On Sept. 13, the Treasury Department and the IRS published proposed regulations to implement Section 139E of the Internal Revenue Code, created by the Tribal General Welfare Exclusion Act of 2014.
The act allows tribal governments to offer nontaxable assistance and benefits to tribal members that can be excluded from their gross income for federal income tax purposes.
In a release, the Treasury Department said that the proposed rules are “an unprecedented recognition of tribal self-determination and self-governance in tax regulations” by offering deference to tribes in how they establish their programs, the scope of benefits they provide, and determinations that involve tribal culture or ceremonial activities.
An IRS release said that the proposed regulations resulted from long-term efforts by Treasury, the IRS, the Treasury Tribal Advisory Committee, tribes and tribal leaders as described in the Consultation and Federal Feedback summary,
Tribal members must still pay federal income tax. However, Section 139E excludes from gross income the value of any Tribal General Welfare Benefit, which is defined as “any payment made or service provided to or on behalf of a member of an Indian tribe (or a spouse or dependent of a member) under an Indian tribal government program.”
The exclusions apply only if the program is administered under specified guidelines and does not discriminate in favor of members of the governing body of the tribe. The benefits offered under the program are available to any tribal member who meets the guidelines, are for the promotion of general welfare, are not lavish or extravagant, and are not compensation for services.
The IRS stated that, in the spirit of the Treasury’s and IRS’ view that the Indian tribal governments are best placed to determine support for their tribal citizens, the proposed regulations give Indian tribal governments the flexibility to design general welfare programs that consider the tribe’s unique cultural practices, history and traditions.
Additionally, the proposed regulations offer deference to Indian tribal governments on certain issues, such as whether benefits promote general welfare and whether benefits are provided in exchange for participation in cultural or ceremonial activities.
The proposed regulations also address the statutory prohibition against “lavish or extravagant” tribal general welfare benefits. The proposed rules mandate that a benefit will be presumed not to be lavish or extravagant if described in and provided in accordance with written specified guidelines that Indian tribal governments establish for their programs.
Comments are due 90 days after the regulations are posted in the Federal Register. The agencies will hold a public hearing on Jan. 13, 2025
Comments can be submitted via the Federal Register. Tribal leaders may also submit comments via the Tribal consultation process, as described in a
Dear Tribal Leader Letter. An overview of the proposed rule can be found in the
Tribal Fact Sheet.