First Alliance, General Welfare Exclusion (GWE)

The US Internal Revenue Service’s General Welfare Exclusion (GWE) challenge to Indian

Governments and tribal members

What is the Problem with IRS?IRS imposing General Welfare Exclusion rule on Indians.

The General Welfare Exclusion Tax Rule seeks to exclude some Indian transactions, but leaves the door open for other transactions.

All Taxation of Indians by the IRS is EXCLUDED under the US Constitution.

Taxation of Indian CountryGeneral Welfare Exclusion should not apply to Indian Country

IRS starts with a premise that unless any income is expressly exempted in the IRS Code the income is taxable

This is opposite of the basis for Indian Law and the US Constitution

where unless a Tribal Nation agrees or it is forced on them by explicit federal legislation the income would not be taxable

IRS Violates US Constitution - LawThe US Constitution expressly prohibits taxation of Indian people

The US Constitution is clear: Indians may not be taxed

1940 US Dept. Interior Solicitor’s Opinion

Solicitor’s Opinion proclaimed there are no more “tribal Indians” that qualify as “Excluding Indians Not Taxed.”….BUT…

Over 550 Indian Tribes with enrolled tribal members are proof that this is still a legal fiction.

We still constitutionally exist as tribal Indians!

10/12/2012 5

US Constitution & Indians Lummi Nation, 2011

United States of America

with Art. VI, Cl.2Art. IV, Sec. 3, Cl.1 & Cl.2

Art. I, Sec. 2, Cl.3Art. I, Sec. 8, Cl.3

Art. II, Sec.2, Cl.2Art. III, Sec. 2, Cl.1

Art. V, 14th, Sec. 1Art. VI, Cl. 1 & Cl.2

Art. I, Sec. 3, Cl.1Art. I, Sec. 10, Cl.1 & Cl.3

Art. III, Sec. 2, Cl.1

Art. IV, Sec. 4Art. V, 14th, Sec. 2

Indian/Federal Relations Indian/State Relations

Constitution Indian Provisions PP

No authority to Tax Indians

Authority? Power vs LawFederal Taxation is an expression of state force compelling loyalty.

“Congress may erect checkpoints that defeat a tribe’s essential right to levy taxes. When it does so ‘by virtue of its superior position,’ it acts on the basis of might, not constitutional law. Checkpoints are a device of force.” (Ball, 1987: 99)

Effects on Indian GovernmentUndermines inherent power of self-government

1. IRS takes positions that limit scope of taxation on trust incomes to the first step, but only money paid for timber is not taxed.

2. IRS position is unlike its position on treaty fishing income where each step performed by a tribal member remains untaxed.

3. The IRS HAS DECIDED ON ITS OWN WITHOUT THE BENEFIT OF LAW to interpret ANY funds paid to individual tribal members NOT DETERMINED BY NEED AND LOW INCOME to be taxable income. (General Welfare Exclusion –GWE)

What do we want?

The United States Internal Revenue Service abandon its attempts to impose the General Welfare Exclusion Rule in Indian Country.

Indian Nations and Indian tribal citizens NOT TaxedBy the US or its subordinate governments

Indian Nations reserve their inherent taxing powers

What is the Cost to Indian Nations

External Taxes Internal Taxes

Income TaxSales TaxExcise TaxSeverance Tax

Inherent Power to TaxBlocked by US Congress and Courts Taxing non-IndiansTax transactions on lands held in trustTax members

$$$$

What is the Cost to Indian NationsInherent Power of Government and Economic

US Economy Tribal Economy

Grants & Contracts $$

$$$$

$$ $$Tribal Business

$$

$$$$$$$$$$$

US Taxes paid by tribal businesses, tribal government and tribal members $$$

Why is GWE Important Now?GWE applied to Tribes undermines tribal sovereignty

1.The GWE when applied to tribes by IRS in this manner begins to weaken the governmental and sovereign powers.

2.The tribes need to stop this encroachment by whatever means possible.

3.The tribes then need to push back and make advances in the other taxation issues that need resolution.

What do we do about the Problem?

SHORT TERM:

Force US Government to agree to a one-year Moratorium on GWE Policy and Practice.

LONG TERM:

Arrange formal talks and negotiate nation-by-nation US/Indian Nation Tax Compact recognizing location of taxation authorities – US government or Indian government.

One year GWE MoratoriumResolve long standing challenges by the IRS in Indian Country

1. declare a one-year moratorium on the US Internal Revenue Service- as an essential action to limit their efforts to impose the General Welfare Exclusion rule upon the tribes, and to limit their selective use of the audit process to discover means to tax tribal revenues

2. Open government-to-government talks at the highest levels of government to set the basis for intergovernmental Taxation Compacts.

3. Settle the Taxation of Indians questions.

Negotiate Tax CompactsForm a new basis for government-to-government relations.

1.Protect Tribal Sovereignty

2.Enhance Tribal Self-government

3.Protect tribal members from unlawful taxation

4.Formalize a tribe-by-tribe solution acceptable to each Indian government.

Meeting the challenge of forced taxation on Indian Country

THANK YOU