Tribes reacting to final Treasury regulations

The U.S. Department of the Treasury is clarifying rules and giving Native American Tribes a one-year time frame to comply with new regulations widely supported in Indian Country.

"I'm encouraged to see the Treasury Department take these steps to improve how tax policies affect our Tribes," said Sen. Catherine Cortez Masto, D-Nev.

"Clarifying that Tribally chartered businesses are exempt from income taxes and fully implementing the Tribal General Welfare Exclusion Act will help Native communities and encourage economic development."

The ruling offers clarification of the General Welfare Exclusion Act of 2014 and the definition of a "Tribal wholly owned corporate entity."

According to the new rules, Tribal economies are unique and a single Tribe or multiple Tribes have the ability to self-determine the makeup of their revenue generating entities and charter them under their own laws.

"These rules were remarkable step forward for Indian Country, following decades of advocacy affirming tribal sovereignty by granting tribes deference and determining general welfare benefits," said Rodney Butler, Chairman of the Mashantucket Pequot Tribal Nation, and NAFOA Board president.

"The rules explicitly exempt wholly owned Tribal chartered corporations from federal income tax and recognize tribal authority to make special needs determinations on par with states."

The NAFOA was founded as the Native American Finance Officers Association and represents over 170 Tribal nations in more than 28 states.

Clarifications to the General Welfare Exclusion Act also affect how and if federal income taxes are ascribed to financial assistance or revenues, including funds coming from gaming operations.

The funds can be classified as "general welfare," as opposed to a per capita payment.

The new rule advises the Internal Revenue Service to defer to Tribal law regarding the flow of funds.

"That's the first time that any language regarding a tribal deference was ever included in the tax code," said Krishna Vallabhaneni, Tax Legislative Counsel, for the Treasury.

"This was also the first time outside of Indian Country, that this sort of concept of 'Hey, the IRS, you're not going to always win,' was really placed in the statute."

To deal with the uncertainties caused by the 2014 version of the GWE Act, the IRS suspended audits until agents could be trained on the rule.

Since the rule has now been changed the IRS is extending the deadline for training and compliance.

"We thought it was important to provide a one-year transition period by saying that the regulations do not they're not applicable for taxable years that begin before January 1, 2027," said Vallabhaneni.

Disagreements between the Tribes and the IRS over tax questions is an ongoing issue.

In June 2025, a bill that would repeal the "essential government function," clause in the tax code was introduced by Sen. Cortez Mastro.

That piece of unclear language has been interpreted to mean that Tribes cannot issue private activity bonds for anything not considered an essential government function. The issue remains unresolved.