The Internal Revenue Service, under Notice 2011-94, is requesting tribal comment on the application of the General Welfare doctrine to benefits provided under tribal benefit programs. The doctrine exempts from gross income any payments made pursuant to governmental social benefit programs for promoting general welfare. However, the doctrine is increasingly unhelpful to tribes and tribal members. This is because the IRS does not apply the doctrine to tribes in the same manner as it applies it to other governments. As a result, tribal governments are having to collect millions of dollars in withholding from their members, tribal members are paying taxes on benefits that others do not pay, and tribal governments are being unfairly subjected to IRS reporting requirements that other governments do not face.
The comments have the potential, among other things, to encourage the IRS to apply the doctrine fairly, to stop the IRS from defining "need" solely as financial need, and to permit tribal governments to self-determine whether program benefits should be exempt from taxable income. The IRS must also clarify and strengthen the exemption's general welfare application to non-per-capita gaming revenue, as consistent with the Indian Gaming Regulatory Act.
The deadline for written comments has been extended to March 14, 2012.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.