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ITG FAQ #2 Answer-Is an incorporated business owned by a tribe subject to federal income taxation?

A corporation formed by a tribe may be subject to federal income tax, depending on the form of the corporation. A tribe may incorporate in several ways, including:

  • Indian Reorganization Act of 1934 - A corporation formed under section 17 of this act is not subject to federal income tax.
  • Oklahoma Indian Welfare Act - A corporation formed by an Oklahoma tribe under section 3 of this act is not subject to federal income tax. Oklahoma tribes are not eligible to incorporate under the Indian Reorganization Act of 1934.
  • State Chartered Corporation - A corporation formed under state law is ordinarily subject to federal income tax on income earned after October 1, 1994. Income earned before October 1, 1994 is not subject to tax.
  • Tribal Law - This issue is currently under review by IRS Counsel and guidance will be issued in the near future.

Partner in a Partnership - A tribe that is a partner is not subject to federal income tax. However, a tribally owned state chartered corporation that is a partner is subject to tax on the distributive share of partnership income.

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Page Last Reviewed or Updated: 11-Oct-2016