Report and Recommendations to Congress regarding 

Tribal Economic Development Bond provision 

under Section 7871 of the Internal Revenue Code 

Department of the Treasury 

December 2011 
DEPARTMENT OF THE TREASURY 

WASHINGTON, D.C. 20220 

The Honorable Max Baucus 

Chairman, Committee on Finance 

United States Senate 

Washington, DC 20510 

Dear Chairman Baucus: 

December 19, 2011 

As mandated by Section 1402(b) of Title I of Division B of the American Recovery and 

Reinvestment Act of2009 ("ARRA"), the Department of the Treasury has conducted a study of 

the effects of the Tribal Economic Development Bond provision in Section 7871(t) of the 

Internal Revenue Code. Section 1402(b) of ARRA directs the Secretary of the Treasury, or the 

Secretary's designee, to conduct a study of the effects of this tax-exempt bond provision and to 

report to Congress on the results of this study, including recommendations regarding this taxexempt bond provision. 

Enclosed is our Report and Recommendations to Congress regarding the Tribal Economic 

Development Bond provision under Section 7871. An identical letter is addressed to Senator 

Hatch. 

Enclosure 

Sincerely, 

~~~"J.i.t~ 

Emily S. McMahon 

Acting Assistant Secretary (Tax Policy) 
DEPARTMENT OF THE TREASURY 

WASHINGTON, D.C. 20220 

December 19, 2011 

The Honorable Orrin G. Hatch 

Ranking Member, Committee on Finance 

United States Senate 

Washington, DC 20510 

Dear Senator Hatch: 

As mandated by Section 1402(b) of Title I of Division B of the American Recovery and 

Reinvestment Act of2009 ("ARRA"), the Department of the Treasury has conducted a study of 

the effects of the Tribal Economic Development Bond provision in Section 7871(f) of the 

Internal Revenue Code. Section 1402(b) of ARRA directs the Secretary of the Treasury, or the 

Secretary's designee, to conduct a study of the effects of this tax-exempt bond provision and to 

report to Congress on the results of this study, including recommendations regarding this taxexempt bond provision. 

Enclosed is our Report and Recommendations to Congress regarding the Tribal Economic 

Development Bond provision under Section 7871. An identical letter is addressed to Senator 

Baucus. 

Sincerely, 

Emily S. McMahon 

Acting Assistant Secretary (Tax Policy) 

Enclosure 
DEPARTMENT OF THE T REASURY 

WASHINGTON, D.C. 20220 

December 19,2011 

The Honorable Dave Camp 

Chairman, Committee on Ways and Means 

U.S. House of Representatives 

Washington, DC 20515 

Dear Chairman Camp: 

As mandated by Section 1402(b) of Title I of Division B of the American Recovery and 

Reinvestment Act of2009 ("ARRA"), the Department of the Treasury has conducted a study of 

the effects of the Tribal Economic Development Bond provision in Section 7871(t) of the 

Internal Revenue Code. Section 1402(b) of ARRA directs the Secretary of the Treasury, or the 

Secretary's designee, to conduct a study of the effects of this tax-exempt bond provision and to 

report to Congress on the results of this study, including recommendations regarding this taxexempt bond provision. 

Enclosed is our Report and Recommendations to Congress regarding the Tribal Economic 

Development Bond provision under Section 7871. An identical letter is addressed to 

Representative Sander Levin. 

Enclosure 

Sincerely, 

~Sin..~ 

Emily S. McMahon 

Acting Assistant Secretary (Tax Policy) 
DEPARTMENT OF THE TREASURY 

WASHINGTON, D .C. 20220 

December 19, 2011 

The Honorable Sander Levin 

Ranking Member, Committee on Ways and Means 

U.S. House ofRepresentatives 

Washington, DC 20515 

Dear Representative Levin: 

As mandated by Section 1402(b) ofTitle I of Division B ofthe American Recovery and 

Reinvestment Act of2009 ("ARRA"), the Department of the Treasury has conducted a study of 

the effects of the Tribal Economic Development Bond provision in Section 7871(f) of the 

Internal Revenue Code. Section 1402(b) of ARRA directs the Secretary of the Treasury, or the 

Secretary's designee, to conduct a study of the effects of this tax-exempt bond provision and to 

report to Congress on the results of this study, including recommendations regarding this taxexempt bond provision. 

Enclosed is our Report and Recommendations to Congress regarding the Tribal Economic 

Development Bond provision under Section 7871. An identical letter is addressed to 

Representative Dave Camp. 

Sincerely, 

Emily S. McMahon 

Acting Assistant Secretary (Tax Policy) 

Enclosure 
Table of Contents 

I. Introduction............................................................................................................................ I 

A. In General............................................................................................................ I 

B. Summary of Structural Recommendations......................................................... 2 

C. Comment on Credit Challenges Facing Indian Tribal Governments.................. 3 

D. Bond Volume Cap Allocation Process and Limited Bond Issuance................... 4 

E. Consultation with Indian Tribal Governments.................................................... 5 

II. Background on the Structure of Tax-exempt Bond Standards............................................... 5 

A. Governmental Bond and Private Activity Bond Classification.......................... 5 

B. Govern1nental Bonds........................................................................................... 6 

1. In General................................................................................................ 6 

2. Private Business Use Limitation............................................................. 6 

3. Private Payments Limitation................................................................. 7 

C. Private Activity Bonds......................................................................................... 8 

D. Essential Governmental Function Standard for Indian Tribal Governments...... 9 

E. Tribal Economic Development Bond Provision.................................................. I 0 

III. Analysis and Recommendations........................................................................................... 10 

A. Governmental Bond Standard.............................................................................. 10 

1. Analysis................................................................................................... I 0 

2. Recommendations for Governmental Bonds........................................... II 

B. Private Activity Bond Standard........................................................................... 11 

I . Analysis.................................................................................................... 11 

2. Recommendations for Private Activity Bonds ......................................... 12 

C. Project Location Restriction ................................................................................. I3 

I. Analysis .................................................................................................... 13 

2. Recommendation to Modify the Project Location Restriction ................ I3 

D. Gaming Facility Financing Restriction ................................................................ 13 

I. Analysis .................................................................................................... I3 

2. Recommendation to Retain Existing Gaming Facility Restriction .......... I4 

E. Credit Challenges Facing Indian Tribal Governments ......................................... I4 

IV. Conclusion ......................................................................................................................... I5 

Appendices 

Appendix A: Historic Data on Indian Tribal Governmental Issuances of Tax-exempt Bonds 

Appendix B: Results of $2 Billion Bond Allocation Process 

Appendix C: Summary of Comments Received in Response to Public Solicitation of Comments 
U.S. Treasury Department Report and Recommendations to Congress on 

Tribal Economic Development Bond Provision under Code Section 7871 

I. Introduction. 

A. In General. 

Indian tribal governments have significant basic economic development needs, high 

poverty, high unemployment, and significant credit constraints that impede their access to the 

tax-exempt bond market. 1 From 1987 through 2010, Indian tribal governments issued an 

average of about $157 million annually in tax-exempt bonds for a total of about $3.76 billion in 

321 total transactions, representing less than one-tenth of one percent of the total $6.599 trillion 

in new issues oflong-term tax-exempt municipal bonds issued during this period.2 

Section 1402 of Title I of Division B of the American Recovery and Reinvestment Act of 

20093 authorized $2 billion in bond authority for a new category of tax-exempt bonds for Indian 

tribal governments, known as "Tribal Economic Development Bonds" under Section 7871(f) of 

the Internal Revenue Code ("Code"), 4 to promote economic development on tribal lands. This 

bond provision provides Indian tribal governments with greater flexibility to use tax-exempt 

bonds for economic development projects than is allowable under an existing more restrictive 

"essential governmental function" standard for Indian tribal governments under Section 7871(c). 

This more flexible bond provision generally allows Indian tribal governments to use tax-exempt 

bonds under standards that are more comparable to those applicable to States and local 

governments under Section 103 (subject to express targeting restrictions on Tribal Economic 

Development Bonds that require financed projects to be located on Indian reservations and that 

prohibit the financing of certain gaming facilities). 

Section 1402(b) of ARRA directs the Secretary of the Treasury, or the Secretary's 

delegate, to conduct a study of the effects of this bond provision and to report to Congress on the 

results of the study conducted under this paragraph, including the Secretary's recommendations 

regarding this bond provision. The legislative history indicates that Congress seeks 

recommendations on whether to "eliminate or otherwise modify" the essential governmental 

function standard for Indian tribal tax-exempt bond financing and a legislative summary 

indicates that the Treasury Department should study whether to repeal this standard on a 

1 See GAO Testimony, Observations on Some Unique Factors that May Affect Economic Activity on Tribal Lands 

(GA0-11-543T) (April 7, 2011). 

2 See Indian tribal governmental tax-exempt bond issuance data in Appendix A to this Report. 

3 Pub. L. No. 111-5, 123 Stat. 115 (2009) ("ARRA"). 

4 Except as noted, Section references in this report are to the Code. 

1 
.. permanent basis."5 This report focuses primarily on this structural issue regarding the 

appropriate tax standard for tax-exempt bond financing for Indian tribal governments. 6 

B. Summarv of Structural Recommendations. 

Set forth below is a brief summary of the Treasury Department's structural 

recommendations for the Tribal Economic Development Bond provision: 

(1) Core Recommendation to Adopt for Indian Tribal Governments the Comparable 

State or Local Government Standard for Issuing Tax-exempt Governmental Bonds on a 

Permanent Basis. For reasons of tax parity, fairness, flexibility, and administrability, the 

Treasury Department recommends that Congress adopt the State or local government standard 

for tax-exempt .. governmental bonds'' (as distinguished from "private activity bonds") under 

Section 141, as generally embodied in the limited authorization for Tribal Economic 

Development Bonds under Section 7871(f) on a permanent basis for purposes oflndian tribal 

governmental eligibility to issue tax-exempt governmental bonds, without a bond volume cap on 

such governmental bonds (subject to a project location restriction and a restriction against 

financing certain gaming facilities). 

The Treasury Department recommends repealing the essential governmental function 

standard for Indian tribal governmental tax-exempt bond financing under Section 7871 (c). 

(2) Recommendation to Adopt a Comparable Private Activity Bond Standard. For 

reasons of tax parity, fairness, and flexibility, the Treasury Department further recommends that 

Congress allow Indian tribal governments to issue tax-exempt private activity bonds for the same 

types of projects and activities as are allowed for State and local governments under Section 

14l(e), under a tailored national bond volume cap as described below, subject to the same 

volume cap exceptions as those for State and local governments (and subject to a project location 

restriction and a restriction against financing certain gaming facilities). 

The Treasury Department recommends a tailored version of a comparable annual taxexempt private activity bond volume cap for Indian tribal governments. The tailored national 

Tribal private activity bond volume cap for all Indian tribal governments together as a group 

would be in an amount equal to the greater of: (i) a total national Indian tribal population-based 

measure determined under Section 146(d)(1)(A) (applied by using such national Indian tribal 

population in lieu of State population), or (ii) the minimum small population-based State amount 

under Section 146(d)(l)(B). For 2012, taking into account inflation adjustments/ each State's 

5 See H.R. Con f. Rep. 111-16, 111 th Con g. 1st Sess. (February 12, 2009) at Page 694. See also 

'""''"~"'~"==co~..:=""e-'='-'==-"'"--~~~·~·""'·='-'-'-'-'-"~== (Ways and Means Committee and Senate Finance 

Committee summary). 

6 The Treasury Department delayed the timing of this report in part to accommodate a tribal consultation process 

and to give the program more opportunity for usage. For further perspective generally on the program, see IRS 

Advisory Committee on Tax-exempt and Governmental Entity (ACT) Reports on Implementation of Tribal 

Economic Development Bond Provision, dated June 9, 2010 and June 15,2011. 

7 See Rev. Proc. 2011-52,2011-45 I.R.B. 701 (November 7, 2011). 

2 
private activity bond volume cap is equal to the greater of: (1) $95 multiplied by the State 

population; or (2) $284,560,000. 

The Treasury Department recommends that Congress delegate to the Treasury 

Department the responsibility to allocate that national bond volume cap among Indian tribal 

governments. 

(3) Recommendation to Retain and Modify the Project Location Restriction. The 

Treasury Department agrees that there ought to be some targeting restriction on the location of 

projects financed with tax-exempt bonds issued or used by Indian tribal governments that is 

similar to the restriction under Section 7871(f)(3)(B)(ii) which requires financed projects to be 

located on Indian reservations. The Treasury Department recommends that Congress provide 

some additional flexibility with respect to the existing project location restriction under Section 

7871(f)(3)(B)(ii) to allow Indian tribal governments to issue or use tax-exempt bonds to finance 

projects that are located on Indian reservations, together with projects that both: (i) are 

contiguous to, within reasonable proximity of, or have a substantial connection to an Indian 

reservation; and (ii) provide goods or services to resident populations of Indian reservations. 

(4) Recommendation to Retain the Gambling Facility Restriction. For policy reasons, 

the Treasury Department recommends retaining the existing targeting restriction under Section 

7871(f)(3)(B)(i) against financing certain gaming projects for tax-exempt bond financing by 

Indian tribal governments. 

Some Indian tribal governments have emphasized that gaming revenues are an important 

source of revenues, given their lack of tax-based revenues or other revenues. The Treasury 

Department points out that, although gaming projects themselves are ineligible to be financed 

with proceeds of Tribal Economic Development Bonds under the existing provision, gaming 

revenues may be used as a source of payment or security for tax-exempt bonds that finance 

eligible types of projects under both the existing Tribal Economic Development Bond provision 

and the recommended tax framework for Indian tribal governmental tax-exempt bond financing 

discussed in this report. 

C. Comment on Credit Challenges Facing Indian Tribal Governments. 

The Treasury Department emphasizes that a more flexible framework for tax-exempt 

bond financing cannot ameliorate the significant credit challenges facing Indian tribal 

governments that impede their access to the tax-exempt bond market. The Treasury Department 

recommends that Congress examine this difficult issue and explore possible ways to improve 

bond market access for Indian tribal governments, such as possible reserve fund programs, credit 

enhancement facilities, or other measures, subject to prudent fiscal controls. 

Some Indian tribal governments have recommended Federal guarantees to support Indian 

tribal tax-exempt bond financings. In general, however, Section 149(b) broadly prohibits 

Federal guarantees of tax-exempt bonds, subject to certain limited exceptions for housing and 

other specific programs. A policy reason underlying this general prohibition against Federal 

guarantees of tax-exempt bonds is a concern that such guarantees could have the potential to 

3 
produce securities that are more attractive than benchmark U.S. Treasury securities (in that 

Federally-guaranteed tax-exempt bonds have the full faith and credit backing of the Federal 

Government as security and they produce more attractive tax-exempt income). In addition, the 

potential Federal revenue cost of any such guarantee is a significant concern. The Federal 

Government has a budget policy against Federal guarantees of tax-exempt bonds.8 

D. Bond Volume Cap Allocation Process and Limited Bond Issuance. 

This section provides certain information regarding the bond allocation process and bond 

issuance for Tribal Economic Development Bonds. Indian tribal governments have shown 

significant interest in this program. The Treasury Department allocated the full amount of bond 

authority to interested Indian tribal governments for identified projects. Actual issuance of these 

bonds through November 2011, however, has been very limited, comprising less than three 

percent of the total $2 billion bond authorization. The Treasury Department believes that the 

reasons for this lack of actual usage relate mainly to credit challenges facing Indian tribal 

governments rather than deficiencies in the more flexible tax parameters for this program. 

Section 7871(f)(l) required the Treasury Department to allocate the $2 billion national 

volume cap for Tribal Economic Development Bonds among Indian tribal governments in such 

manner as the Treasury Department, in consultation with the Secretary of the Interior, 

determined to be appropriate. 

Pursuant to Notice 2009-51,9 the Treasury Department solicited applications for 

allocation of the $2 billion in bond volume cap of Tribal Economic Development Bonds and 

provided guidance on the application procedures, deadlines, forms, and methodology for 

allocating this bond volume cap. The Treasury Department employed a pro rata allocation 

method to allocate this bond volume cap in two separate $1 billion phases, subject to specified 

maximum allocations for any particular Indian tribal government. The two-phased allocation 

approach aimed to distribute bond-issuing authority promptly to issuers that were ready to 

proceed with projects for economic stimulus purposes and to try to take into account the needs of 

other issuers for additional time for applications. 

In Internal Revenue Service ("IRS") News Release 2009-81 (September 15, 2009) and 

IRS News Release 2010-20 (February 11, 2010), the IRS announced the results ofthe two phases 

of Tribal Economic Development Bond allocations. Attached in Appendix A are the results of 

the allocations of this bond volume cap.

10 

8 See Office of Management and Budget Circular No. A-129 Revised (November 2000), at Section II entitled 

"Budget and Legislative Policy for Credit Programs," Subsection 2 entitled "Form of Assistance," under 

Subsections d and e. 

9 2009-28 IRB 128 (July 13, 2009). 

10 See http://www.irs.gov/taxexemptbond/article/O,id=213053,00.html. 

4 
In IRS Announcement 2010-88, II the IRS extended the time period for issuing bonds 

under the first allocation from December 31, 2010 to June 30, 2011 and provided a process for 

further extensions for bond issuance until December 31, 2011. 

In IRS Announcement 2011-71,I 2 the IRS solicited public comments regarding 

reallocation of allocations of bond-issuing authority for Tribal Economic Development Bonds 

that remain unissued as of December 31, 2011. Absent further legislative changes to this 

program, the Treasury Department and the IRS expect to implement an ongoing reallocation 

process for unused bond volume cap under this program. 

E. Consultation with Indian Tribal Governments. 

Pursuant to Executive Order 13175, the Treasury Department consults with tribal 

officials in the development of Federal policies that have tribal implications to reinforce United 

States government-to-government relationships with Indian tribes and to reduce the imposition 

ofunfunded mandates upon Indian tribes. In furtherance ofthe objectives of Executive Order 

13175, the Treasury Department solicited comments on the Tribal Economic Development Bond 

provision. 13 The Treasury Department received twenty-seven different comment letters, which it 

considered carefully and which provided helpful perspective in preparing this report. A brief 

summary of the comments is attached as Appendix C, and the full list of comments received is 

publicly available.I 4 

II. Background on the Structure of Tax-exempt Bond Standards. 

A. Governmental Bond and Private Activity Bond Classification. 

In general, there are two basic types of tax-exempt bonds for State and local 

governments: "Governmental Bonds" and "Private Activity Bonds." Bonds generally are 

classified as Governmental Bonds if the bond proceeds are used predominantly for State or local 

governmental use or the bonds are repaid predominantly from State or local governmental 

sources of funds. The Code does not define Governmental Bonds. Instead, bonds generally are 

treated as Governmental Bonds if they limit private involvement sufficiently to avoid 

classification as Private Activity Bonds under Section 141. 

Bonds are classified as private activity bonds under a two-pronged test in Section 

141(b){l) and Section 141(b){2) if private involvement exceeds both of the following thresholds: 

11 2010-47 I.R.B. 754 (November 22, 2010). 

12 2011-46 I.R.B. 770 (November 14, 2011). 

13 75 Fed. Reg. 39730 (July 12, 2010). 

14 See Regulations.gov website (docket number: TREAS-D0-2011-0001) at the following link: 

http://www.regulations.gov/#!docketDetail;dct=FR+PR+N+PS;mp=lO;so=ASC;sb=documentType;po=O;D=TREA 

S-D0-2011-0001. 

5 
( 1) more than 10 percent of the bond proceeds are used for private business use 

(the "private business use limitation"); and 

(2) the debt service on more than 10 percent of bond proceeds is payable or 

secured from payments or property used for private business use (the "private payments 

limitation"). 

Bonds also are treated as Private Activity Bonds under various special rules in Sections 

141 (b )(3)-( 5), and Section 141 (c). These special rules include restrictions on private business 

use that is unrelated or disproportionate to governmental use, restrictions on financing of private 

loans (including private business loans and consumer loans), special restrictions on private 

business involvement in output facilities (such as electric, gas, or other output generation, 

transmission, and distribution facilities, but excluding water facilities), and restrictions on private 

business involvement in larger Governmental Bond issues absent obtaining special volume cap. 

Overall, various limitations on tax-exempt Governmental Bonds aim to identify 

arrangements that have the potential to transfer the benefits of tax-exempt bond financing to 

persons other than State or local governments and to constrain this potential transfer. 

B. Governmental Bonds. 

1. In General. 

State and local governments are eligible to issue Governmental Bonds for an unspecified 

wide range of public infrastructure projects and other projects if the bond proceeds are used 

predominantly for State or local governmental use or the bonds are payable or secured 

predominantly from State or local governmental sources of payment, such as generally 

applicable taxes. Here, it should be understood that Governmental Bonds can be used to finance 

a project that has significant private business use or that has significant private business sources 

of payment, but not both. Longstanding final 1997 Treasury Regulations under Treas. Reg.§ 

1.141-1 through § 1.141-15 provide guidance on these private business limitations on tax -exempt 

governmental bonds. 

For the interest on Governmental Bonds to be excluded from the bond holder's gross 

income for Federal tax purposes under Section 103, a number of general eligibility requirements 

must be met. Requirements generally applicable to all tax-exempt bonds include arbitrage 

restrictions, bond registration and information reporting requirements, a general prohibition on 

Federal guarantees, advance refunding limitations, restrictions on unduly long spending periods, 

and pooled financing bond limitations. In general, no volume cap limitations apply to 

Governmental Bonds. 

2. Private Business Use Limitation. 

In general, the private business use limitation on Governmental Bonds limits private 

business use to no more than 10 percent of the proceeds of a tax-exempt bond issue. Private 

business use generally arises when a private business has legal rights to use bond-financed 

6 
property. Thus, private business use arises from ownership, leasing, certain management 

arrangements, certain research arrangements, certain utility output contract arrangements (e.g., 

certain electricity purchase contracts under which private utilities receive benefits and burdens of 

ownership of governmental electric generation facilities), and certain other arrangements that 

convey special legal rights to use to tax-exempt bond-financed property. 

Various exceptions and safe harbors apply with respect to the private business use 

limitation, which allow limited private business use of property financed by Governmental 

Bonds in prescribed narrow circumstances. Exceptions to the private business use limitation 

include exceptions for use in the capacity as the general public, such as use by private businesses 

of public roads, certain short-term use arrangements, certain de minimis incidental uses, certain 

uses as agents of State and local governments, and certain uses incidental to financing 

arrangements (e.g., certain bondholder trustee arrangements). In addition, safe harbors against 

private business use apply to certain private management and research arrangements. For 

management contracts, in Rev. Proc. 97-13, 15 the IRS provided safe harbors that allow private 

businesses to enter into certain qualified management contracts with prescribed terms and 

compensation arrangements without giving rise to private business use to accommodate publicprivate partnerships for private management of public facilities. For research contracts, in Rev. 

Proc. 2007-47, 16 the IRS provided updated safe harbors that allow certain research contract 

arrangements with private businesses at tax-exempt bond financed research facilities without 

giving rise to private business use (e.g., certain Federally sponsored research). 

Most tax-exempt Governmental Bonds qualify for this type oftax-exempt bond financing 

based on limiting private business use of the bond-financed projects (as contrasted with limiting 

private payments). 

3. Private Payments Limitation. 

Bonds also qualify as tax-exempt Governmental Bonds if, despite significant private 

business use, the bonds are payable predominantly from State or local governmental sources of 

payment, such as generally applicable taxes. In general, the private payments limitation on 

Governmental Bonds requires limiting aggregate private payments to no more than 10 percent of 

the debt service on a bond issue (on a present value basis). The private payments limitation 

broadly considers direct and indirect payments from property used by private businesses that 

represent sources of payment or security for the debt service on a tax-exempt bond issue. For 

example, if a private business pays rent for its use ofthe bond-financed property, the rent 

payments give rise to private payments even if that rent is not pledged formally to secure the 

bonds. Various limited exceptions apply for purposes of the private payments limitation. 

The private payments limitation is more complex than the private business use limitation 

and is applied less often to achieve tax compliance for Governmental Bonds. Bond issues that 

qualify as Governmental Bonds based on the absence of significant private payments tend to 

involve certain structured financings, such as tax increment financings and stadium financings. 

15 1997-1 C.B. 632. 

16 2007-29 I.R.B. 108 (July 16, 2007). 

7 
C. Private Activity Bonds. 

In addition to tax-exempt Governmental Bonds, State and local governments also are 

eligible to issue tax-exempt Private Activity Bonds under Section 141(e) and related provisions 

(with permitted private business use and other private involvement) to finance certain specified 

types of projects and activities, including the following: (1) airports, (2) docks and wharves, (3) 

mass commuting facilities, (4) facilities for the furnishing of water, (5) sewage facilities, (6) 

solid waste disposal facilities, (7) qualified low-income residential rental multifamily housing 

projects, (8) facilities for the local furnishing of electric energy or gas, (9) local district heating 

or cooling facilities, (1 0) qualified hazardous waste facilities, (11) high-speed intercity rail 

facilities, ( 12) environmental enhancements of hydroelectric generating facilities, ( 13) qualified 

public educational facilities, (14) qualified green buildings and sustainable design projects, (15) 

qualified highway or surface freight transfer facilities, (16) qualified mortgage bonds or qualified 

veterans mortgage bonds for certain single-family housing mortgage loans, (17) qualified small 

issue bonds for certain manufacturing facilities, (18) qualified student loan bonds, (19) qualified 

redevelopment bonds, and (20) qualified Section 501(c)(3) bonds for exempt charitable and 

educational activities of Section 501 ( c )(3) nonprofit organizations. 

Private Activity Bonds are subject to the same general rules applicable to Governmental 

Bonds, including the arbitrage investment limitations, registration and information reporting 

requirements, the Federal guarantee prohibition, restrictions on unduly long spending periods, 

and pooled financing bond limitations. In addition, most Private Activity Bonds are also subject 

to a number of additional rules and restrictions, including a bond volume cap as described below, 

a prohibition on advance refundings, an alternative minimum tax preference, existing property 

financing restrictions, restrictions on financing land acquisitions, and prohibitions against 

financing certain types of facilities (including skyboxes or other private luxury boxes in 

stadiums, health clubs, facilities primarily used for gambling, or liquor stores) .. 

Subject to certain exceptions, Section 146 imposes annual State bond volume caps on 

most types of tax-exempt Private Activity Bonds, based on measures of State population, with 

minimum allocations for smaller, less-populous States and adjustments for inflation, and with 

three-year carry forward periods for unused allocations. For 2012, taking into account inflation 

adjustments, 17 each State's private activity bond volume cap is equal to the greater of: (1) $95 

multiplied by the State population; or (2) $284,560,000. Exceptions to the State private activity 

bond volume caps apply to certain governmentally-owned projects (including airports, docks and 

wharves, environmental enhancements of hydroelectric generating facilities, high-speed intercity 

rail facilities, and solid waste disposal facilities), qualified veterans mortgage bonds, and 

qualified Section 501(c)(3) bonds. 

For Indian tribal governments, outside the limited authorization for Tribal Economic 

Development Bonds, Section 7871 ( c )(2) generally prohibits Indian tribal governments from 

issuing Private Activity Bonds for any of the above-described types of projects or purposes for 

which State and local governments may issue Private Activity Bonds. A limited restrictive 

exception under Section 7871(c)(3)(B) allows Indian tribal governments to issue Private Activity 

17 See Note 7 Supra. 

8 
Bonds to finance certain manufacturing facilities upon satisfaction of complex and restrictive 

employment requirements. 

D. Essential Governmental Function Standard for Indian Tribal Governments. 

In general, a restrictive existing standard under Section 7871(c) applicable to Indian tribal 

governments limits their use of tax-exempt bonds to the financing of certain activities that 

constitute "essential governmental functions." Further, activities cannot qualify as essential 

governmental functions under Section 7871(e) unless they are "customarily" performed by State 

and local governments with general taxing powers. The essential governmental function 

standard under Section 7871(c) was enacted originally in 1982 as part of the Indian Tribal 

Government Tax Status Act. 18 The legislative history to this legislation indicated that essential 

governmental functions for this purpose included activities such as schools, streets, or sewers, 

but did not include activities financed with private activity bonds or other commercial or 

industrial activities. 19 

In 1987, Section 7871 (e) was added to the Code to limit the essential governmental 

functions standard further to provide that essential governmental functions do not include any 

functions which are not customarily performed by State and local governments with general 

taxing powers.

2

° Further, in the legislative history to this provision, the House Ways and Means 

Committee criticized 1984 Temporary Treasury Regulations21 under section 7871(c) for treating 

certain commercial and industrial activities eligible for Federal funding as essential 

governmental functions and indicated that these regulations were invalid to that extent. 22 

In 2006, the Treasury Department and the IRS promulgated an Advance Notice of 

Proposed Rulemaking regarding the essential governmental function standard for Indian tribal 

tax-exempt bonds under Section 7871. 23 This guidance provided that proposed regulations will 

treat an activity as an essential governmental function that is customarily performed by State and 

local governments under Section 7871(c) and Section 7871(e) if: (1) there are numerous State 

and local governments with general taxing powers that have been conducting the activity and 

financing it with tax-exempt governmental bonds, (2) State and local governments with general 

taxing powers have been conducting the activity and financing it with tax-exempt governmental 

bonds for many years, and (3) the activity is not a commercial or industrial activity. Examples of 

eligible customary State and local governmental activities under this guidance included public 

works projects such as roads, schools, and government buildings. 

18 Pub. L. No. 97-473 (1983), 96 Stat. 2605. 

19 H.R. Rep. No. 97-982, 97th Cong. 2d Sess. 17 ( 1982); S. Rep. No. 97-646, 97th Cong. 2d. Sess. 13-14 (1982). 

20 See The Omnibus Budget Reconciliation Act of 1987, Pub. L. No. 100-203, 101 Stat. 1330, § 10632(a) (1987). 

21 Temp. Treas. Reg.§ 305.7871-1 (1984). 

22 See H.R. Rep. No. 100-391, lOOth Cong. 1st Sess. at 1139 (1987). 

'3 

- See 71 Fed. Reg. 45474 (August 9, 2006). 

9 
E. Tribal Economic Development Bond Provision. 

The Tribal Economic Development Bond provision under Section 7871(f) provides 

Indian tribal governments more flexibility to finance economic development projects than is 

allowable under the existing essential governmental function standard of Section 7871 (c). This 

more flexible provision generally allows Indian tribal governments to use tax-exempt bonds 

under a $2 billion volume cap to finance an unspecified broad range of governmentally-used 

projects that would qualify for Governmental Bonds under Section 141 and projects that would 

qualify for Private Activity Bonds under Section 141(e), to the same extent and subject to the 

same limitations imposed on State and local governments under Section 103. 

For this purpose, Federally-chartered corporations organized and controlled by Indian 

tribal governments under Section 17 ofthe Indian Reorganization Act of 1934, 25 U.S.C. § 477 

("Section 17 Corporations") are eligible Indian tribal governmental issuers oftax-exempt bonds 

under Section 7871 and eligible governmental users of proceeds oftax-exempt bonds for 

purposes of the private business restrictions on Governmental Bonds under Section 141.24 

Section 7871(f)(3)(B) includes certain specific limitations on Tribal Economic 

Development Bonds that prohibit the use of any proceeds of these bonds to finance either of the 

following: (1) any portion of a building in which class II or class III gaming (as defined in 

section 4 of the Indian Gaming Regulatory Act) is conducted or housed or any other property 

actually used in the conduct of such gaming; or (2) any facility located outside the Indian 

reservation (as defined in Section 168(j)(6)). 

III. Analysis and Recommendations. 

A. Governmental Bond Standard. 

1. Analysis. 

The private business restrictions on tax-exempt Governmental Bonds for State and local 

governments under Section 141 involve established, well-known, and administrable tax 

standards. The private business use limitation particularly involves workable tax standards using 

general tax principles that focus on ownership, leasing, and contractual rights. These standards 

focus eligibility for Governmental Bonds on the nature of the beneficiaries of the tax-exempt 

financing (rather than on the nature of the activities financed). 

By contrast, the essential governmental function standard under Section 7871(c) focuses 

on appropriate governmental activities (rather than the actual beneficiaries) and has proven to be 

a difficult standard to define and administer. The analogous essential governmental function 

standard under Section 115 is vague. Congress criticized the Treasury Department's 1984 

24 See Treas. Reg.§ 1.301.7701-l(a)(3) (Section 17 Corporations are integral parts oflndian tribal governments and 

are not recognized as separate entities apart from the Indian tribal governments for Federal tax purposes); Rev. Rul. 

94-16, 1994-1 C.B. 19 (Section 17 Corporations are not separate taxable entities apart from the controlling Indian 

tribes and are not subject to Federal income taxation). 

10 
regulations on the essential governmental function standard for Indian tribal governments under 

Section 7871 (c) as too flexible. 

Moreover, the custom-based limitation on the essential governmental function standard 

introduced in 1987 under Section 7871 (e) has proven to be particularly unworkable, based on 

difficulties in determining customs, the subjective nature of customs, the evolving nature of 

customs over time, the differing nature of customs among diverse State and local governmental 

entities, and the increasing involvement of State and local governments in quasi-commercial 

activities. 

The Indian Tribal Government Tax Status Act sought to provide tax parity between 

Indian tribal governments and State and local governments. The Treasury Department 

emphasizes, however, that the existing tax framework for eligibility for tax-exempt bond 

financing for State and local governments, on one hand, and Indian tribal governments, on the 

other hand, reflects fundamentally different analytic standards. Application of the different 

analytic standards has resulted in different outcomes and attendant perceived unfairness. 

The Treasury Department believes that tax policy warrants providing parity between 

Indian tribal governments and State and local governments for tax-exempt Governmental Bond 

financing eligibility purposes using comparable standards, with certain tailored modifications. 

2. Recommendations for Governmental Bonds. 

For reasons of tax parity, fairness, flexibility, and administrability, the Treasury 

Department recommends that Congress adopt the State or local government standard for taxexempt Governmental Bonds (as distinguished from Private Activity Bonds) under Section 141, 

as embodied in the limited authorization for Tribal Economic Development Bonds under Section 

7871(f) (including a location restriction and a restriction against financing gaming facilities), on 

a permanent basis for purposes of Indian tribal governmental eligibility to issue tax-exempt 

Governmental Bonds, without a bond volume cap on such Governmental Bonds (subject to a 

project location targeting restriction and a gaming facility financing restriction). 

The Treasury Department recommends repealing the existing essential governmental 

function standard for Indian tribal tax-exempt bond financing under Section 7871(c). 

B. Private Activity Bond Standard. 

1. Analysis. 

State and local governments may issue tax-exempt Private Activity Bonds for a wide 

range of specified types of projects and activities, subject in most cases to an armual State bond 

volume cap. By contrast, outside the limited authorization for Tribal Economic Development 

Bonds, Section 7871 ( c )(2) generally prohibits Indian tribal governments from issuing Private 

Activity Bonds, except in narrow circumstances to finance manufacturing facilities upon 

satisfaction of complex and restrictive employment requirements. 

11 
The scope of Private Activity Bond eligibility for Indian tribal governments seems 

unduly restrictive. The Indian Tribal Government Tax Status Act sought to provide tax parity 

between Indian tribal governments and State and local governments. The disparate scopes of 

Private Activity Bond authority are inconsistent with this parity goal. 

The Treasury Department believes that tax policy warrants providing parity between 

Indian tribal governments and State and local governments for tax-exempt Private Activity Bond 

financing eligibility purposes using comparable standards, with certain tailored modifications. 

One difficult issue regarding Private Activity Bond eligibility for Indian tribal 

governments involves how to impose a bond volume cap. In the case of State and local 

governments, Section 146 imposes an annual State Private Activity Bond volume cap on most 

types of Private Activity Bonds, based on State populations, with minimum allocations for small, 

less populous States. The development of a workable comparable Private Activity Bond volume 

cap for Indian tribal governments that takes into account the diverse characteristics of Indian 

tribal governments is not a simple task. Factors to consider include the large number of Indian 

tribal governments (565 Federally recognized Indian tribes), the wide range of tribal populations 

within a total national Indian tribal population of about two million people (ranging from about 

176,000 residents of the Navaho reservation to fewer than 50 residents of other reservations), and 

the wide range of land holdings (ranging from approximately 3,468 square miles for the 

Cheyenne River reservation to less than one square mile for some tribal reservations in 

California).25 These characteristics weigh against an automatic formula-based allocation to each 

of the individual Indian tribal governments. An aggregate nationally-based bond volume cap 

allocation method for Indian tribal governments collectively as a group similar to the allocation 

method for Tribal Economic Development Bonds may be more workable. 

2. Recommendations for Private Activity Bonds. 

For reasons of tax parity, fairness, and flexibility, the Treasury Department recommends 

that Congress allow Indian tribal governments to issue tax-exempt Private Activity Bonds for the 

same types of projects and activities as are allowed for State and local governments under 

Section 141(e), under a tailored national bond volume cap as described below, subject to the 

same volume cap exceptions as those for State and local governments (and subject to a project 

location targeting restriction and a gaming facility financing restriction). 

The Treasury Department recommends an annual national tax-exempt Private Activity 

Bond volume cap for all Indian tribal governments together as a group equal to the greater of: (i) 

a total national Indian tribal population-based measure determined under Section 146(d)(l)(A) 

(applied by using such national Indian tribal population in lieu of State population); or (ii) the 

minimum small population-based State amount under Section 146(d)(l)(B). For 2012, the State 

numbers for this volume cap are the greater of: (i) $95 multiplied by the State population; or (ii) 

$284,560,000. 26 

25 See Note 1 Supra. 26 See Note 7 Supra. 

12 
The Treasury Department recommends that Congress delegate to the Treasury 

Department the responsibility to allocate that national bond volume cap among Indian tribal 

governments. 

C. Project Location Restriction. 

1. Analvsis. 

The Tribal Economic Development Bond provision includes a project location restriction 

under Section 787l(f)(3)(B)(ii) which requires financed projects to be located on Indian 

reservations. This restriction aims to target the use of Indian tribal tax -exempt bond financing 

appropriately to areas of need for Federal borrowing subsidies on Indian reservations. The 

Treasury Department generally believes that some form of location restriction is necessary and 

appropriate. In this regard, absent a project location restriction, Indian tribal governments could 

use this more flexible tax-exempt bond provision to finance projects throughout the country in 

competition with private businesses. 

Some Indian tribal governments have suggested that the project location restriction is 

unduly restrictive for various reasons associated with the range of configurations of Indian 

reservation lands. Some Indian reservations have non-contiguous portions or gaps in land areas. 

In addition, some Indian tribal governments seek to serve their resident reservation populations 

with projects that are reasonably proximate in location to Indian reservations (e.g., electric or gas 

utility service projects), but that are not located directly on Indian reservations. The Treasury 

Department believes that a project location targeting restriction is necessary and that some 

additional flexibility is warranted for project locations. 

2. Recommendation to Modify the Project Location Restriction. 

The Treasury Department believes that there ought to be some targeting restriction for the 

location of projects financed with tax-exempt bonds issued or used by Indian tribal governments. 

The Treasury Department recommends that Congress provide some additional flexibility 

to the existing project location restriction under Section 7871(f)(3)(B)(ii) to allow Indian tribal 

governments to use tax-exempt bonds to finance projects that are located on Indian reservations, 

together with projects that both: (i) are contiguous to, within reasonable proximity of, or have a 

substantial connection to an Indian reservation; and (ii) provide goods or services to resident 

populations of Indian reservations. 

D. Gaming Facility Financing Restriction. 

l. Analysis. 

For policy reasons, Congress prohibited the use of Tribal Economic Development Bonds 

to finance certain gaming facilities under Section 7871(f)(3)(B)(i). A similar restriction under 

Section 141 (e) prohibits State and local governments from using any portion of the proceeds of 

tax-exempt Private Activity Bonds to finance facilities primarily used for gambling. 

13 
Some Indian tribal governments have emphasized that, for credit and market access 

reasons, gaming revenues represent an important source of revenues. The Treasury Department 

points out that, although gaming projects themselves are ineligible to be financed with proceeds 

of Tribal Economic Development Bonds, Indian tribal governments may pledge gaming 

revenues to secure tax-exempt bonds used to finance eligible types of projects under the existing 

Tribal Economic Development Bond provision and under the recommended tax framework using 

the two-pronged private business restrictions standard applicable to State and local governments 

under Section 141. Thus, if an Indian tribal government issues tax-exempt Governmental Bonds 

to finance a project for Indian tribal governmental use (as contrasted with private business use), 

it could pledge gaming revenues to secure that financing. Such a pledge of gaming revenues 

would be similar to a pledge by a State or local government oflottery revenues to secure taxexempt bonds. In each case, the pledged revenues constitute governmental sources of payment 

(as contrasted with revenues derived from private business use) under Section 141. Similarly, if 

an Indian tribal government derived gaming revenues from its own governmental ownership and 

operation of a gaming facility, it could pledge those gaming revenues to secure tax-exempt 

Governmental Bond financing for a subsidized privately-used economic development project 

based on the absence of private payments from the gaming facility. 

2. Recommendation to Retain Existing Gaming Facility Restriction. 

For policy reasons, the Treasury Department generally concurs with the existing targeting 

restriction for Tribal Economic Development Bonds under Section 7871(f)(3)(B)(i) which 

prohibits financing of projects used for certain types of gaming. 

E. Credit Challenges Facing Indian Tribal Governments. 

The Treasury Department emphasizes that a more flexible tax framework for tax-exempt 

bond financing cannot ameliorate the significant credit challenges facing Indian tribal 

governments that impede access to the tax-exempt bond market. Set forth below are certain 

reasons that contribute to these credit challenges. 

In contrast to State and local governments which have tax-based revenue sources, Indian 

tribal governments generally lack tax-based sources of revenues from income taxes or property 

taxes. In this regard, tribal lands held in trust by the Federal Government are not subject to 

property taxes. In addition, States and local governments exercise concurrent jurisdiction over 

Indian reservation for taxing purposes. 

Some Indian tribal governments also lack collateral to pledge as security for financings in 

part because tribal lands held in trust by the Federal Government cannot be mortgaged. Indian 

tribal governments also face uncertainties regarding creditors' rights for lenders due to various 

special aspects of Indian tribal laws. 

In addition, the recent recession and problems in the financial markets more generally 

contributed to the limited use of Tribal Economic Development Bonds. During the recent 

recession, investor appetite for risk decreased significantly, making it more difficult for most 

14 
institutions to issue debt. In general, smaller issuers with weaker credit, infrequent issuers, and 

issuers ofless traditional debt experienced problems in the capital markets more acutely. These 

credit constraints affected many Indian triQal governments. Most Indian tribal governments do 

not issue bonds frequently. Limited historical issuances and performance can reduce investor 

appetite for new issuances. Thus financial market uncertainties likely drove up interest rates and 

at times limited access to credit at almost any interest rate, making projects more expensive and 

potentially unaffordable. 

Indian tribal governments also face greater transaction costs for accessing the tax-exempt 

bond market than State or local governments for securities law regulatory reasons. State or local 

governments have an exemption from the securities law registration requirements for public 

offerings of their securities under Section 3(a)(2) of the Federal Securities Act of 1933. Indian 

tribal governments have no comparable exemption. Thus, they either must register their 

securities with the Securities and Exchange Commission or raise funds in private placements in 

more limited markets. 

Some Indian tribal governments have sought Federal guarantees oflndian tribal taxexempt bond financings. Subject to certain exceptions for housing programs and certain other 

programs, however, Section 149(b) generally prohibits Federal guarantees of tax-exempt bonds. 

A policy reason underlying this prohibition is a concern that such Federal guarantees have the 

potential to produce securities that are more attractive than benchmark U.S. Treasury securities 

(in that Federally-guaranteed tax-exempt bonds have the full faith and credit backing of the 

Federal Government as security and they produce more attractive tax-exempt income). In 

addition, the potential Federal revenue cost of any such guarantee is a significant concern. The 

Federal Government has a budget policy against Federal guarantees of tax-exempt bonds.27 

The Treasury Department recommends that Congress examine the difficult issue of credit 

challenges facing Indian tribal governments and explore possible ways to improve bond market 

access for Indian tribal governments, such as possible reserve fund programs, credit 

enhancement facilities, or other measures, subject to prudent fiscal controls. 

IV. Conclusion. 

The Treasury Department believes that the recommendations contained in this report will 

help Indian tribal governments to access the capital markets more effectively and efficiently. In 

this regard, the Treasury Department would be willing to provide technical assistance to 

Congress in developing a better framework for Indian tribal governmental tax-exempt bond 

financing modeled after the Tribal Economic Development Bond program. 

27 See Note 8 Supra. 

15 
Appendix A 

to U.S. Treasury Department Report on Tribal Economic Development Bonds 

Historic Data on Indian Tribal Governmental Issuances of Tax-exempt Bonds28 

1987-1989 

1990 

1991 

1992 

1993 

1994 

1995 

1996 

1997 

1998 

1999 

2000 

2001 

2002 

2003 

2004 

2005 

2006 

2007 

2008 

20o9P 

2010 p p 

Total: 

Annual Average: 

Dollar Volume 

$ 74,198,889 

$ 2,342,500 

$ 1,394,766 

$ 15,995,579 

$ 16,264,300 

$ 33,260,669 

$ 27,606,263 

$ 502,420,372 

$ 236,809,502 

$ 59,754,766 

$ 103,819,035 

$ 35,445,360 

$ 256,467,447 

$267,858,617 

$ 187,576,494 

$ 135,292,601 

$ 171,234,371 

$ 337,587,227 

$ 618,203,075 

$ 261,238,662 

$ 113,437,702 

$ 302,082,450 

$3,760,290,647 

$156.68 million 

Number of Bond Issues 

10 

4 

3 

4 

6 

9 

10 

18 

13 

19 

16 

14 

31 

18 

31 

21 

13 

24 

18 

14 

13 

12 

321 total bond issues 

13.4 average number of bond issues annually 

Comparison to Total Tax-exempt Bond Market Issuance Data for Same Period 4 

Total1987-2010: 

Annual Average: 

$6.599 trillion 

$274.94 billion 

408,557 total bond issues 

17,023 average number ofbond issues annually 

28 Source: IRS, Statistics of Income Division. Table includes all bonds filed on Form 8038-G, Information Return 

for Tax-Exempt Governmental Obligations that specifically reference "Tribal or Indian" governments. 2 Tax year includes all bonds filed on Form 8038-G, Information Return for Tax-Exempt Governmental Obligations 

that specifically reference "Tribal or Indian" governments, or "Tribal Economic Development " bonds. 3 Preliminary data as ofNovember 29, 2011, subject to revision. 4 Data includes all bonds filed on Form 8038-G, Information Return for Tax-Exempt Governmental Obligations and 

Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues. Contains preliminary data as of 

November 29, 2011, subject to revision. 
Appendix B 

to U.S. Treasury Department Report on Tribal Economic Development Bonds 

Results of $2 Billion Bond Allocation Process 

[Chart Attached] 
Allocation Schedule of 1st Tranche of Tribal Economic Development Bonds 

Name of Ael!llcantllsauer State Tyf!! of P!!feet TEDBs Allocation 

Agua Caliente Band of Cahuilla Indians CA Refinancing $13,162,968.27 

Apsaalooke Nation-Crow Tribe of Indians MT Commercial Fadlty and Land $6,419,391.58 

Acquisition 

Blackfeet Tribe of the Blackfeet Indian Reservation MT Refinancing and Acquisition of $22.565,068.46 

Tourism Facility 

Cabazon Band of Mission Indians CA Refinancing $22,565,088.46 

Cedar Band of Paiute Indians of Utah UT Retail Facility $10,530,374.62 

Chemehuevi Indian Tribe of the Chemehuevi Reservation CA Tourism Faciity and Marina $15,795,561.92 

Confederated Tribes of Coos, lower Umpqua and Sluslaw Indians OR Water Infrastructure $1,504,339.23 

Confederated Tribes of Coos, lower Umpqua and Sluslaw Indiana OR Refinancing $8,574,733.62 

Confederated Tribes of the Umatilla Indian Reservation OR Tourism Facility Expansion $22,565,088.46 

Confederated T rlbes of the Warm Springs Reservation of Oregon OR Water lnlrastructure and Tourism $22,585,088.46 

Facility Improvements 

Delaware Tribe of Indians OK Acquisition of Businesses and $22,565,068.46 

Airpark 

Elk Valley Rancherla, California CA Tourism F acillty $22,565,068.46 

Fort Sill Apache Tribe of Oklahoma OK Tourism Facility Expansion $22,565,068.46 

Hopland Band of Porno Indians of the Hopland Rancheria, California CA Tourism Facility $22,581,504.36 

lone Band of Miwok Indians CA Tourism Facility $22,565,088.46 

KawNatlon OK Water Infrastructure $22,565,088.46 

Klckapoo Traditional Tribe of Texas TX Refinancing and Tourism Facilty $22,565,088.46 

La Jola Band of luiseno Mission Indians CA Tourism Facility $22,585,068.46 

lac V18UX Desert Band of lake SUperior Chippewa Indians Ml Refinancing and BUilding $7,521,696.15 

Construetion/Remode&ng 

Lummi Nation WA Environmental and $22,565,088.46 

Transportation Infrastructure 

Menominee Indian Tribe of IMsconsin 1M Tourism Facility and Convention $22,565,088.46 

Center Expansion 

Mille lacs Band of Ojibwa MN Education FadHty $6,279,393.17 

Mille lacs Band of Ojibwa MN Education Facility $2,632,593.85 

Oneida Nallon of New York NY Refinancing $22,565,088.46 

Oneida Tribe of Indians of IMseonsin 1M Retail F adllty Improvements $902,603.54 

Oneida Tribe of Indians of IMseonsln 1M Recreational Facility $9,402,120.19 

Improvements and Refinancing 

Oneida Tribe of Indians of IMseonsln 1M Refinancing $4,889,102.50 

Pascua Yaqui Tribe of Arizona AZ Tourism F adlity $22,565,068.46 

Pauma Band of luiseno Mission Indians CA Tourism Facility $22,565,088.46 

Pawnee Nation of Oklahoma OK Tourism FadUty $22,565,068.46 

Pit River Tribe CA Retall F aclllty $3,760,848.08 

Poarch Band of Creek Indiana AL Refinancing $22,565,068.46 

Ponca Tribe of Indians of Oldahoma OK Tourism Facility $22,565,068.46 

Pueblo of Acoma NM Manufacturing Facility $8,273,885.77 

Pueblo of Isleta NM Tourism Facility $22,565,088.46 

Quechan Indian Tribe CA Refinancing $22,565,088.46 

Sac & Fox Tribe of the Mississippi In Iowa lA Refinancing $22,565,068.46 

Salt River Pima-Maricopa Indian Community AZ Recreational Fadfity $22,565,088.46 

San Pasquaf Band of Mission Indians CA Tourism F adUty $22,565,068.46 

Santa Clara Pueblo NM Tourism Fadlity Expansion and $22,565,068.46 

Refinancing 

Santee Sioux Tribe of Nebraska NE Health Facility $13,539,053.06 

Sault Ste. Marie Tribe of Chippewa Indians Ml Refinancing $8.161,040.33 

B-1 
Allocation Schedule of 1st Tranche of Tribal Economic Development Bonds 

.;:N:;;ame:..:.:;:..;:;of:..:Ap~plican=:;::::;tll:::uu:=Fer:.:.._ _____________ ..!!!!!,_ Typ! of Proj!c:t 

Seminole Tribe of Florida Fl Parking Facility 

Southern Ute Indian Tribe CO Refinancing 

Spokane Tnbe of Indians WA Tourism Facility, Infrastructure, 

Manufacturing Fadlity, and low 

ute Mountain Ute Tribe (ute Mountain Tribe of the Ute Mountaln 

Reservation) 

V!ejas Band of Kumeyaay Indians 

V\linnebago Tribe of Nebraska 

Yankton Sioux Tribe 

Yankton Sioux Tribe 

Yankton Sioux Tribe 

Total of 51 Disclosed Applications 

Total of 7 Non-disclosed Applications 

Total of 58 Applications 

lnoome Housing 

CO Tourism Facility 

CA Tourism F adlity 

NE Tourism Facility 

SO Tourism Fadlity and Convention 

Center 

SO Corractlons Fadlity 

so Administrative omces 

TEDS. Allocation 

$22,565.088.46 

$22.565,088.46 

$22,565,088.48 

$22,565,088.46 

$22.565,088.46 

$13,539,053.08 

$10,530,374.62 

$4,513,017.69 

$7,521,696.15 

$856,967,985.42 

$143,032,014.44 

$999,999,999.88 

Note: This list contains the alocations awarded to those applicants that provided disclosure consent The seven non-disclosed 

applicants did not provide a disclosure consent with their appficatlons. 

B-2 
Allocation Schedule of 2nd Tranche of Tribal Economic Development Bonds 

Nama of Alll!lk:antllssuar ~ Ill!! ot Project TEOBa Allocation 

Absentee Shawnee Tribe of Oklahoma OK Educatlonai/Commetdal F acillty 9,981,848.80 

Agua Caliente Band of Cahuilla Indians CA Renewable Energy 10,934,616.39 

Manufacturing Facllty 

AJabame-Coushatta T rtbe of Texas TX Industrial, TouriSm, Housing, 29,609,847.73 

Commercial, Educational, and 

Health Facilities 

Alturas Indian Rancheria CA Supply Distribution F acillty 7,289,744.26 

Apache Tribe of Oklahoma OK TouriSm F acltity 10,932,879.61 

Big Lagoon Indian Rancl1eria CA Manufacturing and Tourism 21,504,745.58 

FacHIIIes 

Cabazon Band of Mission Indians CA Refinancing 30,000,000.00 

Campo Band of Mission lnd lans CA Renewable Energy, Tourism, and 30,000,000.00 

Wastewater FaciUtles 

Cedar City Band of Palutas of the Paiute Indian Trlle of Utah UT Manufacturing Facility 7,289,744.26 

Chemahue'li Indian Tribe of the Chemehuavl Res8Mltlon CA TouriSm FaciUiy and Marina 3,260,384.91 

Cher-Ae Heights Indian Community of the Trinidad Rancheria, CA CA TouriSm and Renewable Energy 10,932,879.61 

FaciUtles 

Chippewa Cree Tribe MT Refinancing 4,446,015.02 

Comanche Nation, Oklahoma OK Tourism, Parking, Convenflon, 10,570,129.18 

and Retail FadUlles; and Land 

Acquisitions 

Confederated Tribes of the Goshute Reservation UT Governmental, Retal, 10,934,616.39 

Manufacturing, and Renewable 

Energy Facilities 

Confederated Tribes of the Umatilla Indian Reservation OR Health Facility 5,330,048.86 

Confederated Tribes of the Warm Springs Reservation of Oregon OR Water Infrastructure and Tourism 5,107,849,19 

Facility Improvements 

Coyote Valley Band of Pomo Indians CA Tourism Facility Expansion 18,147,818.34 

Delaware Nation OK RetaB. Industrial, Tourism, 27,253,437.90 

Housing, and Re,_able Energy 

Facilillea 

Elk Valley Rancherla. California CA Tourism FadUty 2,709,930.18 

Ely Shoshone T rille NV Health Fac!Uiy 2,988,795.13 

Fort Bidwell Indian Community Council CA Renewable Energy FaciRtles 10.934,616.39 

Fort Peck Assinibolne & Sioux Tribes MT Renewable Energy 10,934,816.39 

Fort Sill Apache Tribe of Oklahoma OK Tourism Facilities 10,934,816.39 

Gila River Indian Community AZ RateW, Tourism, and Youth 30,000,000.00 

Facilities 

Grindstone Indian Rancherla of Wlntun-Wailaki Indians of CaUfomia CA Supply Distribution F acilily 5,467,308.19 

llpay Nation of Santa Ysabel CA T ourtsm Facilities 10,932,679.61 

lone Band of Miwok Indians CA Tourism and Renewable Energy 10,934,616.39 

FaciU!Iea 

Jamul Indian Village of California CA RetaiFacillty 3,848,238.13 

Kaw Nation OK, Renewable Energy FadUty 24,058,156.06 

La Posta Band of Mission Indians CA Retal Faclllly 6,560,769-84 

Lummi Trtbe of the Lummi Reservaflon WA lnfrastruciure and Tourism 3,848,238.13 

Facilities 

Match-E-Be-Nash.She-Wish Band of Pottawatomi Indians Ml Parking, Water, and Wastewater 14,943,975.73 

lnfrastruciure Facilities 

Mesa Grande Band of Diegueno Mission Indians CA Renewable Energy 10,934,616.39 

Mille Lacs Band of Ojlbwe MN Refinancing and Tourism 27,670,387.58 

Facifilles 

Morongo Band of CahuUia Mission Indians CA Tourism, RataU Renewable 16,766,411.79 

Energy, and Water Infrastructure 

Facilities 

B-3 
Allocation Schedule of 2nd Tranche of Tribal Economic Development Bonds 

Nam• of Applicantllnuer 

Navajo Nation of Arizona, New Mexico & Utah 

Ohkay Owingeh 

Oneida Tribe of Indians of Wisconsin 

Otoe Mlssourta Tribe of Indians of Oklahoma 

Pascua Yaqui Tribe of AriZona 

Pauma Band of lufsano Mission Indians 

Pawnee Nation of Oklahoma 

Plnolllwle Porno Nation, cawtomla 

Pit River Tli~ 

Poarch Band of Creek Indians 

Pueblo of Acoma 

Quechan Indian Tli~ 

Rosebud SiOux Tti~ 

Round Valley Indian Tri~s 

Sac & Fox Tribe of the Mississippi in Iowa 

Santa Ynez Band of Chumash Mission Indians of the Santa Ynez 

Reservation, ca!Hbmia 

Seminole Tribe of Florida 

Skokomlsh Indian Tri~ 

Southam Ute Indian Tribe 

Spokane Tribe of Indians 

Slockblidge-Munsee Community 

Tohono O'odham Nation 

Torres Martinez Desert CahuUia Indian Tribe 

Tule River Indian Tribe 

Tuolumne Band of Me-Wuk Indians of the Tuolumne Rancherta 

United Keetoowah Band of Cherokee Indians 

Ute Indian Tli~ of the Ulnteh and Ouray Reservation 

Ute Mountain Ute Tribe 

Viejas Band of Kumeyaay Indians 

Yankton Sioux Tribe 

Yurok Tri~ of the Yurok Reservation, Celifomla 

Totel of 68 Otsctosed Applicants 

Total of 10 Non-Disclosed Applicants 

T otat of 78 Applicant& 

...!!!!!... !le• of ProJm TEDB• Allocation 

AZ Electric, Gas. Water 30,000,000.00 

lnfraslructure, Renewablll Energy 

Facilities, and Ratatl F acllilies 

NM Rellnanclng, Reaeatlonal, 22,913,488.65 

Govemmentel, and CommercJal 

Facilities 

WI Rellnanclng and Tourism 8,154,632.88 

FacUlties 

OK Renewablll Energy and Water 18,224,380.85 

tnfrastruclunl Facilities 

AZ Retail Facility 10,934,616.39 

CA T ourtsm F acilltles 8,177,238.37 

OK Tourism Facllltles 2,709,930.18 

CA Tourism F aclllties 10,932,879.61 

CA Tourism and ReteU Facililles 7,289,744.26 

AL Rellnancln{l 24,776,122.55 

NM ~wable Energy Facilities 8,925,257.05 

CA Reflnanclng 7,120,225.63 

so Manufacturing, Retel, 5,472,775.50 

Commercia~ and Housing 

Facilities 

CA Renewable Energy FacUlties 10,934,616.39 

lA Retail, Comm~ and Tourism 6,187,170.43 

Facility 

CA Tourism, Community. and 24,776,122.55 

Housing F acDties 

FL Par1dng Faculty 14,821,840.27 

WA Refinancing 1,822,436.05 

co Refinancing 18,779,138.25 

WA Toutlsm Fac!Uties 10,934,616.39 

WI Museum FacUlty 3,644,872.12 

AZ RataY and Commercial FacUlties 1,822,436.05 

CA Govemmentel Fac!Utles 2,770,102.80 

CA Commerclal, Tourism, and 10,934,616.39 

Housing F acllilllls 

CA Tourism Facllilllls 14,579,488.53 

OK Water lnfrasWcture Facility 15,598,026.16 

UT Refinanclng and Housing 30,000,000.00 

FacUlties 

co Tourism F acltitles 6,143,079.87 

CA Tourism FacUlties 4,009,359.34 

so Rataa, Farming, Renewable 10,934,616.39 

Energy, Tourism, and 

Governmental Faci&ties 

CA Retell, Tourism. and 10,934,616.39 

Manufacturing F acmtfes 

821 ,271 ,002. 24 

183,242,015.14 

1,~513,017.31 

Note: This list contains the allocations awarded to those app!lcants that provided disclosure consent The 10 non-disclosed applicants did 

not provide a disclosure consent with their appWcations. 

B-4 
Appendix C 

to U.S. Treasury Department Report on Tribal Economic Development Bonds 

Summarv of Comments Received in Response to Public Solicitation of Comments 

The following summary is a broad aggregation of all comments submitted in response to the 

public solicitation of comments from Indian tribal governments and other members of the public 

regarding the Tribal Economic Development Bond provision pursuant to a Notice published in 

the Federal Register at 75 Fed. Reg. 39730 (July 12, 2010) (the "FR Notice"). 

In their comments, Indian tribal governments advocated for the removal of the essential 

government function test and for tax law parity with state and local governments. They believe 

that the essential government function test places burdens on Indian tribal governments that are 

not placed on State and local governments and is therefore inequitable. It was recommended that 

this test be removed to open up the capital markets to tribal governments. Some argued that 

many economic development projects must go unfunded because the debt service on taxable 

financing is too expensive for most tribal governments. At a minimum, most tribes want parity 

with state and local governments in terms of qualification requirements for tax-exempt financing 

because tribal governments must provide the same types of economic development and other 

services as State and local governments. 

One tribe noted that the essential government function test is difficult to administer because the 

IRS does not define an essential government function while the legislative history indicates only 

that such a function is "customarily performed" by state and local governments. Another tribe 

noted that tribal governments may need to directly engage in commercial and industrial 

enterprises to create jobs and tribal income due to the absence of other private sector activity. 

(FR Notice Question 1 ). 

When asked whether the focus should be shifted from the essential government function test to 

the tribal governmental use oftax-exempt bond financed facilities under the standard that applies 

to state and local governments, tribes generally agreed that there should be at least parity with 

the standards applied to State and local governments. For some tribes, this meant that the State 

and local government standard described in the question would be a sufficient standard, but other 

comments indicated that that the State and local government standard would not go far enough in 

providing adequate consideration ofthe tribes' unique roles and responsibilities in the provision 

of essential services. At least seven other tribes commented that the State and local government 

standard does not provide sufficient flexibility for Indian tribal governments and that special 

consideration should be made of the tribes' unique circumstances beyond that which is made for 

State and local governments. Thirteen other tribes either said that they would support the same 

standards as applicable to State and local governments or that they opposed any special standards 

for Indian tribal governments. The tribes agreed that no standard applied to tribes should be 

more restrictive than those applied to State and local governments (FR Notice Question 2). 

In general, Indian tribal governments oppose any restrictions on the use of their revenue streams 

as security or sources of payment for Indian tribal tax-exempt bond financing. Tribes indicated 

that they are often forced to use alternate revenue streams because they do not have adequate tax 

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bases comparable to those of State and local governments. Most notably, tribal land is held in 

trust and not subject to property taxes. When tribes try to levy business taxes, it is often 

perceived as "double taxation" because the state and local governments may also levy taxes on 

economic activities in the same area when those activities involve non-Native persons. The 

alternate revenue streams that tribes draw from were identified as income from lands held in 

trust, oil, gas and other natural resources, and gaming. Many tribes said that limiting qualified 

sources of tribal revenue further limits tribes' already restricted access to credit markets. One 

tribe said that the sole determinant of the eligibility for tax-exempt bond financing should be the 

nature of the project undertaken. Another said that it is unlikely that tribes can meet the 90 

percent governmental use or governmental payment requirement without including revenue 

streams unique to Indian tribal governments. In general, the tribes believe that special 

consideration should be given to special sources of revenue for Indian tribal governments 

because they do not have the same taxing abilities as State and local governments (FR Notice 

Question 3). 

There is a consensus among tribes that current law should be modified permanently to authorize 

tribal governments to use qualified tax-exempt private activity bonds for the same types of 

projects as State and local governments. Additionally, some noted that qualified small issue 

manufacturing bonds (as allowed for State and local governments) would be more useful than the 

existing limited form of tax-exempt private activity bonds for manufacturing facilities under 

restrictive parameters currently authorized for tribal governments (FR Notice Question 4). 

In response to the question of whether there are additional projects that Indian tribal governments 

should be allowed to finance using qualified tax-exempt private activity bonds, tribes generally 

said that Indian tribal governments should be allowed to finance commercial projects and 

corporations that produce revenues for tribal government services. Additionally, four tribes said 

that they only sought parity with State and local governments while five tribes asserted that there 

should be a "presumption" that all projects undertaken by tribal governments are eligible for taxexempt bond financing. Most other tribes gave specific types of projects for which they believed 

tribal governments should be authorized to use private activity bonds. Suggestions included 

commercial projects with economic, environmental, and other social value, elderly housing 

projects, residential assisted living projects, recycling facilities, fire stations, renewable energy 

projects, and grocery stores. Some argued that tribal governments should be authorized to use 

private activity bonds for other types of projects beyond those allowed for State and local 

governments, including projects that would address the unique housing needs of tribes. Indian 

tribal governments also sought to use private activity bonds for tourism and recreational facilities 

and travel centers. Many tribes noted that Section 17 corporations should be able to issue taxexempt private activity bonds (FR Notice Question 5). 

Responses were varied on the question ofwhat the nature of a bond volume cap should be ifthe 

government was to impose one. A few tribes said that a bond volume cap, if used, should be 

identical to the one used for State and local governments. The majority of tribes submitting 

comments said that they opposed the use of any bond volume cap for the use of private activity 

bonds for tribal governments. Proposed structures in the event of a bond volume cap include a 

minimum allocation for each tribe, and additional allocations based on several factors including 

Appendix C Page 2 
on- and off-reservation population, location, land base, and other unique circumstances (FR 

Notice Question 6). 

There is a general consensus among Indian tribal governments that the restriction on the use of 

Tribal Economic Development Bonds outside of Indian reservations should be lifted. The 

opinions on whether this should be replaced with a standard for proximity of the project to a 

reservation are more mixed. Some tribes believe that projects within a "reasonable" proximity 

should be eligible for tax-exempt bonds, while other tribes believe that this subjective standard 

should be avoided by allowing the use of tax-exempt bonds on all types ofland owned by tribal 

governments. Overall, the sentiment is that the limitation on use ofTribal Economic 

Development Bonds outside ofindian reservations should be eliminated because of the 

exceptionally complex mix of land tenure in Indian country. One specific suggestion was the use 

of the "substantial connection" or "nexus" test to determine whether there is a "direct, material 

benefit to the issuing jurisdiction." This tribe suggests that this nexus test would provide parity 

with State and local governments (FR Notice Question 7). 

The large majority of Indian tribal governments submitting comments also agree that the 

prohibition on the use of Tribal Economic Development Bonds for gaming facilities should be 

eliminated because many tribes rely on gaming revenues in the absence of an adequate tax base 

to support a significant amount of their governmental and social services (FR Notice Question 

8). 

Other general comments were that the ability of tribal communities to utilize tax-exempt bond 

financing should be at least equal to the ability of State and local governments, the unique 

position and responsibility of tribes requires much more flexibility than is currently offered, and 

what may be considered only a customary government function for a state or local government is 

often essential for tribes to carry out their responsibilities. Many tribes emphasized the 

extremely limited access to credit markets that hinders tribal economic development, and noted 

that special needs and unique circumstances of tribal governments should be considered when 

making tax laws (FR Notice Question 9). 

A Note on Section 17 Corporations 

In recognition of sovereign status, previous federal law has acknowledged the authority of tribes 

to establish unique corporate forms (Section 17 corporations). Many tribes believe that Section 

17 corporations should be eligible for Tribal Economic Development Bonds and widely eligible 

to issue tax-exempt bonds because they are not technically for-profit entities. These corporations 

are wholly owned by Indian tribal governments and many tribes believe that these corporations 

should be afforded the same treatment as the Indian tribal governments that control them. 

Appendix C Page 3