TGB Passes General Welfare Exclusion Act to Protect Citizens from Taxation on Tribal Benefits

By Joe Morey

News Editor

At their meeting on Tuesday, Oct. 10, the Lac Courte Oreilles Tribal Governing Board (TGB) approved the General Welfare Exclusion Code, which recognizes that tribal members are exempt from being taxed when receiving essential benefit payments from the TGB.

LCO Attorney General James Schlender Jr said the TGB passed the Code to protect sovereignty of Tribe and its citizens.

“This is in response to the CARES Act and ARPA payments that were being taxed or impacted,” Schlender stated. “These agencies were reporting it as income, but they are exempt.”

Congress passed the GWE Act in 2014 because the IRS kept taxing citizens of Tribal governments who were not supposed to be taxed when they received direct benefits from their Tribe. Congress, by passing the GWE Act, allowed citizens to be exempt for essential payments to not affect Social Security payments and other such benefits.

Schlender explained that states were still taxing these benefits.

“The code passed by TGB preempts and blocks the State of Wisconsin or any other agencies from taxing these benefits,” Schlender noted. “TGB did this as part of a recommendation from the LCO Legal Department to implement this GWE Code that’s intended for members to still report special payment income from the TGB, but they are exempt from being taxed on it.”

In a letter from the National Congress of American Indians, it explains that tribal programs, which benefit the general welfare of the tribe, should be excluded from taxation regardless of whether the recipient demonstrates ‘financial need’, i.e., means testing should not be a requirement for programs to qualify as general welfare programs.

The tribe, as a sovereign government, is best situated to determine: (a) the needs of the community; and (b) how best to address those needs.

-Often times, tribal programs seek to supplement the federal trust responsibility, such as in the areas of education, cultural preservation, healthcare, housing, and elder programs.

-Deference must be given to tribal governments to develop their own unique programs – there are 566 federally-recognized tribes with diverse histories, needs, and policy approaches.

-Maintaining and promoting culture, including language preservation, intercultural exchanges between tribes, and heritage education is a profound community need.

Exception for rule against compensation for services: Tribes should be allowed to offer nominal stipends or benefits for bona fide programs with community service ties, without the recipient of the stipend or benefit incurring tax liability.