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Tribes Celebrate New Tax Law

Tribal leaders and advocates are exuberant over a subject that often induces a yawn, but this time the tax reform will benefit all of Indian country.

Tribal leaders and advocates are exuberant over a subject that often induces a yawn and a glazed look – tax reform. But this time the tax reform will benefit all of Indian country, the leaders said.

On Friday, September 26, President Barack Obama signed into law H.R. 3043, the Tribal General Welfare Exclusion Act of 2014 (GWE ACT)," which excludes Indian general welfare benefits from gross income in calculating income tax and establishes a Tribal Advisory Committee to advise the Treasury Department on matters relating to the taxation of Indians. The bill stops IRS efforts to tax tribal citizens who receive essential tribal government programs and services, such as housing, education, funding for funeral expenses, elder and childcare, and cultural awards, among other things, and puts tribes on an equal footing with states.

It was a bi-partisan and unified effort that led to the bill’s passage, the leaders said, which proves that when Indian country acts as one, much can be achieved.

“We had a choice, stand on our treaties or live on our knees begging the IRS for mercy,” Oglala Lakota President Brian Brewer said in a release. “We decided to stand on our treaties.”

“[The bill] is a great thing for Indians,” said Rob Porter, former Seneca Indian Nation president and now an attorney/lobbyist with Dentons who lobbied for the GWE Act on behalf of the Lummi Nation.

An immediate benefit of the bill is it puts a stop to IRS audits of tribal governments’ finances.

Over the past several years, tribal governments have been targeted for audits by a government entity that was supposed to help them understand and comply with applicable tax laws. Instead the IRS’s Indian Tribal Governments Office initiated audits and other compliance check activities throughout Indian country that tribal leaders said not only violated tribal sovereignty, but were discriminatory, harassing, and almost always failed to find any tax abuse.

Although tribal governments and their advisers had discussed taxation issues for years, the issue came into the public eye in the spring of 2013 when the Treasury Department Inspector General issued an investigative report revealing that the IRS had singled out the Tea Party and other groups with conservative-sounding words, such as patriot, in their titles when applying for nonprofit tax-exempt status. The story was all over the mainstream media, but there was no news about the IRS targeting tribal governments. Brewer noted the difference. “When the IRS gores the Tea Party Ox, heads roll. When Indians are targeted, the mainstream press takes a nap. It’s time for Congress to Act!” Brewer told Indian Country Today Media Network.

RELATED: IRS Harassing Tribes with Audits, Threatening Sovereignty

The report also revealed that the IRS had conducted around 1,000 audits of tribal governments and individuals over the past 10 years, Porter said.

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So why didn’t any of the tribes or individuals make a fuss about it during all those years?

“My view of it is it’s kind of like child abuse or spousal abuse – no one really talks about their audit by the IRS in public – it takes place in an abusive context,” Porter said. “Some tribal leaders were talking to each other about it, but it was all super secret so you couldn’t get aggregate information about what was happening. The report was so important to us tribal advocates – it just revealed this unbelievable targeting and the other takeaway was it had occurred without any clarity of mission? Who said that it was the purpose of this Indian Tribal Office to be involved in auditing?”

Yet the whole issue of cheering the general welfare exemptions – let alone questioning who authorized the tribal audits – raised a troubling question for a tribal member, who asked not to be named. Neither the U.S. Constitution nor any Indian treaty expressly authorizes the taxation of individual Indians or Indian nations, he said. “The Constitution talks about ‘Indians not taxed.’ So when you say you’re exempt from a, b, and c, aren’t you tacitly saying you aren’t exempt from the rest of the alphabet and therefore subject to the jurisdiction of the United States?” he asked. That question and similar ones concerning the issue of paying personal income taxes on money earned on Indian lands are under review Porter said.

In addition to the suspension of tribal audits, the bill also creates a tribal advisory committee for policy guidance to the secretary of the Treasury Department and requires any ambiguities in the statute to be resolved in favor of the Indians – a legal doctrine called the Canons of Construction. “I think this is a big deal because it flips the presumptions that the IRS uses, which decides everything in its favor,” Porter said.

The Oglala Sioux Tribe was among those tribes hard hit by the audits. More than two years ago, the tribe went to Great Plains Tribal Chairman Association, headed up by Tex Hall, chairman of the Mandan, Hidatsa & Arikara Nation, and sought assistance in stopping the IRS harassment of tribal governments, Brewer said. Great Plains helped by developing a network of support among other Indian nations and tribes who were harassed by the IRS.

"In the Great Plains, the IRS has harassed our tribes for several years,” Hall said. “We have five of the 10 poorest counties in the country on our reservations, and our people need assistance from tribal government. The IRS has spent weeks auditing our tribal headquarters, harassing us over elderly payments of $50 per month and questioning us over burial assistance. This Act says that has got to stop, the IRS must respect our treaties."

Brewer said that with the support of the Great Plains, Montana, and Wyoming, and from the Coalition of Large Tribes, National Indian Gaming Association (NIGA) and other Indian organizations, the tribes were able to testify at hearings, seek the introduction of bills, and secure support from the House and Senate to move the legislation forward.

Ernie Stevens Jr., NIGA chairman said, "It was a tough fight for our treaty rights, yet led by our tribal leaders working in unity and friendship, perseverance and sovereignty won out over bureaucracy. As President Obama said at Standing Rock, 'We must put our minds together to build better lives for our children' and we did."

Brewer also thanked the South Dakota congressional delegation, as well as Reps. Devin Nunes (R-CA), Ron Kind (D-WI) , and Tom Cole (R-OK), and Senators Heidi Heitkamp (D-ND) and Jerry Moran (R-KS).

“And, we want to thank President Obama for signing the bill into law,” Brewer said. “It’s a great day for Indian sovereignty.”