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Tribal General Welfare Exclusion Act signed into law by Obama

Monday, September 29, 2014

Fawn Sharp, the president of the Quinault Nation of Washington. Photo from United South and Eastern Tribes

President Barack Obama signed H.R.3043, the Tribal General Welfare Exclusion Act, into law on Friday.

The law puts tribes on the same level as states and the federal government when it comes to taxation of general welfare programs. It also suspends Internal Revenue Service enforcement actions that drew outrage across Indian Country.

“The legislation is the response to intrusions on tribal self-determination by the IRS, which have been illegally perpetrated far too long,” said Fawn Sharp, the president of the Quinault Nation of Washington.

Generally, all income and benefits are subject to federal income tax. The new ensures that tribal members won't have to pay taxes on certain benefits received through tribal general welfare programs.

“Credit for this law locally affirming and recognizing our sovereignty and making sure benefits derived under it are received by our people also go to the current and past president. This law is our due and is long overdue," said Darlene Miller, a member of the Seneca Nation of New York who is running for president of her tribe. Seneca President Barry E. Snyder, and his predecessor, Robert Odawi Porter, lobbied for the law.

In response to complaints from Indian Country, the Obama administration finalized new guidance, Application of the General Welfare Exclusion to Indian Tribal Government Programs That Provide Benefits to Tribal Members in June. The new law, however, establishes a more permanent policy on the matter.

The law also provides temporary relief to tribes and their members who are being audited by requiring the Department of Treasury to develop new training for agents who work in Indian Country. A Tribal Advisory Committee will be set up to help oversee the training and to advise the Treasury Secretary on taxation issues.

“Passage of this critical legislation will implement long-needed reforms of the work of the IRS in Indian Country and clarify that federally recognized tribal government programs and services provided to our citizens are not subject to federal income taxation," Sharp said. "This legislation will help align federal tax laws with federal Indian law and policy, strengthen Indian self-determination, and respect the local decisions of tribal governments to improve our communities."

The House passed the bill by a voice vote on September 16. The Senate passed it by unanimous consent on September 18.