Alaska’s tribes should prepare for possible Internal Revenue Service audits, says an attorney with National Congress of American Indians.
“They’re basically going around and auditing every single tribe in the country,” said John Dossett, general counsel for NCAI. “We’ve been telling tribes that if they haven’t come for you yet, they’re going to.”
Dossett said the IRS Tax Exempt and Government Entities Division — the arm of the tax agency that came under fire earlier this year for targeting Tea Party and conservative groups — is responsible for probe into tribal accounting books.
“You can’t selectively target some groups over others,” Dossett said. “And the tribes aren’t the Tea Party, but you just can’t do that.”
The Senate Indian Affairs Committee held a hearing in July to look into reports that the IRS was targeting tribes with audits. At the time, the president of the Oglala Sioux tribe told the committee that nearly every Great Plains tribe had been audited or had received notice of an audit.
Dossett said he’s not sure if the IRS will come to Alaska, but that it’s worth making tribes aware of what may be in store.
“It doesn’t make any sense that they would go to Alaska,” Dossett said. “The tribes in rural Alaska just don’t have much going on, but we’ve been very surprised that they’ve been auditing all the South Dakota tribes and they’re really impoverished. So, who knows what they’re going to do.”
A spokesperson for the IRS said he could not comment on whether the agency is targeting tribes or how many tribes the agency had audited in the last ten years.
Tribes are currently lobbying Congress on several different issues that would grant them explicit tax parity with states. One bill in the U.S. House — the Tribal General Welfare Exclusion Act of 2013 — would clarify IRS code to allow tribes the benefit of the General Welfare Doctrine, which allows federal, state and local governments to operate tax-exempt social benefit programs.
“(Tribes are) getting hit for failing to issue 1099 forms for very small things,” Dossett said. “If the states do this by providing health care or services to poor people, they’re protected by the General Welfare Doctrine, but for tribes (the IRS is) saying, ‘Oh, that’s taxable.’”
Another bill — the Tribal Tax and Investment Reform Act of 2013 — would allow tribes to operate as states do in issuing tax-exempt bonds for community infrastructure.
“Somebody needs to provide those services in rural Alaska and we should find a way for the tribes to create a tax base and provide those services themselves,” Dossett said. “Tribal governments shouldn’t be treated any differently than states. They’re providing services just as state governments do, and we think they should be treated the same.”
Dossett said the problem with the IRS targeting tribes with audits is extensive. He knows of one Lower 48 tribe that has an arrangement with the state government to allow the tribe’s public safety officers to enroll in the state’s pension plan, but then the IRS is penalizing the tribe for failing to withhold Social Security taxes. Some tribes, including those in Alaska, often use their own money to supplement health care or educational services they may be overseeing on behalf of the federal government. Dossett said that intermingling of funds has also been under review by the IRS. He said further consultation with lawmakers and IRS officials is needed to ensure tribes have autonomy.
“The IRS shouldn’t be subject to political pressure necessarily,” Dossett said. “But they also can’t be closed off to all discussion, and that’s how they’ve kind of been so far.”