments from property ownership interests in or usage rights to real property ownership interests (including rents, leases, royalties or income derived from extraction of natural resources, harvesting of timber, other plants and plant products, animals, fish, and shellfish), and distributions or payments resulting from the exercise of federally protected rights relating to such property ownership interests. This applies to any land within the boundaries of any federallyrecognized tribe s reservation, pueblo or colony, including former reservations in Oklahoma, Alaska Native Regions established by the Alaska Native Claims Settlement Act, and Indian allotments on or near a reservation as designated and approved by the Bureau of Indian Affairs of the Department of Interior. For any federally-recognized tribe not identified in the previous sentence, this includes property located within the most recent boundaries of a prior Federal reservation. (See #3 under IRS Treatment). Distributions and payments from rents, leases, rights of way, royalties, usage rights, or natural resource extraction and harvest from federally protected rights regarding off-reservation hunting, fishing, gathering, or usage of natural resources. Rents from any such lands and any structures on the land (housing, retail facilities, etc.). Royalties or other compensation received from oil and gas production, mineral extraction, timber harvesting, and similar activities. Profits or revenues derived from economic activity on the land, operation of motels, retail outlets, etc. Profits from the sale, lease, or harvest of mineral, timber, and other such resources. Income derived from hunting, fishing, gathering, and harvesting fish, wildlife, and plant resources pursuant to Federallyprotected rights, including offreservation rights. Excluded Public Law (1) Income directly derived from allotted and restricted land is exempt from federal income tax provided all elements of a five pronged test set forth in Revenue Ruling are met. Revenue Ruling is premised on the Squire v. Capoeman case. (2) There is no general exclusion for income from the exercise of federally protected rights, but there is a specific exclusion for income from the exercise of federally protected fishing rights. (3) The underlined sentence under Type of Income/Source may include nonrestricted land. Income derived from that portion would be taxable. Restricted = land held in trust or subject to another federal restraint or alienation. Allotted = assigned to an individual tribal member. Un-allotted land = restricted land of the tribe rather than an individual member. (1) Revenue Ruling (does allow exemption for rents, royalties, etc.; as clarified by Revenue Ruling ); Revenue Ruling 62-16; additional rulings expand on this topic. (2) 26 U.S.C (3) 26 U.S.C. 61; Revenue Ruling