2020 Tax Considerations for Tribal Governments’ General Welfare Benefits

As your tribe prepares for its 2020 tax needs, remember that the General Welfare Benefits (GWB) Exclusion Act of 2014 (the Act) can help provide nontaxable distributions to your tribal members.

Below, we review requirements of receiving benefits under the Act, and how it may help your tribe’s tax filings.

Guidelines and Policies

If your tribe provides payments to members that could qualify as nontaxable benefits under the Act, you’ll need to develop guidelines and policies to ensure you’re meeting the Act’s requirements. 

The Act provides that taxable gross income doesn’t include the value of any Indian GWB that meets the following guidelines:

  • Benefits pursuant to an Indian tribal government program
  • Benefits with specific written guidelines
  • Benefits that promote general welfare—based on individual or family need to help establish Indian-owned businesses on or near a reservation
  • Nondiscriminatory benefits
  • Benefits aren’t lavish or extravagant
  • Benefits not considered compensation for services

Steps to Establish or Amend Guidelines

If your tribe previously established a general welfare ordinance or policies, now is a good time to re-evaluate whether or not new policies are needed, or if you can expand the policy to provide for additional services that could qualify as GWBs.

If you’re still in the process of adopting policies, there are several options to get the process started. You can first look at the programs you’re operating to make sure they’ve implemented written policies and guidelines in compliance with the Act. 

You can also review your tribes’ previous IRS Forms 1099 issued to tribal members to evaluate whether any of these activities can and should be re-evaluated under the GWB guidelines. A form can be amended if, during your review, you determine you inadvertently included a general welfare payment.

Some tribes start by prioritizing basic essential needs, such as:

  • Elder and disabled assistance
  • Housing
  • Education
  • Cultural, religious, or social events
  • Health care

Other tribes use this as an opportunity to expand existing programs or create new programs such as:

  • Costs associated with dependent care
  • Health and life insurance
  • Transportation assistance
  • Housing repairs and replacements
  • Emergency assistance

Recipient Income Levels

Some tribes initially interpreted that, to be GWB eligible under the Act’s requirements, they needed to evaluate individual recipients’ income levels.

However,  until further legal guidance has been published on this issue, tribes should consider whether benefits offered  meet the needs criteria defined in the GWB as referenced above in the first section.

Per Capita Payments

The IRS and the Act don’t define an annual limit per member on the GWB. Further, GWB distributions may be sourced from gaming revenue. Per capita payments of gaming revenue, however, are still taxable and subject to income tax withholding.

If your tribe distributes per capita and doesn’t have well-established GWB policies, consider whether or not your tribe is exercising its sovereign right to provide the necessary level of assistance to each eligible tribal member on a nontaxable basis before providing additional distributions through per capita. You’ll want to make sure you follow the guidelines under the Act. 

Ultimately, well-defined GWB policies and eligibility criteria for each program assistance will benefit your tribal members and help you stay compliant with the Act’s requirements.

Treasury Tribal Advisory Committee (TTAC)

The Act also created the TTAC to provide advice and recommendations regarding the taxation of Indians. The committee also advises the Secretary of the US Department of the Treasury on establishing training and education for agents who work with tribal governments.

In addition, the ACT provided that the Secretary shall, in consultation with TTAC, establish guidelines for what constitutes lavish or extravagant benefits with respect to Indian tribal government GWB programs.  

TTAC Meeting Schedule

The TTAC met four times in 2019 and has three scheduled meetings in 2020: March 31, September 16, and December 9. Agenda policy items include:

  • Implementing the ACT’s requirement to define lavish or extravagant
  • Training IRS and tribal professionals
  • Establishment of rules for training

Subcommittees have also been formed relating to GWB exclusions, dual taxation, and tribal pensions.

We’re Here to Help

To learn more about the GWB guidelines or for help reviewing your existing policies, contact your Moss Adams professional.