IRS Releases Proposed General Welfare Doctrine Guidelines for Tribal Governments >>

December 5th, 2012

IRS Releases Proposed General Welfare Doctrine Guidelines for Tribal Governments

Today, December 5, 2012, during the 4th annual White House Tribal Nations Conference, Deputy Treasury Secretary, Neal Wolin, announced that the Internal Revenue Service (IRS) and Treasury issued proposed guidance for the application of the general welfare exclusion (GWE) to Indian tribal government programs that benefit tribal members.

The IRS and the Department of Treasury, beginning in November of 2011, engaged in consultations with tribal leaders and members of Indian tribes concerning the application of the GWE to programs of Indian tribal governments. The GWE is an administratively created exemption from federal income taxation. It applies to a number of federal and state government programs, but no specific guidance has been adopted regarding the application to tribal government programs and services. The IRS and Treasury received 85 comments outlining how the general welfare exclusion should apply to those programs.

The proposed guidance responds to the issues addressed in the written comments and discussed as part of the consultation process, including the requirement under the general welfare exclusion to establish individual need. Under the proposal, Indian tribal government provided benefits will be considered exempt under the GWE if the payments are:

(1) made pursuant to a governmental program of the tribe;

(2) for the promotion of general welfare (that is, based on individual or family need, and, uniquely in the case of programs of Indian tribal governments, to help establish Indian-owned businesses on or near a reservation); and

(3) not compensation for services.

Under the proposed guidance, the IRS would conclusively presume that the individual need requirement is met for each tribal member, spouse, or dependent receiving a benefit that qualifies under Section 5.02 and 5.03.

Section 5.02 lists specific programs that would be presumed an exclusion, and includes housing programs, educational programs, elder and disabled programs, other qualifying assistance programs, and cultural and religious programs. Section 5.03 addresses ceremonial and religious services rendered, and presumes that the benefit (any payment for those services) does not represent compensation.

Comments on the proposed guidelines may be submitted to the Treasury Department in writing on or before June 3, 2013. However, the proposal notes that tribal governments and individual Indians can rely on the proposal in lieu of a final guidance. Comments should be submitted to Internal Revenue Service, CC:PA:LPD:PR (Notice 2012-75), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044, or electronically to Notice.Comments@irscounsel.treas.gov. Please include “Notice 2012-75” in the subject line of any electronic communications.

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