SANTA YNEZ BAND OF CHUMASH INDIANS

BUSINESS COMMITTEE

P.O. BOX 517 • SANTA YNEZ • CA • 93460

Tel: 805.688.7997 • Fax: 805.686.9578

www.santaynezchumash.org

KENNETH KAHN, CHAIRMAN

RAUL ARMENTA, VICE-CHAIRMAN

MAXINE LITTLEJOHN, SECRETARY-TREASURER

MIKE LOPEZ, COMMITTEE MEMBER

GARY PACE, COMMITTEE MEMBER

September 10, 2019

Treasury Tribal Advisory Committee

Department ofthe Treasury

1500 Pennsylvania Avenue NW, Room 1426G

Washington, DC 20220

Tribal.Consult@treasury.gov

RE: Public Comment in advance of Sept 18, 2019 TTAC meeting

To the Honorable Treasury Tribal Technical Advisory Committee:

As the Committee addresses the General Welfare Exclusion (GWE), the Santa Ynez Band of

Chumash Indians (“Chumash”) respectfully requests the following issues be included:

1. Safe Harbor for the Use ofCasino Net Revenues for GWE

Revenue Procedure 2014-35 gives some limited guidance in distinguishing between taxable per

capita payments and non-taxable payments under the GWE:

Sec. 2.03, p. 7:

Payments under Indian tribal governmental programs meeting these requirements qualify for

the general welfare exclusion whether the revenues that the Indian tribal government uses

to fund the programs derive from levies, taxes, service fees, revenues from tribally-owned

businesses, or other sources. For example, general welfare programs may be funded from

casino revenues. However, per capita payments to tribal members of tribal gaming revenues

that are subject to the Indian Gaming Regulatory Act are gross income under § 61, are subject

to the information reporting and withholding requirements of §§ 6041 and 3402(r), and are

not excludable from gross income under the general welfare exclusion or this revenue

procedure. See 25 U.S.C. §§ 2701-2721 and 25 C.F.R. Part 290.

However, recently the 11th Circuit in United States v. Jim (11 Cir. 2018), the Court ofAppeals

upheld the decision ofthe trial court that payments funded by net gaming revenues were taxable

as per capita payments under the Indian Gaming Regulatory Act (IGRA), 25 U.S.C. Sec.

2710(b)(3) and not exempt under the Code Section 139E.

The Jim case involved a very unique fact pattern and distribution years that predated the GWE.

Nor do we think the case could reasonably be read to prohibit the use of gaming revenue for
GWE so long as the distributions are not in substance per capita payments. However, as Indian

Gaming is the most successful form of economic development in all ofIndian Country, any

confusion about the use of net gaming revenues to fund General Welfare programs could

undermine the entire GWE.

Thus, we think this may be a topic that TTAC should consider addressing. We would suggest

considering guidance that clarifies (1) that program benefits which meet the criteria for treatment

as “Indian general welfare benefits” under Code Section 139E do not lose that status merely

because they are funded with gaming revenues; (2) that IGRA requires taxation of only those

gaming revenues that are distributed “per capita”; and (3) that the determination ofwhether

payments are classified as “per capita” will depend on each tribe’s individual revenue allocation

plan and program descriptions.

In this regard, there should be recognition that general welfare benefits are not “per capita” just

because they are equal. In fact, such limits are often put in place due to budget constraints and/or

cultural values for the equitable apportionment oftribal resources. Payments, even if equal for

all members with a qualifying need, should be distinguished from an IGRA per capita, ifthey are

designated for specific GWE purposes. A $200 per member per year allowance for cultural

language training paid for from gaming revenues, for example, should not lose its status for

GWE merely because each member has equal access to the same level of qualifying assistance.

Other tribes may budget a uniform amount for use by tribal members to address different preapproved GWE needs. If expended for qualifying program purposes, such benefits should not

lose their status because the tribe addresses budget limitations on a uniform basis.

As a safe harbor pending final guidance, it may be helpful to confirm that tribes may rely on the

description of per capita versus general welfare assistance in their IGRA approved revenue

allocation plans, and/or to confirm that payments designated for specific GWE purposes are

distinguished from “per capita” payments subject to taxation under IGRA.

2. Expanded consideration for medical payments as GWE eligible

Given the challenges to the Affordable Care Act in which Section 139D was included, we would

like to see the category ofmedical benefits separately addressed as Revenue Procedure 2014-35

specifically did not address any Section 139D medical benefits:

2.04 Benefits that are not addressed by this revenue procedure

In addition, this revenue procedure does not address certain benefits that members of an

Indian tribe may exclude from income under a specific provision of the Code or other federal

statute. For example, § 139D provides that gross income does not include the value of medical

care (as used in § 213) an Indian tribe (as defined in § 45A(c)(6)) provides to a member of the

tribe or the member's spouse or dependents. Thus, a payment that an Indian tribe makes to

an Indian medicine man to use traditional practices for the purpose of treating a tribal

member's disease may be excludable from the tribal member's gross income under § 139D.

See Tso v. Commissioner, T.C. Memo 1980-399. [p. 8]
We note that Code Section 139D is limited certain benefits that qualify as medical care for

purposes of employee health programs (as defined in Code Section 213) and uses a definition of

member, spouse and dependent that is arguably narrower than that used in Revenue Procedure

2014-35. We believe that tribes should be free under Code Section 139E to develop health and

wellness programs distinct from those benefits otherwise covered by Code Section 139D.

Thank you for the opportunity to provide public comment on these important GWE and federal

income tax issues. If you have any additional questions, please contact me or Sam Cohen,

Government Affairs and Legal Officer (scohen@sybmi.org).

Sincerely,

Kenneth Kahn,

Tribal Chairman