Friday, July 17, 2009
A bill pending in Congress, The Tribal Charities Fairness Act, would take a small but significant step towards clarifying the tax relationship between the federal government and tribal governing authorities. The longstanding myopia is well described in a recent article posted by Professor Ellen Aprill:
In tax law, as elsewhere, the federal government has treated native Americans and their tribal governments ineffectively and inconsistently. Examining the treatment of Indian tribal government under the Internal Revenue Code through the early 1990's demonstrates again their unique position in our federal system. The saga of how these tax laws affected tribal governments, however, also illustrates in dramatic microcosm the relationship between ambiguous statutory language, administrative discretion, and legislative oversight.
One of the ways the ineffective and inconsistent treatment Aprill talks about is manifested is in the way tribal charities are classified as either public charities or private foundations. Here is a summary of the problem from one of the chief legislative sponsors of the Tribal Charities Fairness Act:
Native American households are among the most disadvantaged in the United States, with more than 25 percent living in poverty. Tribal charities play an essential role in providing assistance to impoverished communities across Indian country. Yet, the tax code currently treats tribes like corporations rather than like state and local governments when they fund charities that serve tribal members. That is why, joined by my colleague Devin Nunes (CA-21), l recently introduced H.R. 3085, the “Tribal Charities Fairness Act” in the House of Representatives. Charitable organizations under section 501(c)(3) of the tax code are classified as either public charities or private foundations. Organizations are deemed “public charities” when they receive “public support” from local, state, or federal governments. When an organization does not receive public support, it is deemed a “private foundation” and is subject to more stringent tax rules and regulations. The Tribal Charities Fairness Act would allow Indian tribes to be treated the same as state and local governments when they provide support to tax-exempt charitable organizations – thus allowing tribal-funded charities that serve their communities to be deemed public charities. Passage of this legislation would free numerous nonprofit charities funded by Indian tribes – from health clinics and wellness centers to tribal museums and cultural centers – from additional tax rules aimed at regulating private foundations, not public charities. It’s a question of equity, and tribes deserve to be treated the same as any state or local government.
The Tribal Charities Fairness Act would correct this disparity by allowing support from Tribal governing authorities to be taken into account in determing the amount of "public support" a charity receives, just as state support is taken into account in determining the public (rather than private) status of charities. Professor Aprill has done excellent work in highlighting this issue, as demonstrated by the article linked to above as well as this informative powerpoint presentation.