An Overview of Tax-Related Matters that May Impact Your Tribe

Dealing with regulatory and policy changes is nothing new to tribal governments. To prepare for and manage the risks and potential impact of tax-related regulatory and policy changes, there are several current issues for tribes to follow.

2017 ITG Briefing Highlights

The Tax Exempt and Government Entities Division of the Department of the Treasury recently rolled out its Fiscal Year 2017 Work Plan. Highlighted within the plan was the Indian tribal governments’ (ITG) briefing document, which outlined the ITG’s goal to use a balanced approach to improving compliance through outreach, education, and compliance checks. Additional highlights of the ITG’s briefing included:

  • Infrastructure. The ITG’s workforce continues to shrink, causing the group to disseminate information and procedures by transferring the technical knowledge base of the IRS’s highly skilled workforce via webinars and technical issue snapshots to new employees. Additionally, the ITG will develop training for IRS Collection employees to use while working with tribal entities and individual tribal members.
  • Compliance and enforcement strategy. Although overall examination focus was reduced, the ITG will continue to have a presence for noncompliance with general employment taxes and information returns underreporting. The IRS had moved from a regional approach when classifying cases of noncompliance to a national approach, and this will continue with only the most egregious noncompliance selected for audit. The Tip Compliance Agreement Program will continue to convert Tip Rate Determination Agreements to Gaming Industry Tip Compliance Agreements.
  • ITG outreach and education. In fiscal year 2017, the ITG will focus on providing education products and nationwide webinars that cover emerging and problematic topics in tribal tax administration. The ITG will develop an interactive Web-based tool to direct customers in the gaming industry to proper forms and reporting thresholds. The ITG also will update and redesign Publication 4268, ITG Employment Tax Desk Guide. For customers with little or no Internet access, the ITG will create templates, guides, and products that will be available on CD or DVD.
  • ITG support for Treasury initiatives and consultation. The ITG will continue to provide technical expertise on a wide range of tax topics at various joint speaking engagements. These topics and speaking engagements include Affordable Care Act implementation and technical issues with tribal leaders at the National Indian Health Board annual meeting, social security and wage tax issues with the National Congress of American Indians, and general welfare exclusion implementation status with the National Intertribal Tax Alliance and the Native American Finance Officers Association. IRS representatives will continue to speak at regional forums, such as the CFO Roundtable series hosted by Moss Adams. The ITG is also expected to continue providing extensive support to the development of published guidance and interagency coordination, most notably with the Department of Interior and the formation of the Treasury Tribal Advisory Committee.

Next Steps

  • Tip Compliance Review (TCR). The ITG issues a TCR for entities that currently have a tip agreement with the IRS but haven’t been timely or correctly supplying additional annual documentation per the tip agreement requirements. If not previously completed, tribes with gaming operations should voluntarily convert their Tip Rate Determination Agreement to the more appropriate Gaming Industry Tip Compliance Agreement.
  • Tools. Visit the IRS Web site frequently for education products and nationwide webinars on emerging and problematic topics in tribal tax administration.

Paid Sick Leave for Federal Contractors

On September 7, 2015, President Barack Obama signed Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors. The executive order requires certain employers that contract with the federal government to provide their employees with up to seven days of paid sick leave annually, including for family care. After considering comments on a proposed version of such regulations, the Department of Labor (DOL) published the regulations in a Final Rule on September 30, 2016. Under the Final Rule, Executive Order 13706 applies to four major categories of contractual agreements:

  • Procurement contracts for construction covered by the Davis-Bacon Act
  • Service contracts covered by the McNamara-O’Hara Service Contract Act (SCA)
  • Concessions contracts, including any concessions contracts excluded from the SCA by the DOL’s regulations in 29 CFR 4.133(b)
  • Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public

Does Executive Order 13706 Impact My Tribe?

Contracts aren’t subject to the rules in Executive Order 13706 if they’re:

  • Grants
  • Contracts and agreements with and grants to tribes under the Indian Self-Determination and Education Assistance Act (Public Law 93-638), as amended
  • Any procurement contracts for construction that aren’t subject to the Davis-Bacon Related Acts (procurement contracts for construction under $2,000, for example)
  • Contracts for the manufacturing or furnishing of materials, supplies, or other items to the federal government that are subject to the Walsh-Healey Public Contracts Act

Tribes were generally opposed to the new overtime regulations, and their feedback was critical to securing the exclusions noted above. As a result, the impact to tribes is expected to be minimal.

General Welfare Benefits Policy Update

IRS audits and examinations of tribes and tribal members remain suspended as they relate to the exclusion of payments or benefits from a tribal government under the general welfare exclusion. The future period of enforcement is still unknown.

Next Steps

If you haven’t already, now is the time to update your tribe’s general welfare benefits policies and procedures to ascertain and document whether benefits are tax-exempt to your members. It’s critical that a tribe’s policies thoroughly and clearly explain the underlying needs intended to be addressed by benefit programs as well as eligibility criteria and other details. This careful attention to detail could help ensure benefits to members remain tax-exempt.

We're Here to Help

If you have questions about how to interpret and address recent regulatory and policy changes or other tribal issues, contact your Moss Adams professional.