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ITG FAQ #1 Answer-Is income earned from fishing taxable to Indians?

With respect to an Indian tribe, income earned from activities related to recognized fishing rights secured as of March 17, 1988, by a treaty between such tribe and the United States, by an Executive Order, or an Act of Congress, is covered by IRC Section 7873 . Under IRC Section 7873, income derived by individual members of Indian tribes, or by a "qualified Indian entity," from fishing rights-related activities is exempt from Federal income taxes. Unless specifically exempted, income from fishing would be taxable to Indians.

Wages are not exempt if paid by an employer who is not a member of the same tribe or is not a qualified entity. Wages are also not exempt if paid to an employee who is not a member of the tribe whose fishing rights are exercised. Tribal members must fish in their own waters to be exempt.

CAUTION: 90% Rule for processors and transporters. If the entity engages to any extent in any substantial processing or transporting of fish, then at least 90 percent of the annual gross receipts of the entity must be derived from the exercise of protected fishing rights of tribes whose members own at least 10 percent of the equity interests in the entity. If a processor or transporter fails to meet the 90% rule, all income from that year is taxable.

For more information regarding Section IRC 7873, please see FAQs for Indian Tribal Governments regarding IRC Section 7873 (Fishing Rights).

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Page Last Reviewed or Updated: 18-Jan-2017