On Friday, 14 September 2012, the Subcommittee on Indian and Alaska Native Affairs of the U.S. House of Representatives held an oversight hearing to examine the dramatic shift in federal policy by the Internal Revenue Service regarding tribal distributions from trust resources under the Per Capita Act. Noting that the IRS on 6 September backed off on its claim that trust fund distributions from the settlement of Department of Interior mismanagement of Indian Trust Fund resources are taxable, tribal witnesses at the hearing made the important observation that the IRS has not backed off on its more significant claim that other trust fund distributions are.
This unilateral reversal of U.S. policy by the U.S. Treasury not only attempts to take tribal resources exempt from taxation under U.S. law, but would also establish the unprecedented situation where tribal distributions derived from these resources would now be included in income determination for federal benefits such as housing, health and education–as well as Social Security. As American Indian tribes try to raise their members from lives of poverty through self-sufficient efforts — using their own resources — the idea that the IRS would try to thwart these efforts is baffling.
As Athena Sanchey Yallup of the Yakama Nation Tribal Council remarked,
the IRS’ attempts to tax our trust resources are simply a disingenuous money grab that our People can ill afford…The IRS’ policy change perversely requires poor tribal members to pass on tribal resources to avoid taxation [and] corrupts the trustee relationship by profiting from trust resources of the beneficiary.
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