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Per capita payments under tribal, federal scrutiny

Correction/Clarification: Per capita payments are NOT exempt from federal taxes. Per capita payments have always been subject to federal taxes. The IRS concern stems over attempts to avoid paying such taxes that tribal members have always paid.

As the $19 billion Indian gaming industry continues to expand, debate over the distribution of per capita payments to tribal members grows along with it.

The Indian Gaming Regulatory Act of 1988 authorizes the use of casino revenues for per capita programs. Some of the payments can be extremely high -- members of the Santa Ynez Band of Chumash Indians receive $30,000 a month from the tribe's successful casino, The Los Angeles Times reported last year.

Other tribes distribute more modest payments while the majority of tribes don't offer them at all. According to a June 2003 report by the Interior Department's Inspector General, only about 73 tribes, of the more than 200 with casinos, have developed revenue allocation plans.

But more tribes are set to get into the action. Members of the Comanche Nation of Oklahoma recently voted to approve a per capita program and receive about $900 a year from their gaming operations. Some members of the Chickasaw Nation of Oklahoma are also clamoring for a share.

The Mohegan Tribe of Connecticut, the owners of one of the most profitable casinos, already has a revenue allocation program. But newly elected leaders are considering bigger payments.

Not everyone thinks making payments a wise idea. Wallace Coffey, the chairman of the Comanche Nation, told The Oklahoman that the per capita program would eat up $11.6 million of the $29 million the tribe expects to make from its four casinos and would derail an expansion plan.

And the leader of the nation's largest tribal gaming organization doesn't support such payouts either. "I'm telling you that the per capita destroys your economy and your budget," said Ernie Stevens Jr., the chairman of the National Indian Gaming Association, at the recent Global Gaming Expo in Las Vegas.

Stevens is a member of the Oneida Nation of Wisconsin, which distributes some of its gaming revenues to its 15,000 citizens. But he said he didn't fill out the paperwork to receive his payment this year.

"I can't tell you how much it is but ... you can spend it real quick at Wal-Mart in one afternoon," Stevens said.

Victor Rocha, the proprietor of, the well-known Indian gaming web site, receives a per capita payment as a member of the Pechanga Band of Luiseno Indians from California. Yet he said he doesn't think it's necessarily a good idea for tribes to share gaming revenues.

"If I spent every single dollar I got out of my paycheck and didn't put it in the bank, my wife would crucify me," he said at the conference. "But that's what the tribes are doing -- they're just bleeding money."

Some tribes have already experienced problems. Due to financial strains, the Ho-Chunk Nation of Wisconsin was forced to cut back its casino payments by 30 percent, much to the dismay of some tribal members. The Cabazon Band of Mission Indians in California, also facing budget woes, reduced its $14,000 monthly payment to its 32 members.

The per capita debate has sparked allegations of greed as well. In California, where tribes with casinos brought in $5.3 billion according to the Indian Gaming Industry Report, the removal of hundreds of people from the rolls of wealthy tribes is being linked to the rapid growth of the industry -- at a cost to tribal unity and culture, some say.

Ousted members of the Pechanga Band have sued, seeking at least $38 million in withheld payments. In South Dakota, members of the Flandreau Santee Sioux Tribe who were excluded from a per capita plan sued to halt the use of all gaming revenues.

Federal agencies have put scrutiny on revenue allocation programs too. The Internal Revenue Service, whose agents are going after tax-free bond deals for gaming tribes, says that some tribes are abusing the per capita system in order to avoid paying taxes. Per capita payments are subject to federal taxes.

The Bureau of Indian Affairs is also concerned. George Skibine, the acting deputy assistant secretary for policy and economic development, said the agency is proposing new regulations to help tribes determine what is appropriate under the law.

"We have seen a steady increase in the percentage that tribes have allocated in their per capita payments and we're concerned with that," Skibine said at the conference.

The BIA and the National Indian Gaming Commission have already been questioned for their role in approving revenue allocation plans. "Neither the BIA nor the NIGC is monitoring Indian tribes to determine whether tribes comply with approved revenue allocation plans or whether tribes are making per capita distributions of gaming revenues without an approved plan," the Inspector General report stated.

In many cases, the BIA approved a plan without sufficient or accurate information, according to the IG. "Of the 73 approved plans, only 24 contained any information that might assist in evaluating a tribe�s economic health," the report stated. "Of these 24, only 5 provided comparative information about gaming profits, tribal enrollment levels, and tribal operations budgets � all of which are essential for a reasoned evaluation of a tribe's economic health."

Inspector General Report:
Evaluation of the Bureau of Indian Affairs� Process to Approve Tribal Gaming Revenue Allocation Plans (June 2003)