GM 13-084

Tribal General Welfare Exclusion Developments

Several developments have emerged this month regarding policy efforts to clarify the taxability of tribal government program benefits.

• The House Ways and Means Committee Chairman Camp (R-MI) and Ranking Member Levin (D-MI) wrote Treasury Secretary Lew to urge full consideration of tribal comments as Treasury and the Internal Revenue Service (IRS) finalize the rules for applying the general welfare exclusion to tribal programs set forth in Notice 2012-75.
• The Joint Committee on Taxation (JCT) concluded that HR 3043, the Tribal General Welfare Exclusion Act, “would have a negligible effect on Federal fiscal revenues.”
• Senators Moran (R-KS) and Heitkamp (D-ND) introduced a companion general welfare bill in the Senate (S 1507) containing the same terms as HR 3043.

Ways and Means Chairman Camp and Ranking Member Levin Weigh in on IRS Notice 2012-75. On December 5, 2012, the IRS and the Treasury Department released a new proposed revenue procedure to govern the application of the General Welfare Exclusion (GWE) to tribal government program benefits as IRS Notice 2012-75. In the time since the Notice was released, Representative Nunes (R-CA) introduced HR 3043. While HR 3043 is primarily a clarification and codification of the Notice (with expanded flexibility for tribes) it includes two important provisions which were not in the Notice:

• a provision directing the Secretary to establish a Tribal Advisory Committee which would be charged with advising the Secretary on matters relating to the taxation of Indians and the development of mandatory training and education for IRS field agents
• a provision that would temporarily suspend audits and examinations of tribal governments and tribal citizens relating to the distribution of tribal general welfare benefits and would empower the Secretary to waive any associated interest and penalties that may have accrued
By a letter dated September 12, 2013 (attached), Chairman Camp and Ranking Member Levin urged Secretary Lew to:

• review comments received on the Notice and ensure final administrative guidelines are fair and comprehensive
• provide any necessary guidance to the IRS and IRS field agents
• establish a Tribal Advisory Committee to advise the Secretary
The letter urges the Treasury Department to follow many of the provisions included in
HR 3043/ S1507.

Joint Committee on Taxation Provides Revenue Estimate on HR 3043. The JCT conclusion that HR 3043 would have little federal budget revenue impact improves the bill’s prospects to be included in a tax reform bill or to be attached to another legislative vehicle than would have been possible if the bill had received a high revenue score that would have required budget offsets. Since our last writing, Representatives Blumenauer (D-OR); Grijalva (D-AZ); Hunter (D-CA); Noem (R-SD); Rangel (D-NY); and Simpson (R-ID) have added their names to the list of the 14 original cosponsors, bringing the total to 20. Both Blumenauer and Rangel serve on the House Ways and Means Committee, which is the committee of jurisdiction for this bill.

S 1507. Senators Moran and Heitkamp introduced S 1507 on September 17. S 1507 was referred to the Senate Finance Committee.

Senator Moran in his press release states: “Tribes are sovereign governments with the responsibility to provide services to their citizens. By clarifying the definition of general welfare programs, this bill respects tribal sovereignty while making certain [that] tribal citizens are not unfairly taxed. This legislation will also enhance economic development and the quality of life in Indian Country.” Senator Moran’s press release may be viewed here:

Senator Heitkamp in her press release states: “This bill levels the playing field by recognizing the inherent sovereignty of tribal governments to provide programs and services to its citizens, without subjecting them to heightened scrutiny from the IRS. Just as state and local governments are able to determine what programs best help their citizens – like scholarships, elder or child care, or housing assistance – we must recognize tribal governments also have those same rights. With this bill, we’re supporting tribal self-determination and taking a step toward living up to our trust and treaty obligations to tribes.” Senator Heitkamp’s press release may be viewed here:

Please let us know if we may provide additional information regarding the Tribal General Welfare Exclusion legislation or IRS Notice 2012-75.