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Department of Defense tax correction


WASHINGTON, D.C. ? The Defense Department is acknowledging American Indian tribal sovereignty in a move that is expected to save thousands of dollars for tribal members in the military.

It is issuing a form that will notify tribal men and women in the armed services that they no longer have to pay state income taxes if they have a home address on their reservation. The generic form will stop state income tax withholding when the military personnel certifies that he or she claims a residence in Indian country and belongs to a federally recognized tribe.

"Federal laws clearly are intended to respect the sovereignty of Indian Tribes and to protect Indians in many aspects of their lives," said U.S. Rep. George Miller, D-Calif., who pushed DoD to change its previous withholding policy and who announced the new form. "DoD's action will finally make it easier for Indians to keep more to their own hard-earned money."

The change comes after years of lobbying, first by private citizens and then by Congress. In spite of individual protests, DoD continued to deduct state income taxes from the pay of tribal members with reservation home addresses. Service members and their Congressional allies argued that as a basic constitutional principle, one sovereign government cannot tax residents of another co-equal sovereignty.

The issue was first raised in the early 1990s by the father of an Eastern Cherokee serviceman from North Carolina, who enlisted the help of a lawyer in a nearby community action project. The lawyer later took a job on Capitol Hill and was instrumental in interesting several congressmen in the issue.

Defense delayed changing its withholding policy until the Justice Department issued a ruling in November 2000 concluding the practice was improper. Justice said that the federal Soldiers' and Sailors' Civil Relief Act "prohibits states from taxing the military compensation of Native American service members who are residents or domiciliaries of tribal reservations, and who are absent from those reservations by virtue of their military service."

The new form, numbered DD2058-2 is entitled "Native American State Income Tax Withholding Exemption Certificate." It is available on the Defense web site at