The Internal Revenue Service (IRS), in the attached FEDERAL REGISTER notice, announced proposed regulations which would permit tribal members who are paid for certain fishing-rights related activities to contribute this non-taxable income to a qualified retirement plan. Comments and requests for a public hearing must be received by February 13, 2014. Treasury and the IRS will host a telephonic consultation on December 10, 2013 at 4:00 pm EST (877-918-2508 / Passcode 4284).
The proposed regulation arises from the treaty-protected fishing rights income exclusion codified in section 7873 of the Internal Revenue Code. Section 7873 clarified that income derived from fishing rights-related activity is exempt from federal, state, Social Security and unemployment taxes. Previously, the IRS had determined that this non-taxable compensation could not be placed into a tax-deferred retirement plan, such as a 401(k) plan.
In the FEDERAL REGISTER notice IRS proposes to clarify that although section 7873 “income” is non-taxable, it may be treated as “compensation” for the purpose of establishing an individual’s eligibility for participation in certain qualified retirement plans.
Please let us know if we may provide additional information regarding the proposed regulations or the telephonic consultation to be held on December 10, 2013.