Tribal leaders say that in recent years, the IRS has narrowed down the scope of those exempted from taxes to include only those with significant financial need. The IRS has been reviewing per capita payments that tribes make to members from trust money raised through tribal businesses.
One tribal leader that has voiced his objection is John Yellowbird Steele, chief of the Ogalala Sioux tribe. In a recent speech given to the Senate, Steele brought up the treaty drawn up between his tribe and the US government. In his speech, Steele said, “We fix houses, and they want us to put a value on how much that lumber cost to patch a hole in a roof or a floor, put shingling on, they want us to put a value on that and give the person a 1099. The next year, where are those people going to find the money to pay the IRS?”
Steele claims his tribe has been asked by the IRS to produce various documents pertaining to payments to tribal members such as bank records, healthcare benefits and Pow Wow prizes which are essential in raising the living standard of the members and at times even crucial to their very survival.
The executive secretary of the Confederated Tribes and Bands of the Yakima Nation in Washington State, Athena Sanchey Yallup said the IRS action of seeking to tax her nation’s distribution of earnings from the timber on its land to each of its 10,400 tribal members reflects a “radical change in policy” and was happening for the first time in its history.
The IRS has been holding talks with tribes to clarify and fine tune the rules governing what is taxable under the General Welfare Doctrine, the document that stipulates whether aid that tribal members receive should be considered taxable income. However, as talks have been ongoing, tribes have been receiving audit notices.
However, the IRS sees nothing wrong in its work with tribes. IRS Deputy Assistant Secretary Aaron Klein has been gathering comments and recommendations on what can be taxed as income. According to Klein, the discussions show that more guidelines and greater clarity on rules pertaining to when tribal benefits can be taxed are required.