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ITG FAQ #2 Answer-Are federally recognized Indian tribal governments subject to employment taxes?

Yes. In general, Indian tribes in their role as employers are subject to federal employment tax laws and procedures.

When a business enterprise or political subdivision of an Indian tribe is organized and operated by the tribe itself, such enterprise is considered a private tribal activity and services performed in its employ constitute employment (Revenue Ruling 56-110 and Revenue Ruling 59-354). Services performed in the employ of the tribal government also constitute employment.

The federal statutes, regulations, case law, revenue rulings, and other sources of tax authority establish the role of Indian tribal governments as employers. As such, tribal governments are required to follow substantially the same procedures as other employers.

In addition, it is important to distinguish between the status of Indian tribal governments and the members of tribes. While tribal governments are not subject to income tax, there is a well established principle expressed by the U.S. Supreme Court in Squire vs. Capoeman (Squire vs. Capoeman, 351, U.S. 1, 6 (1956)) and Choteau vs. Commissioner (Choteau v. Commissioner, 283 U.S. 691 (1931) that Indians are citizens, and in the ordinary affairs of life, not governed by treaties or remedial legislation, they are subject to the payment of income taxes as are other citizens. To establish an exemption from tax, there must be “express exemptive language in some statute or treaty (United States v. Anderson 625 F. 2d 910, 913 (9th Cir. 1980))”. Accordingly, unless income of an Indian derived from a particular source is otherwise exempt, such income will be subject to tax the same as it would be for any other taxpayer.

CAUTION: Because of the relationship between federally recognized tribes and the United States government, there may be statutes, treaties, court decisions, regulations, revenue rulings, and other authority to exempt specific items from the general rules. Additional research may be required on a case-by-case basis.

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Page Last Reviewed or Updated: 17-Nov-2016