The authority to tax is an inherent attribute of sovereignty. Tribes, like their federal and state counterparts, depend on taxation to raise revenues for essential services. Yet, with their lands held in trust by the federal government, tribal governments have a limited tax base and rely on revenue generated from economic development to meet and supplement vital programs and services. Dual taxation—when both a tribe and state tax non-Tribal members—also poses obstacles to tribal governments, siphoning revenues from Indian Country and making it difficult to attract and retain non-Indian business.
The federal tax code imposes burdens and limitations on tribal governments that are not faced by other governments in the federal system. Reforming federal tax policy is critical to ensuring that tribes are treated consistent with their governmental status, as reflected by the U.S. Constitution and numerous federal laws, treaties, and court decisions. A federal tax policy aligned with Indian Self-Determination principles will promote economic growth, self-sufficiency and strengthen tribal governments.
The firm’s long history of advocating for tribes in the area of Federal Indian tax law and policy extends to our partners’ work prior to the firm’s founding. In the 1970s, Charles A. Hobbs litigated Indian tax matters in the U.S. Supreme Court, the Fourth Circuit Court of Appeals, and the Court of Claims. In 1971, Mr. Hobbs and Jerry C. Straus also appealed an Internal Revenue Service ruling regarding the taxation of allotted lands to the Ninth Circuit Court of Appeals. Hans Walker, Jr. published and periodically issued updates to the invaluable resource Federal Indian Tax Rules: A Compilation of Internal Revenue Service Rules Relating to Indians. Hobbs Straus attorneys continue this legacy of advocacy and scholarship in our current taxation practice.
More recently our attorneys have worked on behalf of tribes and intertribal organizations to urge Congress to adopt the Tribal General Welfare Exclusion Act. We have also drafted proposed comprehensive tax reform legislation on behalf of the United South and Eastern Tribes. Hobbs Straus has assisted its clients by preparing comments on such issues as the IRS effort to tax per capita distributions of trust resources, the IRS’s advanced rulemaking on governmental benefits plans, and the consultation process that resulted in the IRS’s Revenue Procedure on the general welfare exclusion as applied to tribal government benefits programs.
In 2013 and 2014 we worked with tribes to develop general welfare program ordinances implementing the advantages of new IRS rules. In 2014, Hobbs Straus issued a legal opinion for a client affirming that a regulatory commission established jointly by four tribes qualified for “governmental plan” status under Section 414(d) of the Internal Revenue Code and was exempt from the Employee Retirement Income Security Act of 1974 (ERISA) and related reporting requirements.
Our efforts to shape and preserve beneficial federal tax policy for tribes are part of a multi-faceted practice that includes important front line work assisting tribal governments in the development of effective tribal tax codes and enforcement systems so they may exercise their inherent sovereign right to regulate activities within their jurisdictions. From tobacco taxes to oil and gas severance taxes to a wide range of other taxes, our attorneys have played instrumental roles for our clients in maximizing and preserving tribal governmental powers and revenues through effective tax laws. Our duties have involved negotiating tribal-state compacts, enforcing tribal taxes against oil companies, and advising and defending against the application of unlawful state income and employment taxes.
Hobbs Straus attorneys have experience working with tribal governments to:
- Maximize tribal tax revenues;
- Plan, implement, and enforce tribal tax law and policy;
- Create tax-efficient structures for tribal enterprises;
- Resolve tax disputes with federal or state entities; and
- Advocate for tax reform in federal legislative and policy development.
Our attorneys have assisted tribal governments in a variety of tax matters, including:
- Serving as tax policy counsel and tax agency to tribes;
- Drafting and enforcing tribal tax ordinances, including general welfare ordinances and tax ordinances governing sales, tobacco, motor fuels, motor vehicles, minerals severance, and other taxes;
- Submitting comments to the IRS regarding general welfare exclusion policies, per capita distributions on income derived from trust resources, and other matters;
- Defending tribal clients in IRS audit and enforcement actions;
- Negotiating tribal/state tax compacts and litigating disputes involving such agreements;
- Providing legal opinions to tribes on matters such as ERISA-exempt employee benefits and tax reporting obligations associated with gaming prizes awards;
- Monitoring legal and legislative developments for tribal clients, such as the Tribal General Welfare Exclusion Act and tax extender legislation;
- Creating and implementing comprehensive tax reform strategies.