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New bill helps create business

WASHINGTON - New legislation will make it easier to create businesses on reservations through new capitalization and technical assistance.

Sen. Tim Johnson, D-S.D. introduced the bill, the Tribal Economic Enhancement Act of 2003, following hearings held in the Senate Banking Committee on which Johnson serves.

The bill, in the first phases of a comprehensive economic development plan for reservations, has nine components to it that will ease the difficulties of acquiring capital for funding businesses on reservations and create an atmosphere for banks to open on reservations.

An important part of the plan will be changes in the Tax Code that will provide tax free bond issuance by the tribes and also create tax credits for investors.

Sen. Johnson said the bill would provide technical changes in the tax code and securities code that will build an infrastructure for economic opportunity.

Key to the legislation, Johnson said, was the exemption for tribal governments to register under Chapter S, which prevents double taxation, and expands the authority of tribes to issue private activity bonds, promote interstate banking on Indian lands, and other categories that will soften the problems of business on the reservations.

"These are all new initiatives that will collectively allow for a greater amount of capitalization to take place in Indian country. It will allow investment to take place that will lead not only to a better circumstance for tribal government, but for individuals," he said.

The bill is ambitious, and it will not only allow for economic expansion on reservations, but in South Dakota especially it will promote increases in the economies of towns near the reservations and throughout the state.

Many of the towns on reservations are not only the most impoverished in South Dakota, but also in the nation, he said. There are specific challenges in Indian country to economic growth, but some similarities include the need for capital and infrastructure improvements like roads and utilities. Greater access to investment capital is a much greater challenge in Indian country.

The legislation will compliment efforts that tribes have initiated to expand economic growth, such as the Lakota Fund on the Pine Ridge Reservation. The Lakota Fund supports private business enterprises with capital and assistance in business operation.

Johnson said his legislation will compliment the work of the Lakota fund. However, there are some overlapping categories, such as the Individual Development Accounts that allow tax credits for savings for education, home ownership or business development. The Lakota Fund provides IDAs, Monica Drapeau, executive director of the Lakota Fund said.

She added that she had not seen the legislation, but with caution said that many times legislation looks good, but to execute much of it in Indian country is the problem.

"They may be the best laid out plans, but it depends on who is running the show. The Lakota Fund has low income tax credit. It's unfortunate that all legislation will not help us," Drapeau said.

She was quick to give Sen. Johnson credit for introducing such a bill, and said that the benefits may become reality in the future.

Issuing bonds in Indian country is very difficult and many tribes don't even try that means of capitalization. Whether or not the bill will make the market friendlier for tribes is not certain, some tribal officials said.

Part of the legislation will be additional allocations for the Small Business Administration to provide technical assistance to prospective entrepreneurs on reservations.

"This will help tribes develop their economic initiatives and develop their tribal businesses, yet we also want to make sure we have a parallel level of success with individual Native American entrepreneurs," Johnson said.

He said that one of the things that strikes many people when they travel through South Dakota is the lack of business development in towns on the reservations.

"Where are the coffee shops, the barber shops, the hardware stores or the gas stations, where are the auto body shops; in many cases they simply do not exist.

"We need to create an environment where that can be changed," Johnson said.

Legislation categories:

*Expansion of Subchapter S

*Tax exemption for interest from Tribal bonds

*Exemption of Indian Tribes from volume cap limits on private activity bonds

*Expansion of authority for Indian tribes to issue tax-exempt private activity bonds

*Low-Income housing credit consideration

*Native American set-aside for new markets tax credit

*Interstate banking on Indian lands

*Individual Development Accounts