The Treasury Department and the Internal Revenue Service said Monday they plan to hold a listening session with Native American tribal leaders to consult with them on the application of the general welfare exclusion to benefits provided under Indian tribal government programs.
The Treasury and the IRS have been actively engaged in previous consultations with tribes and tribal leaders, and last November they began consulting with the tribal leaders on this specific topic in several public sessions. The Treasury and the IRS also requested written comments and received over 65 comments in response to a notice that it issued last year, Notice 2011-94.
Section 61(a) of the Tax Code provides that, except as otherwise provided by law, gross income means all income from whatever source derived. The IRS has consistently held, however, under a limited general welfare exclusion (the exclusion), that payments under governmental social benefit programs for the promotion of the general welfare are not includible in a recipient’s gross income. To qualify under the exclusion, the payments must (1) be made to an individual under a governmental program, (2) be for the promotion of the general welfare (that is, based on need), and (3) not represent compensation for services.
The IRS has received inquiries from Indian tribal governments about the application of the exclusion to tribal government programs that provide benefits to tribal members. These programs may include, but are not limited to:
• Housing (for example, programs providing housing on and off the reservation, with income limits different from those of the Department of Housing and Urban Development);
• Cultural (for example, programs involving tours of sites that are historically significant to a tribe; language preservation programs; community recreational programs; cultural and social events);
• Education (for example, programs providing tutors or supplies to primary and secondary school students; job retraining programs for adults);
• Elder programs (for example, programs providing heating assistance or meals).
During recent consultations, the Treasury and the IRS said they heard tribal concerns regarding consistent treatment of tribal programs in the IRS compliance programs. To address those concerns, the Office of Indian Tribal Governments of the IRS is looking at what administrative steps it can take to develop a national coordination process in order to ensure that general welfare programs are reviewed in a consistent fashion.
The IRS also plans to publish written guidance that will address issues raised by the tribes in their comments. The intent is that this published guidance, along with improved internal coordination procedures, will improve the clarity and consistency of the application of the general welfare doctrine to tribal government programs.
To provide tribes and tribal leaders additional opportunities for input, and to provide the Treasury and the IRS with the opportunity to further discuss the issues, the Treasury and the IRS plan to host a conference call with tribes and tribal leaders on May 30, 2012 at 3:00pm (Eastern Daylight Time). The conversation is expected to last approximately two hours. The conference call number is 1-(888) 810-9155 and the access code is 750610.
Participation is open to all tribes and tribal leaders regardless of whether formal comments were submitted. While the official deadline for formal comments has passed, Tribes and tribal leaders are still encouraged to submit comments which can still be considered. Comments should be submitted to Internal Revenue Service, CC:PA:LPD:PR (Notice 2011-94), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044, or electronically to Notice.Comments@irscounsel.treas.gov. Emails should include “Notice 2011-94” in the subject line of any electronic communications.
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