The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have issued a Notice of Proposed Rulemaking (NPRM) to implement section 139E of the Internal Revenue Code, established by the Tribal General Welfare Exclusion Act of 2014. This Act allows Tribal governments to provide non-taxable assistance and benefits to Tribal members, which are excluded from their gross income for federal income tax purposes.
The proposed regulations aim to support Tribal Nations in enhancing community welfare through various forms of aid, including housing assistance and Native language restoration. These rules stipulate that gross income will not include any Indian general welfare benefit paid to or on behalf of a Tribal citizen.
These regulations mark a significant acknowledgment of Tribal self-determination and self-governance in tax policies, allowing Tribes discretion in program establishment, benefit scope, and decisions related to cultural or ceremonial activities. This aligns with Presidential Executive Order 14112 under the Biden-Harris Administration’s recognition of federal trust and treaty responsibilities towards Tribal Nations.
The proposed rules follow extensive consultations with Tribal Nations and collaboration with the Treasury Tribal Advisory Committee (TTAC), alongside Treasury’s Office of Tribal and Native Affairs, Office of Tax Policy, and IRS.
“The Biden-Harris Administration has provided historic support to Tribal Nations and today’s announcement will provide clarity and certainty that is critical to economic opportunity,” said U.S. Deputy Secretary of the Treasury Wally Adeyemo. “These proposed rules recognize that Tribal Nations know best how to serve their citizens and demonstrate the Biden-Harris Administration’s commitment to ensuring the voices of Tribal leaders are at the table.”
U.S. Treasurer Chief Lynn Malerba added, “The provision of general welfare is core to indigenous customs and practices and today’s rule incorporates respect for these values in our tax regulations.” She acknowledged Treasury's consultative process involving TTAC as crucial for understanding tribal needs.
A decade ago, Congress enacted the Tribal General Welfare Exclusion Act to expand general welfare exclusions specifically for tribal programs beyond historical administrative exclusions. The Act also established TTAC for advising on tribal tax matters while suspending audits until IRS field agents received appropriate training.
Today's proposed regulations reflect Treasury's investment in policy development inclusive of tribal feedback. The current administration created Treasury's first Office of Tribal and Native Affairs under Chief Malerba's leadership. This office has managed $30 billion in recovery funds for Tribes and facilitated access to clean energy tax credits through initiatives like elective pay under the Inflation Reduction Act.
Treasury invites further consultation from Tribes on these proposed regulations. For more information about this rulemaking process, see relevant documents such as the Dear Tribal Leader Letter, Consultation Summary, and Fact Sheet.
