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Tribes Confront IRS Attempts to Tax Per-Cap Payments

September 21, 2012 | Posted by Keane, Merril | Print this page
Last Friday, tribal representatives testified before the U.S. House Subcommittee on Indian and Alaska Native Affairs at an oversight hearing titled Per Capita Act and Federal Treatment of Trust Per Capita Distributions, to oppose recent action suggesting that the IRS is willing to ignore the Per Capita Act of 1983. The Act states that per capita distributions of funds held in trust by the Interior Secretary for tribal citizens are not to be considered taxable income. Some tribes, however, reported the IRS recently sent letters indicating that per capita payments from timber trust accounts would be taxed.

Christy Jacobs, Director of the Office of Indian Tribal Governments at the IRS, responded that her staff was looking into the matter and that she wasn't aware of the change in policy. But after a series of probing questions from the subcommittee members, she agreed with tribal leaders, saying that she "did not believe that per capita payments made to tribal members pursuant to the Per Capita Act from trust resources are taxable."

The IRS has recently issued guidance stating that the agency will not tax per capita payments made from tribes to citizens as a result of tribal trust settlements with the Obama administration. The subcommittee highlighted this apparent inconsistency, asking why the IRS would grant tax relief to settlement funds in private, nontrust accounts while considering trust per capita payments to be taxable.

The subcommittee will publish a transcript of the hearing in hopes that Ms. Jacobs’ statements will help to clarify the apparently inconsistent IRS action.

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