On Saturday, January 20, 2013, the National Indian Gaming Association (NIGA) held a policy summit in Washington D.C. to discuss a variety of issues relating to Indian Sovereignty. The session was well represented with tribal leaders from around the country participating in the discussions and advocating for the recognition and freedoms due to sovereign Indian Nations. The discussions were highlighted by the participation of a Freshman Senator, Heidi Heitkamp of North Dakota, and Freshman Congressmen, Dan Kildee of Michigan (District 5) and Markwayne Mullin of Oklahoma (District 2).
The following two sections provide a summary of two major policy topics discussed: (1) the National Indian Gaming Commissions strategic plan and (2) the IRS General Welfare Exclusion. Within each section is a summary of the current policies, new policies to be introduced in 2013, and key action items for tribal leaders to consider as the policies are being implemented.
In addition to these two major topics, leaders discussed a variety of issues that included the following:
- Reauthorization of the Violence Against Women Act (VAWA) – Enabling tribes to protect women against domestic violence;
- Strategic Priorities for the Department of Interior under the second Obama administration;
- Impact of Budget cuts and the need for the White House's Office of Management and Budget (OMB) to institutionalize consultation with Indian tribes;
- Energy policy reform as it relates to exploration, production, and taxation on tribal land;
- Stafford Act – Providing tribes greater access to disaster relief; and
- Internet Gaming regulation and the ongoing request for Senator Harry Reid to treat tribes fairly, as he leads the efforts to legalize online gaming.
Beyond attending the recent policy summit, RubinBrown's Gaming Services group remains up to date on current policy issues related to gaming regulations, social welfare, and tribal sovereignty within Indian Country. Should you have questions on the policies discussed around gaming and the IRS's General Welfare Exclusion audits within Indian Country, please do not hesitate to contact either Daniel Holmes or Brandon Loeschner.
Section One: National Indian Gaming Commission Policies
Chairwoman Traci Stevens reflected on the advancement of the National Indian Gaming Commission (NIGC or the Commission) over the last four years and highlighted the strategic priorities for the next four years.
Summary of Current Policies: In discussing the past four years, Chairwoman Stevens emphasized the Commissions ability to change its mentality to an "assist and educate first" regulator, while limiting enforcement actions and civil penalties to the option of last resort. In discussing the changes that have taken place, Chairwomen Stevens reflected on one of her first meetings with tribal leaders in her role as NIGC Chairwoman. A tribal leader told her a story of the tribe previously reaching out to the NIGC for assistance in compliance. Upon asking the NIGC for help, the tribe received a Notice of Violation letter and never received the help it originally requested. Chairwoman Stevens was appalled by the Commission's refusal to help and spoke of how the culture and mindset have since changed. When discussing the changes, the Chairwoman highlighted the success of the NIGC Phoenix region, which hosted over 15 trainings in 2012, and the increasing levels of compliance across the country.
Policy Changes in 2013: The Chairwoman outlined the five strategic priorities described in the NIGC's Strategic Plan for Fiscal Years 2014 - 2018. The strategic priorities will further the "assist and educate first" mindset adopted under Chairwoman Steven's leadership. The strategic priorities included in the plan are:
1. Advance the Assistance, Compliance, and Enforcement Initiative through:
a. Increasing the voluntary audit technical assistance request
b. Conducting more site visits to develop more efficient internal control standards;
2. Enhance training and guidance programs;
3. Improve and Update NIGC Regulations;
4. Refine the consultation process; and
5. Improve the efficiency of the Commission.
In addition to discussing the strategic priorities for the Commission, Chairwoman Stevens identified the following regulatory changes that are anticipated to be introduced in 2013:
1. Providing additional clarification and minor changes to the Minimum Internal Control Standards for Class II Gaming (25 CFR Part 543) and Minimum Technical Standards for Gaming Equipment with the Play of Class II Games (25 CFR Part 547);
2. Streamline the appeals process outlined in the Appeals [by a tribe] (25 CFR Part 524), Appeals (25 CFR Part 539), and Appeals Before the Commission (25 CFR Part 577); and
3. Strengthen the Self Regulation of Class II Gaming Standards (25 CFR Part 518).
Action Items for Tribal Leaders: Tribal leaders are encouraged to continue dedicating resources to the Consultation process and soliciting the NIGC's input on changes that go beyond the Minimum Internal Controls. Tribal Leaders should also ensure their compliance departments and accounting personnel are keeping up to date with the new regulations and adopting the necessary control changes to remain compliant with NIGC regulation.
Section Two: IRS General Welfare Exclusion & Tribal Audits
The increasing number of IRS audits being conducted on tribal lands was an issue of significant concern. Tribes have seen an increase in IRS audit activity relating to the General Welfare Exclusion ("the Exclusion") for tribal governmental programs. The Exclusion allows social benefit payments received by an individual to be excluded from the computation of net income, thus deeming the payments as non-taxable.
Summary of Current Policies: In December of 2012 the IRS released proposed administrative guidance to assist in defining criteria which a tribal program must meet to qualify for the Exclusion. A tribal program must meet the following six criteria for the Exclusion to apply:
1. The benefit is provided pursuant to a specific tribal governmental program;
2. The program has written guidelines that specify how individuals may qualify for the benefit;
3. The benefit is available to any tribal member who satisfies the program guidelines;
4. The distribution of benefits does not favor governing tribal members;
5. The benefit is not compensation for services; and
6. The benefit is not lavish or extravagant.
In addition, the guidance also listed five general categories in which the Exclusion benefits are classified: Housing Programs, Educational Programs, Elder and Disabled Programs, Cultural and Religious Programs and Other Qualifying Assistance Programs.
Policy Changes in 2013: During the policy summit the general consensus was an immediate need to codify the proposed administrative guidance to provide tribal leaders definitive guidance on how the General Welfare Exclusion will be applied to tribal programs.
Action Items for Tribal Leaders: Tribal leaders should evaluate their general welfare programs to ensure they meet the criteria established by the IRS. If the programs do not meet the criteria established, tribal leaders should consider what program modifications can be made to ensure the program qualifies for the General Welfare Exclusion.
In addition, tribal leaders should review all other programs, previously deemed taxable, to evaluate if the Exclusion criteria can be applied. If a program previously deemed taxable meets the Exclusion criteria, tribal members would be eligible to seek tax refunds for open tax years.
Click here for additional information on the IRS proposed revenue procedure.
Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.
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