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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

Tribal Consultation Summary

Tax Status of Tribally Chartered Corporations

Introduction

In consultations, Treasury Tribal Advisory Committee meetings, and engagements with

Treasury, Tribal governments have requested guidance on the tax status of Tribally chartered 

corporations to provide certainty for Tribal economic development to support the generation of 

Tribal government revenue. These requests for guidance have increased as Tribal governments 

have become eligible for tax credits via the elective pay mechanism under the Inflation 

Reduction Act. During the November 2022 Tribal consultations on the Inflation Reduction Act, 

many Tribes requested that their enterprises be able to access these tax credits highlighting the 

lack of guidance on the federal tax status of Tribally chartered corporations.

In accordance with Treasury’s consultation policy, Treasury held two Tribal consultations on the 

tax status of Tribally chartered corporations on June 21, 2023 and June 22, 2023 to gather input 

from Tribal leaders. Specific questions can be found in the Dear Tribal Leader Letter that was 

published on May 15, 2023. The consultations were held virtually to maximize Tribal 

participation across Indian country. Nearly 320 attendees joined the consultations over the twodays. The comment period ended on August 18, 2023. Treasury received 47 written comments 

from Tribal governments and Tribally-led organizations that collectively represent over 70% of 

Tribal Nations. 

Pursuant to Treasury’s Tribal consultation policy, below is a summary of the feedback received 

in Tribal consultation. 

Foundational Concepts

1. Application of the Federal Trust Responsibility and Support for Tribal SelfDetermination

Understanding the Condition of Tribal Economies & Existing Federal Policy: Commenters 

requested that any guidance issued by the Treasury Department should incorporate the federal 

trust responsibility towards Tribes and citizens, which includes the long-established federal 

policy, expressed through various congressional and executive actions, to promote Tribal selfdetermination and economic development. As part of this policy, Tribal business activities have 

been encouraged by the federal government in order to foster self-determination and to raise the 

socio-economic status of Tribes from the severe poverty experienced by many Tribal 

communities. Commenters cited to the United States Civil Rights Commission’s 2018 Broken 

Promises Report1 which highlighted that: 

1 U.S. Commission on Civil Rights. (2018). Broken Promises: Continuing Federal Funding Shortfalls for Native 

Americans.
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

Indian Country faces many economic development challenges. Over 25 percent of 

Native Americans live in poverty, which is higher than the poverty rate of any 

other racial group in the U.S. Approximately 12 percent of Native Americans are

unemployed, which is more than double the national average. For Native 

Americans living on reservations, the unemployment rate is around 50 percent 

and for certain reservations, the average unemployment rate is much higher, 

hovering around 80 percent and up.... 

Tribes emphasized that this poverty is the consequence of Tribal communities enduring a long 

history of asset deprivation, colonization, forced removal, war, loss of homelands, and restricted 

access to traditional lands and resources, which has Tribes "into a near-assetless state for at least 

a century.” The consequences of this sustained economic deprivation persist to this day. 

Commenters highlighted that they manifest themselves in the form of obstacles to economic 

development that include, but are not limited to, insufficient access to capital; lack of small

business capacity; insufficient workforce development, financial management training and 

business education; regulatory constraints on land held in trust and land designated as restricted 

use (prohibiting such land from being used as collateral or as property subject to Tribal taxes); 

and underdeveloped physical infrastructure. Tribes asked Treasury to understand Tribal 

economies against this backdrop, which is materially different than the experience of states and 

local governments. 

Understanding the Policy Purpose of the IRA: Further, Tribes expressed that it is critical that 

Treasury and IRS understand the purpose of the Indian Reorganization Act of 1934 (IRA) 

because the federal policy behind it is relevant to the evaluation of Tribal entities. The IRA was 

enacted in response to the Meriam Report of 1928 that detailed extreme poverty in Tribal

communities resulting from the federal government’s policy of forced assimilation and breakup 

of Tribal communal land ownership under the General Allotment Act of 1887. The IRA was 

created to decrease federal control over Tribes by increasing Tribal self-determination over 

internal affairs. This included the operation of government programs which required the 

generation of revenue. The IRA was the first formal federal effort to encourage Tribes to become 

more economically self-sufficient through the creation of corporations that segregated business 

assets and liabilities from governmental assets. Commenters emphasized that they have followed 

that federal policy in their development of Tribally chartered business entities. 

Consistent with federal policy, Commenters requested that Treasury’s guidance support and 

promote tribal sovereign authority, the right to Tribal self-government and a Tribe’s ability to 

provide for its citizens. Commenters expressed that Tribes should at a minimum be on parity 

with federal, state, and local governments, who regularly engage in business activities to fund 

citizen programs and services (such as municipal golf courses, convention facilities, and the like) 

which are not subject to tax. Above that, the unique government-to-government and trust 

relationship that Tribes have with the United States requires that guidance not limit in any way a 

Tribe’s ability to generate tax exempt governmental revenue. 
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

2. Impacts of Uncertainty

Tax Uncertainty Contributes to the Underdevelopment of Tribal Communities:

Commenters highlighted that the status of Tribally chartered corporations has been pending for 

over thirty years. The uncertainty has created a significant barrier to economic development and

has impaired Tribes’ ability to generate revenues for the programs and services they provide to

their citizens. The result of depressed economies has a circular effect. Without the ability to 

stimulate economic growth, diversify economic activities, and generate revenues to fund 

governmental programs and services, Tribes lack the resources to invest in building the essential 

physical and human infrastructure necessary to attract the capital investment needed to compete 

in the regional, national, and global marketplace. Based on present per-capita income, it is 

estimated that Tribal citizens will not achieve parity with the rest of the United States for at least 

four more decades. By clarifying the tax status of Tribal entities, Treasury would take a critical 

step towards enabling Tribes to raise the socio-economic status of their members. 

In the absence of federal guidance, Tribes have become increasingly sophisticated in the 

structuring of business operations and transactions utilizing a range of options from federally 

chartered corporations to tribally chartered corporations and LLCS, as well as partnerships 

and/or joint ventures. Tribes have established under their own laws hundreds if not thousands of 

corporate entities. Commenters highlighted that IRS risks destabilizing considerable economic 

development in Indian Country if a regulation does not recognize the tax immunity of Tribally

chartered entities that are at least majority-owned by a Tribal government. Tribes would be put in 

a position of foregoing the benefits of creating Tribal entities in order to avoid the negative 

impacts on Tribal government revenue that federal taxation would cause.

Tribes Have Been Unable to Obtain Certainty: Commenters noted that after Revenue Ruling

94-16, IRS issued several private letter rulings concerning tribally owned and chartered

corporations, concluding in each case, based on several factors, that they were "integral parts" of 

the Tribal governments and entitled to share in each Tribal government's tax immunity. Despite 

these early rulings, the IRS declared a moratorium on private letter rulings raising the "integral 

part" test in 2007 preventing Tribes from ensuring that a Tribal entity is not considered a 

separate taxable entity. While commenters expressed that they do not support resumption of the 

Integral Part Test, they highlighted that this moratorium made it impossible for Tribes to obtain 

tax certainty or their entities that generate governmental revenue. 

3. Definitions, Scope, and Process

Definition: Due to the expansion of Tribal corporate structures, commenters frequently 

referenced entities that extended beyond just Tribally chartered corporations, this included 

partnerships and limited liability companies. “Tribal entities” is used to encompass all of these 

categories. 

Process: Commenters expressed that the tax immunity of Section 17 corporations is currently 

only established by IRS ruling, rather than by regulation and requested that Treasury include its 

prior determination in formal guidance. Additionally, Tribes expressed the importance of 

additional consultations once guidance is drafted and requested that Treasury and IRS utilize the 
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

expertise of the Treasury Tribal Advisory Committee which statutorily advises the Secretary on 

matters of taxation. 

Request for a Bright-Line Rule: Commenters expressed that overly complicated guidance, 

such as a subjective test similar to the Integral Part Test, will have the unintended consequence 

of constraining Tribes because certainty is needed to respond to market opportunities to generate 

governmental revenue. Tribes require a categorical rule as to the tax status of Tribal entities, and 

not a case-by-case determination. Without a categorical rule, there will be continuing uncertainty 

over the tax status of Tribal entities, which negatively impacts the ability of Tribes to plan for 

and realize economic development opportunities.

Application to LLCS: Commenters requested that Treasury clarify that the common treatment 

of LLCs as disregarded for federal income tax purposes, also applies to tribally chartered LLCs 

and their subsidiaries, which are owned by an Indian tribe or Section 17 corporation, regardless 

of location of business activities. Tribes expressed that assessment of a LLC’s tax status should 

be based on ownership and not a control test. Where Tribes and Section 17 and Sec. 3 

corporations are members of an LLC, the membership income received by these entities should 

also not be subject to federal income tax. Additionally, Tribes requested confirmation that 

“unincorporated commercial businesses,” e.g., businesses operating as a division of the Tribe are 

tax exempt under Revenue Ruling 94-16. 

4. Substantive Priority Requests

Confirm the Exempt Status of Tribal Entities that are Majority Owned or Controlled by a 

Tribe: The majority of Tribes requested that Treasury issue guidance on both wholly owned 

Tribal corporations and LLCs and for Tribally chartered entities that are at least 51% owned or 

controlled by a Tribe. Tribes requested that such Tribal entities be found to be owned and 

controlled by the Tribe for income tax purposes if they are 51% owned or controlled by a Tribe. 

As such, Tribal entities who meet this test should be deemed to share in the tax status of the 

Tribe itself and should therefore be nontaxable for federal income tax purposes. Commenters 

expressed that the 1996 Treasury Regulation §301.7701-1(a)(3), which provides that “[a]n entity 

formed under local law is not always recognized as a separate entity for federal tax purposes”

constitutes the legal basis for such a finding. Further, Tribes expressed that it should be the 

purpose, activities, and ownership of the entity, rather than the choice of form or jurisdiction of 

incorporation which should matter for purposes of federal income taxation. Tribes should have 

the same tax treatment as entities which are under governmental ownership, because regardless 

of the choice of corporate form or jurisdiction of incorporation, the tribe still owns and controls 

the company, sets its policy, determines its leadership, can dissolve the company at any time, and 

uses the revenues generated by the company for essential governmental purposes. 

Tribes expressed that the non-tribal minority owners in such entities would be subject to federal 

income tax generally on any distributions they receive. Further, where a Tribe has less than 

majority ownership or control, such as in a partnership, commenters expressed that the profit 

received by the Tribal owner should still be exempt from tax base on the owner’s pass-through 

status. The non-Tribal owner should be taxed based on their status. In contrast to the majority, a 
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

minority of Tribes requested that guidance come out first on wholly owned corporations a 

because those were structures held by those Tribes.

Inapplicability of the Integral Part Test: Commenters highlighted that the Integral Part Test 

should not be applied for Tribal entities because it is cumbersome and results in disparate results 

because it is calibrated to state and local governments. As described in the responses to Question 

1, Tribes highlighted that they rely on commercial activities to generate governmental revenue 

because they do not have a tax base. As a result, analysis such as whether a governmental entity 

has the power to tax is not the correct lens for Tribal entities. Further, Tribes highlighted that 

Congress in the IRA encouraged Tribes to establish business entities that are separate and 

distinct from the political arm of Tribes, so the Integral Part Test used for state governments does 

not work for Tribes based on Congressional intent.

Revise Prior Guidance on the Tax Status of Tribally Owned State Chartered Entities:

Commenters expressed that the relevant consideration for income tax purposes is not which 

government created the corporate entity but instead, “what is the tax status of the ultimate 

owner?” For various business purposes and regulatory considerations, particularly with regard to 

an “off-territory” business venture, a Tribal government may decide to utilize a state-chartered 

entity. It should be immaterial for tax purposes that a Tribal government does so if the Tribal 

government is the sole owner of the state-chartered entity. This is particularly true for limited 

liability companies which are treated as “pass through” entities for federal tax purposes.

5. Additional Clarifications:

Tribal Entities Owned by Tribal Citizens: Commenters requested that Tribal entities owned 

by individual Indians should carry the same tax status as the individual Indians, including the 

preservation of treaty and statutory tax immunities. Commenters highlighted that existing 

guidance recognizes that individual Indians possess income tax immunity for certain forms of 

income such as income derived from Tribal lands or income earned from exercising treaty 

fishing rights. Tribes requested that the Treasury confirm the tax-exempt treatment of tax-exempt 

income earned by Indians through Tribally chartered entities.

Tribal Entities Owned by Tribes, Tribal Citizens, and Tribal Entities: Commenters 

explained that increasingly Tribes are engaged in economic development ventures and 

partnerships with other Tribes, individual Tribal citizens, and other Tribal organizations or 

Alaska Native Corporations. Commenters expressed that the same principles supporting Tribal 

sovereignty and Tribal economic development, which provides that income earned by Tribal

governments is not subject to income tax, should also apply in each of these three scenarios. 

Tax exempt status, foundations and supporting organizations: Guidance on Tribal 

corporations and other entities should reflect the ability of Tribes to retain 501(c)(3) status and 

(particularly for health care entities) to establish foundations and supporting organizations per 

Internal Revenue Code Section 509(a)(3). Section 501(c)(3) status is often necessary for grant 

eligibility independent of whether the entity itself is subject to tax or in need of an exemption. 

Foundations are similarly needed to raise revenues to supplement inadequate federal funding for 

health care. The guidance should retain and/or enhance this flexibility.
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

Tribal Responses to Consultation Questions

1. What role do Tribally chartered corporations (wholly, majority, or jointly owned) 

perform for Tribal governments and Tribal economies?

Nation Re-Building and Generation of Governmental Revenue: Regardless of corporate 

structure, commenters explained that Tribal entities serve the vital role of revenue generation to 

fund governmental services2 because—in contrast to states and local governments—Tribes do 

not have a tax base due to the impacts of federal policy which include, but are not limited to the 

following:

• Limited to No Land Bases on which to Levy Property Taxes:

▪ the removal of Tribal communities from their homelands which extended past the 

mid-20th century resulted in many Tribes having no reservation; 

▪ Tribes with land bases have experienced diminishment of their original reserved 

lands. 

• Inability to Tax Tribal Lands Held in Federal Trust: 

▪ the federal trust status of existing Tribal lands, which means that Tribes cannot 

levy property taxes on land held in trust by the Department of Interior. 

▪ Further, in contrast, to states and counties that similarly have federal lands in their 

boundaries, Tribes do not receive Payment in Lieu of Taxes to compensate for the 

loss of taxable land.

• Dual Taxation Results in the Loss of Sales Tax: 

▪ State and local taxation of commercial sales by non-Indians within reservation 

boundaries creates the specter of “dual taxation” which forces Tribes to forfeit taxing 

such activities to retain business on their lands. 

• Impoverishment of Tribal Communities Makes Personal Income Tax Infeasible: 

▪ Federal policy such as forced assimilation which entailed the loss of individual

property rights has led to some reservation economies having upwards of 80% 

unemployment. 

Importantly, Tribes also explained that federal policy involving the attempted destruction of their

political unit of government, such as through Congressional termination of hundreds of western 

Tribes in the 1950s-60s, resulted in Tribes still seeking federal restoration until the 21st century. 

These policies resulted in Tribes having increased governmental service delivery costs to

generate revenue to re-purchase their land bases at market rates in order to meet service delivery 

needs. Relatedly, as a result of the federal policy of dismantling Tribal families through child 

removal that lasted into the 1970s, Tribal governments bear significant social service costs.

Tribal commenters explained that, as a result of the underfunding of the federal trust and treaty 

responsibility, Tribes have unmet capital needs in excess of $44 billion each year.

As a result, commenters expressed that Tribal entities are critical to “Nation-rebuilding” which 

entails reconstructing Tribal economies; creating jobs to raise the socio-economic status of Tribal 

households and improving the public well-being and economic self-sufficiency of Tribal citizens 

and their surrounding communities. Of note, because many Tribes have been removed to remote 

2 Examples of cited government services include a range from housing, health care, elder care, education, child 

welfare services, social services, public safety; emergency management, and numerous other services.
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

and rural locations, Tribal citizens living near Tribal homelands primarily depend on Tribal 

entities for employment opportunities. 

Tribal Entities Support Tribal Governance: Commenters strongly expressed that the revenue 

generated by Tribal entities directly influences their ability to govern, provide for their citizens, 

and is critical to the “existence and perpetuation of Tribes” as these entities decrease poverty by 

providing funding for governmental services. Further, Tribal entities are the ideal structure for 

generation of revenue because Tribal governments have limited assets that they are often reticent 

to risk for an economic development venture. The various structures available for Tribal entities 

enable Tribes broadly to:

• minimize the risk to limited Tribal general funds by allowing the Tribe to segregate

various businesses and their related liabilities and provide a limited waiver of sovereign 

immunity; 

• supports stabilization of Tribal services by separating government operations, which are 

subject to political changes, from revenue generation activities;

• can quickly be created under Tribal law, enabling Tribes to access commercial 

opportunities as they arise;

• conduct operations in a familiar corporate form or in the form of an LLC which 

streamlines the process for entering into contracts and arrangements with business

partners without having to educate those partners on government operations;

• facilitate economic diversification, which is an important factor in the resiliency of Tribal 

economies; and

• respects the sovereignty of Tribes, by enabling them to structure their revenue generation 

according to their unique cultural, social, and economic circumstances instead of the laws 

of another sovereign. 

(a) In what ways are Tribally chartered corporations different than a non-Tribal 

government owned business?

Tribal Entities Generate Revenue for a Public Purpose: Commenters expressed that nongovernment owned businesses are conducted to generate a profit for a private purpose whereas 

Tribal entities generate profit for the public purpose of governmental revenue to fund operations 

and services for the benefit of Tribal citizens. Commenters explained that Tribal entities are 

similar to the activities of states and local governments that own and operate commercial entities

such as lotteries, convention centers, etc., which produce profit for governmental purposes that 

are subject to the decision-making of an elected body. Relatedly, some commenters analogized 

Tribal entities to a nonprofit, Section 501(c)(3), economic development corporation because the 

funds generated underwrites and offsets the costs of government and contribute to the betterment 

of the public, rather than individual private beneficiaries.

Tribal Entities Are Influenced by Governmental Needs: Commenters expressed that Tribal 

entities are also different from private sector businesses because governmental ownership means 

the Tribe retains control of the business operations and is the primary beneficiary and thus has 

oversight of decision-making. As a result, Tribal entities may have a multitude of interests to 

balance such as aligning business operations with overall Tribal government goals and priorities, 

and minimizing negative impacts of such operations, which can impact revenue. For example, 
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

while generating revenue may be a primary goal, developing employment or training 

opportunities for citizens may also be a goal of a Tribal entity. This may result in the location of 

business on or near the reservation, rather than locating business (even if more profitable) away 

from the reservation. In addition, Tribal entities often give greater consideration to the potential

impacts to Tribal resources. For example, a Tribal business may be located away from sensitive 

cultural resources, even if that location may result in higher costs. Similarly, a business may be 

scaled down to accommodate other Tribal government uses at the same location, impacting 

potential revenues. 

Taxing Tribal Entity Revenue Would Devastate Tribal Economies: Commenters expressed 

alarm over the impacts of any potential tax of Tribal entities which would result in less 

governmental revenue to provide services at the expense of the health, safety, and welfare of 

Tribal citizens. The impact of a tax on a private business has an effect on only the owners and 

shareholders. In contrast, for Tribes, the impact of tax on governmental revenue has a direct 

impact on Tribal citizens that are reliant on their governments for services and employment. 

Tribes also expressed equity concerns over the disparate treatment they would incur if their

governmental revenue was subject to tax, but revenue obtained by states and localities remain

tax-exempt. Lastly, Tribes expressed that the loss of governmental revenue would increase their 

reliance on the federal government because they would have no alternative to supplement for the 

loss of funding. Given the current underfunding of the federal trust and treaty responsibility, it is 

unlikely federal support would increase—resulting in further impoverishment of Tribal citizens

who presently have some of the highest poverty rates of any demographic group in the United 

States. 

(b) Do Tribes consider Tribal corporations to be arms of the Tribal government and/or 

political subdivisions or instrumentalities. If so, please explain the factors that 

inform this determination.

Application of the “Integral Part Test” is Inapposite to Tribal Governments: The majority of 

commenters expressed concern with application of an “arm of the Tribe” test from the Integral 

Part Test because adoption of a multi-part test would result in continued confusion and unequal 

treatment across Tribes, and further stifle revenue-generating and economic development 

opportunities. Commenters further expressed that there are sound financial, governance and 

operational reasons to create separation between revenue generation and politics that do not 

neatly fit in the Integral Part Test. Commenters highlighted that research supports the conclusion 

that Tribal government economic development is furthered when the functions of governance 

and business operation are separated. They emphasized that this was the reason why Congress 

established separate provisions for the organization of Tribal governments and Tribal 

corporations under the Indian Reorganization Act. Commenters requested a clear, bright-line rule 

that Tribal entities that are at least majority owned by the Tribe are not subject to federal tax 

regardless of where the profits are earned.

Tribal Entities Perform the Sovereign Function of Revenue Generation: For Tribes that did 

affirmatively respond on this question, they expressed that Tribal entities are the “economic 

arms” of the Tribe and can be classified as political subdivisions or instrumentalities because 

these entities are (1) used to perform the sovereign function of raising governmental revenue, (2) 
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

are authorized to act on behalf of the Tribe, which includes extension of a Tribe’s sovereign

immunity; and (3) are subject to the control of the Tribe by virtue of Tribal majority ownership 

interest. 

Tribes Should Not be Limited to the Sovereign Powers Exercised by States: Relatedly, 

commenters expressed that Tribes do not limit their determination as to whether a Tribally entity

is an arm of the Tribal government and/or political subdivision or instrumentality of the Tribe to 

those activities that are “customarily performed by state and local governments with general 

taxing powers” as noted by Section 7871(e) of the Internal Revenue Code (the “Code”) 

pertaining to the Internal Revenue Service’s (“IRS”) definition of an “essential government 

function”; this definition does not recognize the inability of Tribal governments to generate 

meaningful revenue through taxes in the same manner as state and local governments. Applying 

this narrow lens to Tribal governments, in effect, limits the ability of such governments to 

generate revenue in creative ways not currently implored by state and local governments. For 

commenters, it is the entity’s control by the Tribal government that should determine the entity’s 

tax status and Tribes expressed that Tribe should not lose its tax status merely because it 

performs sovereign acts through a Tribal controlled entity.

2. Existing IRS Regulations and Revenue Rulings provide that Federally chartered 

corporations under the Indian Reorganization Act of 1934 (IRA) and Oklahoma Indian 

Welfare Act (OIWA) are not subject to Federal income tax. 

(a) What challenges do Tribes encounter in chartering such corporations? 

The Process to Charter a Section 17 Corporation is Costly & Lengthy: Commenters 

expressed that chartering a Section 17 corporation is cumbersome and costly because of the 

lengthy approval process which typically takes between 18 to 24 months. Such a timeline is 

incompatible with the timeline of most economic development and business opportunities. To 

incorporate a Section 17 corporation, a Tribe needs to complete a five-step process that entails: 

(1) submitting a petition to the Secretary of the Department of the Interior to issue a corporate 

charter; (2) drafting a corporate charter, which describes the organizational framework of the 

corporate entity; (3) seeking Tribal Council approval of the corporate charter (Tribal leadership 

may have changed because of the passage of time from the petition); (4) sending the Tribal 

resolution and approved charter to the local Bureau of Indian Affairs (BIA) office for subsequent 

approval by the regional BIA office; (5) upon receiving approval from the regional BIA office, 

the Tribe must ratify the corporate charter which may be different from the original petition 

because the BIA insists on changes. It is only once the charter is ratified by resolution that the

corporation may commence. The multi-step incorporation process for a Section 17 corporation 

results in significant delays in starting a business and may lead to missed business opportunities.

Commenters also expressed that there is no model Section 17 corporate charter, so each section 

17 corporation is a case of first impression and may be reviewed by individuals with no 

corporate experience resulting in further delays. 

The Process to Amend a Section 17 or Dissolve is Impractical: In addition to the burdensome 

and lengthy approval process, commenters expressed that Section 17 corporations require the 

Tribe to seek Secretary of Interior approval for any amendments to the articles of incorporation 

or Tribal corporate bylaws. Further, a dissolution of a Section 17 corporation requires an act of
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

Congress. This is an extremely burdensome component that would prevent a Tribe from being 

able to make its own decision regarding when to dissolve a wholly owned Tribal business entity 

and could result in a defunct business entity continuing in existence indefinitely.

The Section 3 Process is Even More Challenging: An Oklahoma Tribe explained that in order 

to incorporate under the Oklahoma Indian Welfare Act (OIWA), all Oklahoma Tribes “must first 

incorporate pursuant to Section 3 of the OIWA, 25 U.S.C. § 503.” (Wichita and Affiliated Tribes 

v. Acting Southern Plains Regional Director, Bureau of Indian Affairs, Docket No. IBIA 13-112, 

2015). Section 3 of the OIWA provides: 

“[a]ny recognized tribe or band of Indians residing in Oklahoma shall have the 

right to organize for its common welfare and to adopt a constitution and bylaws, 

under such rules and regulations as the Secretary of the Interior may prescribe. 

The Secretary of the Interior may issue to any such organized group a charter of 

incorporation, which shall become operative when ratified by a majority vote of 

the adult members of the organization voting: Provided, however, that such 

election shall be void unless the total vote cast be at least 30 per centum of 

those entitled to vote.” (emphasis added).

For large Tribes, incorporation under Sec. 3 of OIWA is extremely unlikely due to the 30% voter 

turn-out requirement which is challenging when many Tribes have significantly lower voter 

turnouts in annual elections. 

Federally Chartered Corporations Restrict Tribal Sovereignty: Commenters expressed that 

Section 17 & Section 3 corporations limit a Tribes exercise of its inherent sovereign authority to 

generate revenue in culturally customized ways and preferencing federally chartered 

corporations frames Tribal entities as second class. Tribes also noted that the BIA has certain 

expectations for the form and structure of a charter when reviewing and deviating from these 

expectations only serves to lengthen the period of review.

(b) What limitations do Tribes see in these structures that result in chartering under 

the alternative categories listed in question 3.

Need for Flexibility in Corporate Structure: Commenters explained that there is limited

flexibility in the structure of a Section 17 Charter which was adopted based on 1930s 

expectations of Tribal governments. Tribes also explained that they have limited resources and as 

a result, often form corporate structures with a holding company with several subsidiaries. Large 

corporate enterprises become unreasonably difficult to structure using Section 17 corporations 

because the formation of one Section 17 corporation often takes a full year to form. After taking 

an entire year to form one company it becomes logistically unreasonable to plan for another year 

to form each subsidiary within the corporate enterprise. Commenters explained that as Tribes 

have gotten more sophisticated in their economic development initiatives, the need for more 

flexibility in corporate structures has become apparent. In contrast to this inflexible structure, a 

Tribally chartered entity allows for different classes of stock or governance structures and can be 

created in a day. 
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

Need for Liability Insulation: Commenters expressed that operating multiple Tribal businesses 

through a single Section 17 Corporation would unfairly expose a Tribe’s business assets to 

creditors of the Tribe’s other businesses that are operated through the same Section 17 

Corporation, as well as present governance challenges as the governing body of the Section 17 

Corporation would be overseeing multiple businesses.

Lack of Equity Investment: Commenters highlighted that a Section 17 corporation can only be 

owned by an Indian tribe, which impairs the ability to raise capital via outside equity partners or 

investors. As such, this precludes its use in any circumstance where the goal is to bring in outside 

equity investors or partners in a project – as they are prohibited from owning shares of the 

Section 17 corporation. Instead, Tribes must often turn to state or tribally chartered limited 

liability companies, where outside equity investors are sought, or a joint venture is desired to be 

established. The amount of time and federal oversight required and lack of flexibility has made 

Section 17 corporations a less desirable choice for tribal economic development matters.

Restricted Uses: Commenters highlighted that the structural limitations of a Section 17 

corporation are a barrier to economic development in many instances. For example, under the 

terms of 25 U.S.C. § 5124, a Section 17 corporation may not lease Tribal land (to a third party) 

for a period longer than 25 years. That limitation frequently prevents Section 17 corporations 

from being able to profitably develop Tribal lands for commercial purposes, as sublessees often 

insist on much longer lease terms to justify substantial investments in improvements.

Additionally, Tribes cannot decide to put certain assets at risk in an investment vis a vis limited

sovereign immunity waivers using a Section 17 corporation. 

3. Tribal governments may charter a business under Federal, State, or Tribal law and 

subject to such laws Tribes may consider a variety of structures, including but not 

limited to wholly owned, majority owned, and jointly owned corporations. 

(a) What advantages and disadvantages exist for the following business structures for 

Tribal governments

(1) Corporations chartered under Tribal law (tribally chartered corporations);

The majority of Tribal commenters expressed that they primarily use Tribal Corporations and/or 

a mixture of Tribal Limited Liability Corporations to generate governmental revenue. 

Regarding Tribally Chartered Corporations (TCCs), commenters shared the following benefits:

• They support Tribal self-determination by allowing Tribes to generate revenue through 

structural flexibilities that consider their cultural, community, and priorities. 

• They do not subject the Tribe to the laws of a foreign jurisdiction, and are flexible with 

regard to establishment, changes, and termination. 

• They allow Tribes greater flexibility to enter into contracts with other entities by

providing limited waivers of sovereign immunity. 

Commenters expressed that the primary disadvantages of TCC are the following: 

• Difficultly attracting partners and/ or assessing economic viability given the uncertainty 
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

of their federal tax status;

• Non-Tribal parties and lenders are often hesitant to conduct business with Tribes because 

of an unfamiliarity with TCCs and concerns over sovereign immunity. 

o Note: Many Tribes expressed that their Tribal Corporation Codes increase 

transparency for outside business parties by demonstrating that these entities are 

subject to rules and regulations and have dispute resolution options. 

(2) Corporations chartered under the law of a State;

Most commenters stated that, as a threshold matter, forming a state-chartered corporation, LLC, 

or other venture under a state's laws is inconsistent with the Tribes sovereign status and is 

therefore not an option Tribes typically pursue, absent extraordinary circumstances. 

In terms of advantages, Tribes identified that state-chartered corporations are:

• a familiar structure to outside investors and parties. 

• compared to federally chartered corporations, they are easier to form and dissolve (but 

still more complex than Tribally chartered corporations); and

• Tribes may need to form these corporations to access certain funding or build 

infrastructure. 

In contrast to the advantages, commenters highlighted the significant disadvantages of these 

corporations as follows: 

• Tribes would be subjected to another jurisdiction’s laws and regulations, 

• depending on the jurisdiction, and any mandatory “sue and be sued clauses”, a state 

incorporation may result in a waiver of Tribal sovereign immunity; and

• according to Revenue Ruling 94-16, a state-chartered corporation exposes a Tribe to 

federal taxation. 

Regarding the tax status of these entities, commenters expressed that the prior guidance is in

error and should be withdrawn. Tribes expressed that the relevant consideration for income tax

purposes is not which government created the corporate entity but instead “what is the tax status

of the owner.” For various business purposes and regulatory considerations, particularly with

regard to an “off-territory” business venture, a Tribal government may decide to utilize a statechartered entity. It should be immaterial for tax purposes that a Tribal government does so if the

Tribal government is the sole owners of the state-chartered entity. This is particularly true for 

limited liability companies which are treated as "pass through" entities for federal tax purposes.

(3) Limited liability companies organized under Tribal law or State law; and

LLCs Organized Under Tribal Law:

Commenters expressed that during the time that the IRS has been reviewing the tax status of 

Tribally chartered corporations, Tribes have become much more sophisticated in how they 

structure their business operations. Given the uncertainty surrounding the tax status of TCCs, 

many Tribes have shifted to organizing various businesses as limited liability companies formed 

under Tribal law because of these advantages:
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

• Provide much the same benefits as TCCs;

• gives a Tribe greater flexibility on how the Tribal business will be managed. 

• LLCs do not have the same procedural requirements as a corporation such as annual 

board meetings, recording minutes of the board meetings, having a quorum present at 

board meetings; and

• while not confirmed by the IRS, Tribes believe that LLCs well-established disregarded 

tax treatment under 26 CFR § 301.7701-2, provides the legal basis for application of the

tax immune nature of the Tribe or a Section 17 corporation as the LLC’s parent 

company/owner.

Notwithstanding the last point, commenters identified that the main disadvantage of Tribally 

chartered LLCs is that their tax status has not been confirmed by the IRS which impacts their 

engagements with non-Tribal entities. Commenters strongly urged that any tax guidance confirm 

that a Tribal LLC has the tax status of its owning Tribal government. 

Lastly, as an example of the value of LLCs, a commenter explained that when a new business 

opportunity arises, they typically establish a new LLC to undertake the venture because the 

Section 17 process makes it impossible to utilize such a corporation for a new business initiative

without long-term planning. In contrast, using an LLC formed under a Tribal LLC ordinance 

(which can be done same day) is a much easier process. The same holds true when changes are 

needed to an LLC’s Articles of Organization, or when a certificate of good standing might be 

needed. The Tribe also noted that when a business involves federal contracting, it can be easier 

to set up the necessary registrations to obtain a UEI3and SAM.gov using a Tribal LLC, as these 

systems were not built to accommodate the unique structure of a Section 17 corporation.5

LLCs Organized Under State Law: Tribes expressed these entities have the same benefits of 

state-chartered corporations and are largely not utilized unless required under the circumstances 

by the 3rd party investor. Relatedly, these LLCs have the same disadvantages as state-chartered 

corporations and Tribes reiterated concerns that Revenue Ruling 94-16 may expose a Tribal LLC 

chartered under state law to federal income tax.

(4) Partnerships organized or operating under Tribal law or State law (for 

example, joint venture partnerships).

Commenters expressed that partnerships and other non-corporate forms organized under Tribal 

law should be available to Tribes but noted that they are not commonly used because Tribes 

prefer business entities that provide limited liability to reduce business assets at risk. When they 

are used, Tribes typically do so for specific reasons such as to access funding for a tax credit or 

for the expertise of the partner. Overall, commenters requested that Tribes in partnerships not be 

subject to income tax because the profit they derive is utilized for a governmental purpose and 

they do not cease to act as a government when engaged in a partnership. 

(b) What factors shape a Tribe’s decision to charter a corporation as a wholly owned, 

majority owned, or jointly owned corporation? 

3

In 2022, the DUNS numbers transitioned to the Unique Entity ID (UEI).
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

Commenters expressed that there are a multitude of factors that inform the structure of their 

revenue generators and many of the considerations are detailed in the “Tribal Business 

Structuring Handbook4.” In addition, Tribes noted that they choose the business structure that 

best fits the nature of the business or investment being considered and take into consideration the 

following when making that determination: 

• the extent to which the tribe controls the assets, revenues, and leadership of the company

as Tribes have a lot at stake because a bad business decision is not just a financial loss, 

but impacts their whole community;

• the flexibility in formation, amendment, and dissolution to be able to respond to business 

opportunities; 

• the extent to which the entity enables the Tribe to limit liability to protect its ability to 

deliver governmental services; 

• whether the company shares in the Tribe’s sovereign immunity and whether the legal 

structure subjects the Tribe to taxation or the laws of another jurisdiction which diminish 

Tribal sovereignty; 

• acceptance by outside business partners; 

o (ex. Stock corporations are the preferred choice for many non-Tribal investors and 

the flexibility of various classes of stock. LLCs can imitate all of these stock 

features, but these features of LLC membership interests are less well accepted by 

investors.) 

• the need to access specific federal funding available only to certain types of legal entities 

(ex. Partnerships for tax credits);

• the need to overcome specific barriers, such as a lack of access to capital or expertise 

may lead to a Tribe offering a minority interest or entering a partnership in order to 

acquire equity investments. 

Overall, commenters emphasized that guidance should not impair or impede a Tribe's ability to 

structure a business entity in the way that best serves its purposes because Tribes are the best

situated to prioritize the economic goals of their communities. The decision to charter a TCC as

a wholly owned, majority owned, or jointly owned corporation rests solely with the Tribal

government and is an exercise of sovereignty and self-determination.

(c) How important to the success of a Tribal business enterprise is stock investment 

from investors other than the Tribal government (as opposed to, for example, debt 

financing)?

Some Tribes expressed that they do not pursue these types of investments because they prefer 

total control of their entities. However, a majority of commenters expressed that it is critical that 

Tribal corporations have access to both debt and equity financing to generate governmental

revenues. As noted above, commenters expressed that a non-Tribal investor may be needed 

because Tribes experience significant access to capital barriers and an equity investor may be 

providing capital not available through debt financing. Tribes also noted that investor capital is 

important because the bond market is not a viable alternative. As of May 1, 2023, the volume cap 

4 Atkinson, K., Nilles, K., (2009). Tribal Business Structure Handbook.
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

for Tribal Economic Development Bonds (TEDBs) has been extinguished and the restrictions on 

the issuance of Tribal bonds remain. Treasury’s guidance will be important in giving Tribes the 

ability, through business structuring, to attract private financing. See also, answers to 4 and 5 

below in which Tribes also expressed that granting a minority interest may be necessary where 

an individual has expertise not held by the Tribe. Giving the third-party a percentage interest in 

the business (as opposed to simply a management agreement) can be intended to incentivize the 

partner.

4. Some Tribes have partnerships with outside investors that consist of varying degrees of 

ownership by the Tribe and its non-governmental partner. We seek to better 

understand the reason for these structures and the needs they address. To that end, 

when launching a business enterprise with investors other than the Tribal government:

(a) What are the most important considerations for Tribes when choosing what type of 

legal entity to operate the business enterprise?

Tribes listed the same factors explained question 3(b) regarding the factors that inform the legal 

entity that Tribes select for generation of governmental revenue. 

(b) What are some typical barriers that Tribes face when competing with non-Tribal 

competitors in the marketplace?

Commenters expressed that the most significant barrier they encounter is uncertainty over the tax 

status of their business entities, which is not a situation that state and localities experience in the 

marketplace or in their generation of governmental revenue. Additionally, Tribes noted that:

• Tribes experience significant barriers in accessing capital, this is worsened by lenders 

lack of familiarity with Tribally chartered corporations and their governing documents;

• due to the limitations on how Tribes hold and control property and the prevalence of trust 

property in Indian Country, Tribes may lack the ability to use real property as 

collateral—or may have significant barriers when using real property as collateral. 

o The lack of collateral may deter outside investors from lending to Tribes because 

lenders will fear that they will not be able to recoup any of their investment if a 

Tribe defaults on its loan. 

• Tribes’ revenue is often used to fund vital government programs, limiting the amount of 

re-investment possible to increase business reach or capacity; 

• lenders or partners may be hesitant to deal with Tribes because they fear Tribal sovereign 

immunity will preclude them from suing the Tribe.

o Lenders also lack familiarity with how Tribes and Tribal courts operate, which 

can discourage lending to a Tribe. Tribes have used contract law to agree to 

limited waivers of sovereign immunity with non-tribal lenders to ease concerns.

Other Tribes use minority ownership to attract investors. 

• depending on the industry and location of the business, a state license may be needed (ex. 

for the sale of liquor). Many statutory frameworks in state law do not contemplate the 

inclusion of Tribally owned entities, so in many cases the Tribe is simply shut out from 

obtaining a commonly held license or authority to conduct certain types of businesses. 
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

Regarding the lack of access to capital, commenters identified this as the greatest barrier facing 

Tribes. The largest asset the Tribe may hold is often their land, but if the land is in trust, then the 

land itself and the assets on the land cannot be used as collateral. This complication often limits a 

Tribal company’s ability to access the capital needed to compete. Banking and bonding entities 

are often reluctant to work with Tribal entities that do not have a significant track record in the 

industry of meeting financial obligations. So, often the Tribe must fund most of the initial 

investment working without outside help. The slow pace of clarification of the Tribal 

corporations’ tax status has led to additional uncertainty which hurts a Tribal entity’s ability to 

compete.

As an example of lender discrimination, one commenter shared that after obtaining their 8(a) 

status for a Tribal entity and increasing federal contracting, they reached out to a well-known

bank in Indian country to inquire about obtaining a line of credit. The bank would only agree to 

provide the line if the Tribe deposited funds in an amount equal to the amount of the line being 

requested (which essentially defeats the purpose of the line of credit). In their experience, given 

the well-known issues related to financing projects in Indian country, it can be incredibly 

difficult to obtain financing outside of either government supported programs or for casino 

gaming projects specifically.

(c) In addition to typical barriers described above, what are a few noteworthy barriers 

that you have faced when competing with non-tribal competitors in the 

marketplace?

Commenters expressed that people and companies outside of Indian country generally do not 

understand the unique nature of Tribal governments and Tribal entities. This can lead to 

confusion about something as simple as a sales tax re-sale certificate (which a Section 17 or 

Tribal entity generally will not have as a non-state-chartered entity), which can make something 

as simple as procuring equipment for re-sale difficult. The lack of understanding adds time and 

cost to what would otherwise be straightforward responses in a non-Tribal context. In turn, this 

can jeopardize business opportunities, for which the ability to quickly respond and facilitate 

smooth transactions is paramount.

Additionally, one commenter shared that for businesses that engage in land transactions, a major

consideration is whether the Tribe wants its involvement with the company to be publicly 

known. This is because non-Indian land sellers may impose a “Tribal premium” on the price they 

are willing to accept for a parcel of land if they know that a Tribe is the prospective purchaser. 

Because Tribes have been deprived of the vast majority of their traditional land base, purchasing 

back their own lands near or adjacent to their reservations is a common priority. Landowners in 

these areas will often take advantage of this fact to increase the price for a prospective Tribal 

purchaser if it is a Tribal corporation versus a state-chartered entity. 

(d) Are there different considerations or barriers that Tribes face in forming business 

structures for investments involving tax credits, for example, the New Markets Tax 

Credit?
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

Commenters re-iterated that a frequent impediment to attracting private investors for tax credits 

is misapprehension and misunderstanding of a Tribal sovereign immunity. Providing limited 

waivers of sovereign immunity is often insufficient incentive to assuage an investor's concerns. 

Non-Tribal competitors do not face this barrier to entry. Therefore, joint ownership in a business 

form that provides commercially understood protections for liability and capital risks, and known 

costs of business, is important for Tribes to be able to offer.

One commenter explained that it is developing solar-generated microgrid with energy storage on 

the reservation with funding from the Bi-Partisan Infrastructure Law and Inflation Reduction 

Act. To offset microgrid project costs and conserve governmental resources, the Tribe is trying 

to attract an investor to share the execution risk of development and operation. However, key 

prospective investors have dropped out of the pool because they do not want to expend the 

resources required to conduct the due diligence necessary when dealing with an Indian tribe for a 

project located in Indian country. Nontribal competitors do not face these types of barriers to 

entry. Therefore, joint ownership in a business form that provides commercially understood 

protections for liability and capital risks, and known costs of business, is important for Tribes to 

be able to offer.

With regard to tax credits outside of the Inflation Reduction Act, commenters expressed that 

because Tribes are not subject to federal income taxes tax credits need to flow to non-federal 

partners or be allocated to such non-Tribal partners as a partnership allocation. With regard to the 

New Market Tax Credit (NMTC) program, Tribes expressed that the underlying law takes away 

much of the decision making of the Tribe and requires that a non-Tribal entity have ownership of 

a business looking to locate in Indian Country. Tribes also expressed that given the complexity 

of the NMTC program structure, and the unique considerations requested by investors, it is often 

easier to utilize a state chartered limited partnership which gives the investors the comfort and 

security of a known structure sufficient to facilitate their investment in the project. With regard 

to the program itself, Tribes further explained that the rules, costs, and application processes 

associated with NMTCs often impede Tribal participation in the program altogether. 

Lastly, commenters expressed that if the intent of this question is to imply that if Tribal entities

were taxable then they could better utilize tax credits, this implication is wrong. Taking away the 

general tax-exempt status of an entity so that it can better utilize tax credits is not a fair economic 

trade and should not be used as a rationale for taxing Tribal entities. “It is like curing the 

common cold by cutting off someone’s head. If the concern is the access to federal tax credits, 

then make them easier to sell by the Tribe to outside investors.”

5. With regard to a non-wholly owned Tribally chartered corporation or company that 

limits the legal liability of its owners:

(a) Is there a typical threshold percentage of stock or equity investment from investors 

other than the Tribal government that a Tribe would be comfortable with to 

maintain Tribal government control of an enterprise it charters?
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

The majority of commenters requested that Treasury adopt a 51%-49% bright-line rule that 

provides that Tribes with a 51% majority stake in a Tribal entity are exempt from federal 

taxation because that threshold demonstrates that the Tribe has control of the entity. In citing to 

this standard, Tribes explained that 51% threshold is a general practice and reflected in several 

government contracting regulations concerning Tribal 8(a)s, Indian Economic Enterprises 

(“IEE”), and Indian Small Business Economic Enterprises (“ISBEE”). 

Commenters also explained that Tribes could maintain control with even less than a majority of 

ownership such as in a general partnership arrangement. They requested that any new rule should 

not prevent tribes from maintaining governmental control with less than a majority ownership. 

(b) Is there a typical threshold percentage of board seats controlled by investors other 

than the Tribal government that a Tribe would be comfortable with to maintain 

Tribal government control of an enterprise it charters? 

Commenters expressed that there is no typical threshold. At the minimum, however, they 

requested that this determination should not be made more complicated for a Tribe than it is for 

any business owner. Tribes expressed that a 51%-49% bright-line rule would demonstrate a 

Tribe’s majority control over the Tribal corporation as a majority shareholder. Because a Tribe 

would be the majority shareholder, a Tribe would be able to elect a majority of members to sit on 

the board of directors and make other significant decisions as a majority owner. Additionally, a 

51%-49% bright-line rule may enhance a Tribe’s access to outside investments while still 

maintaining a majority ownership stake in the tribally chartered corporation. Commenters 

strongly urged Treasury to create a bright-line rule that provides a presumption that a 51% 

ownership of a tribally chartered corporation is Tribally controlled and carries the tax status of 

the Tribe.

Outside of the presumption, commenters highlighted that there may be instances in which a 

Tribe chooses to hold fewer seats on the board of directors while still maintaining Tribal 

government control of the enterprise by other control factors, particularly for partnership 

structures. Control factors could include approving its governing documents (e.g., articles of 

incorporation and bylaws) and requiring the entity to provide the Tribal government with 

periodic reports that hold the entity accountable for meeting certain benchmarks or other goals. 

Additional, non-Tribal board seats may be required, for example, to obtain outside industry 

expertise (e.g., members of other federally recognized Tribes or non-Tribal members) or a Tribe 

is unable to fill all of its seats on the board of directors for other reasons (e.g., size of the Tribe, 

lack of interest by Tribal members, to establish appropriate checks and balances or separation of 

power, and more). Accordingly, the composition of the board of directors alone should not 

determine whether a Tribal government still controls an enterprise it charters and Tribes with less 

than 51% ownership should be permitted to demonstrate control factors. 

6. How important to Tribal governments are the following requirements when creating a 

Tribally chartered corporation or other entity that limits the legal liability for its 

owners under the law of the Tribal Council (or other legislative body)?
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

Commenters broadly expressed that control factors of a Tribally chartered entity are subject to 

the determination of the Tribal government. They emphasized that Tribal leadership have 

maximum authority to determine entity formation, control, governance, and management. 

Additionally, they highlighted concerns that the control factors identified in these questions 

appear similar to the Integral Part Test which they stated should not be the lens for evaluation of 

Tribal control over their sources of revenue generation. Whether and to what extent the Tribal 

Council should control the entity is different for each Tribe and a uniform rule requiring some 

level of legislative control will unnecessarily limit Tribes’ abilities to respond to economic 

opportunities. For example, a disadvantage of forming a Tribal business entity as an 

unincorporated instrumentality of a Tribal government is that the sovereign status of the Tribe 

may impact a Tribe’s ability to obtain credit and financing for its business transactions if 

agreements are not enforceable through judicial action. If a Tribe does waive its immunity from 

suit through a Tribal instrumentality, it may subject its assets to potential liability for the 

obligations of the Tribal instrumentality. Since there is no separate legal entity conducting 

business, the assets and obligations of the Tribe are intermingled with the business. 

As a result of these concerns, Tribes reiterated the need to have a bright-line rule that adopts a 

presumption that a Tribe is exercising majority control over a Tribal entity when it has 51% 

ownership of such an entity. 

(a) The Tribal Council (or other legislative body) must approve the entity’s:

(1) Articles of incorporation or organization or charter (including 

amendments);

Commenters expressed that approval of formation documents such as the articles of 

incorporation or charter of a Tribal entity, and any amendments, are usually subject to approval 

by a Tribe’s governing body or its political subdivision and/or instrumentality that has its 

delegated authority for this specific purpose. Commenters also explained that Tribes may 

delegate this authority to an entity they have already chartered under Tribal law (ex. a holding 

company) in order to create subsidiaries. 

(2) Bylaws (including amendments); and

Amongst commenters, there was less uniformity regarding this requirement. Some Tribes 

expressed that bylaws and amendments to the bylaws are subject to the governing body and/or its 

political subdivision/instrumentalities approval. In contrast, other commenters expressed that 

more flexibility may be provided for an entity to amend its own bylaws without governing body

approval, where the limitations on the board or management teams’ authority is clearly spelled 

out in the articles. Such a limitation in the articles of incorporation would restrict the ability to 

make material changes in the operations of the company that are averse to the Tribe.

(3) Decisions regarding major actions of the entity (for example, acquiring 

or investing in a business, selling a business, paying dividends, or making 

other distributions to owners, liquidating or dissolving, etc.).
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

Commenters expressed that Tribal corporate codes, articles of incorporation, and charters 

address the actions which require governing body, political subdivision, or instrumentality 

approval and explained that there is no uniformity across Tribes in these standards because of 

their diversity of needs and structures. For example, the board of directors of the Tribally 

chartered corporation – like the board of directors in a state-chartered corporation – may be

delegated authority for managing and serving as fiduciaries of the corporation and may be best 

positioned to make decisions regarding major actions of the entity. Overall, Tribes explained that 

the key evaluation should be whether the Tribe has authorized the entity or its board of directors 

to engage in certain major actions and has placed limitations on that decision-making.

(4) Decisions regarding the day-to-day operations of the entity’s business.

Commenters opposed requiring a governing body to be involved in the day-to-day operations of 

a Tribal entity because the purpose of creating a business entity and hiring staff with expertise is 

to authorize these individuals to make operational decisions, subject to the oversight of a board. 

The authority of an entity’s staff is not unlimited, as the scope of that authority is subject to rules 

set forth by the governing body or an entity to which it has delegated that authority. Tribes also 

noted that because a governing body can change due to electoral politics, Tribes seek stability in 

their revenue generation which supplies the resources for continuance of governmental services. 

This is accomplished through delegation of day-to-day decision making to individuals with 

expertise and a fiduciary duty to the Tribal entity subject to Tribal laws. Lastly, commenters 

highlighted day-to-day operations for state-chartered corporations and other entities do not 

require approval by the state or other government entity and are left largely as a design decision 

in the corporate articles, bylaws, or similar governing documents (ex. operating agreements) and 

requested that Tribes not be held to a more stringent and impractical standard. 

(b) A majority of the entity’s board of directors (or other government body) must be 

Tribal members.

Commenters strongly opposed this requirement and described it as:

• Paternalistic: this standard erodes Tribal sovereign decision-making and assumes Tribes 

do not possess the judgement to determine what is in their best interest; 

• Problematic: limits a Tribe’s ability to attract expertise and diverse voices. It would also 

prevent Tribes from appointing individuals from other Tribes. Broadly, this standard

misunderstands that the key decision for control is not the citizenship of a representative, 

but whether the appointment for the board of directors are subject to the Tribe’s control 

through direct appointment or delegated authority. 

• Infeasible: this standard would also be infeasible for many small Tribes, which constitute 

over 50% of Indian Country, as these Tribes often have less than 500 people, inclusive of 

elders and children. 
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

(c) The Tribal Council (or other legislative body) has the power to:

Commenters broadly expressed that these decisions should be left to the Tribe to determine as 

their unique governing structures may make it challenging to have a uniform standard. For 

example, one Tribe explained that their General Membership has the ability to perform the 

activities set forth in subsection (c). Other Tribes highlighted that Tribes ordinarily seek to 

insulate the entities that generate revenue from political interference which can be destabilizing. 

One Tribe explained that its governing body is subject to annual elections. If the Tribe’s revenue 

generation was subject to significant interference by the governing body, it would cause 

instability and limit the transfer of institutional knowledge necessary to transact and close 

revenue opportunities.

In summary, the majority of commenters strongly expressed that Tribes would oppose any rule 

that included a multi-factor test for Tribal “ownership” or “control” because it is critical that 

Tribes maintain the greatest flexibility to structure their business operations as they see fit, 

without being forced into a series of boxes that need to be checked in order to maintain the tax 

immune status of the entity.

For those Tribes that did respond directly to questions, below are their answers. 

(1) Select and remove board directors (throughout the life of the 

corporation);

Commenters agreed that the ability to appoint a majority of the board of directors, or delegate 

that appointment to a Tribal political subdivision, instrumentality, or holding company was 

critical to demonstration of control. Regarding removal, commenters expressed that Tribes 

ordinarily seek to limit political interference in their sources of revenue generation so ordinarily 

removal of the board of directors is subject to Tribal control through the procedures laid out in 

the authorizing documents.

(2) Review the financial and operating records of the corporation;

Commenters generally agreed that the ability to review financial and operating records by the 

governing body, or its entities that it delegated this authority to, is important.

(3) Approve, or disapprove, all capital and operating budgets of the 

corporation; and

Commenters generally agreed that the ability to conduct this review is important for the 

governing body, or its entities that it delegated this authority to. 

(4) Receive periodic (for example, quarterly) financial reports from the 

corporation.

Commenters generally agreed that the ability to conduct this review is important for the 

governing body, or its entities that it delegated this authority to. 
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

7. How feasible would it be to require that more than half of a Tribally chartered 

corporation’s board consist of members of the Tribe?

As expressed above, commenters reiterated that Treasury should recognize that in hiring talent to 

strategically grow and diversify our economies, Tribes need access to the best talent available, 

including members of any federally recognized Tribe and non-Tribal members. Tribes possess 

other ways to ensure businesses remain owned and controlled by the Tribe without being forced 

to adhere to strict guidelines imposed by the federal government in a one-size-fits-all approach.

8. How important to Tribal governments is the use of corporate or partnership 

subsidiaries in carrying out a business venture?

Commenters expressed that subsidiaries are essential to the diversification of Tribal economies

because a subsidiary allows a Tribe to minimize risk to other assets of the Tribe. A Tribe’s 

liability only extends to the assets of the subsidiary. Because a Tribal subsidiary allows a Tribe 

to minimize the risk to other assets of the Tribe, a Tribe can take calculated risks when pursuing 

economic development projects. Further, commenters shared that some special federal programs 

(e.g., SBA 8(a) status), mandate separate subsidiaries. As an example of the importance of 

subsidiaries, one commenter shared that their: 

gaming operations are contained within a dedicated LLC which is itself a 

subsidiary to our Section 17 holding corporation. The gaming operation currently 

carries 100% of the debt related to a prior expansion, for which neither the 

Section 17 or the Tribe itself are ultimately liable (thereby protecting the Tribal 

resources which run important government programs). Our 8(a) business is also 

run via a dedicated LLC which is a subsidiary of the Section 17 holding company. 

This segregates those federal contracting operations from the gaming operations, 

for example.

Overall, commenters emphasized that subsidiaries are important to Tribal decision making as 

they enable Tribes to limit liability, control the assets at risk, and compartmentalize the particular 

business activity to protect governmental revenue streams. 

9. To the extent the Federal tax status of a Tribally chartered entity derives from the tax 

status of the Tribal government that owns interests in the entity, what mechanism 

would you recommend for the IRS to know if the ownership of a Tribally chartered 

entity or its other characteristics is significantly changed (for example, the Tribal 

government sells or transfers its interests in the entity to an individual or a new entity 

that is not a Tribal government)?

Commenters expressed that Tribes should not have to file annual documentation to prove the taxexempt nature of their entities as this is burdensome. Further, given that Tribes are engaged in 

business operations for the sake of creating revenues to fund Tribal government services, Tribes

highlighted that it is very unlikely that a Tribe would simply sell its interest in a business to a 

non-tribal entity for an economic benefit, rather than wind up the operations. However, in those 

cases where a Tribe sells its interest to another entity, Tribes expressed that there is an existing 
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Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

process for this. IRC § 1060 requires disclosure to the IRS of sales and purchases of business 

assets. Form 8594 is used for this purpose. Tribes expressed that if a Tribal entity’s ownership 

changes to where all or a majority of Tribal ownership is transferred to a non-Tribal entity, then 

the non-Tribal entity should be responsible for informing the IRS of the change.

Lastly, a transfer of the economic interest in a Tribal entity should be treated differently than the 

sale of the full interest. For example, many Tribes lack the ability to put up sufficient collateral 

to secure funding from lenders. As such, the economic interests in a Tribal business enterprise 

are used as collateral to secure funding from lenders.

10. Based on your experience, how do the rules of your Tribe’s business or corporate code 

that govern Tribally chartered corporations, companies, or other entities differ (if at 

all) from corporate codes of neighboring State governments?

Commenters opposed any requirements that Tribal corporate codes mirror or be similar to 

federal codes or the state codes and explained that Tribes have the inherent sovereign authority 

to craft their own codes that meet their community’s needs. Some Tribes explained that their 

corporate codes mirror state codes, while others expressed that their codes are significantly 

different. For example, one Tribe explained that their corporate code also functions as their

Tribal entity corporate charter and annual plans must be reviewed by Tribal membership in 

addition to Tribal leadership. Even where a Tribal code mirrors a state, the compliance often 

looks different as Tribes do not have large offices to manage corporate filings, similar to what 

you would see in a Secretary of State’s office. Instead, responsibility for review and approval for 

a new entity may be shared amongst multiple departments in a Tribe.

11. What other information, comments, or suggestions are important for the Department of 

the Treasury and the IRS to know in developing guidance on the Federal tax status of 

Tribally chartered corporations or companies organized under Tribal laws that protect 

owners from legal liability?

See answers under the foundational concepts section above. In addition to that feedback, the 

majority of Tribes requested that the Form SS-4 Application for Employer Identification Number 

be updated because Tribes currently run into delays when submitting for EINs. Specifically,

Tribes expressed that: 

• SS-4, Box 9a does not cleanly accommodate Section 17 Corporations, instructions should 

be provided as to where these entities fit. 

• SS-4, Box 9a should be modified, so that a Tribe applying for an EIN not only selects the 

box "Indian tribal governments/enterprises" but also has a line to identify the affiliated 

Tribe. This modification will help ensure Tribal businesses are properly classified within 

the IRS and could be used for a searchable database.

• Section 9b also requires a state or foreign country of organization for corporations, which 

does not apply to Section 17 or Tribally chartered corporations.

• The IRS's internal EIN processing manuals should be updated to acknowledge Tribal 

businesses. The addition of "inc.," "comp.," "LLC," or "LLP" in box 1 - Legal name of 

the entity - should not result in an error, rejection, or request for further information.
24

Tribal Consultation Summary: Tax Status of Tribally Chartered Corporations

Lastly, some commenters also requested that Tribes be permitted to make an S-Corporation 

election which they explained would reduce the disparity between Tribal entities and statechartered entities.