Tribe explores pathway to tax-free casino distributions
Starting in March, members of the Eastern Band of Cherokee Indians may have the chance to sign up for a program that will let them receive casino distributions without reporting them as income on federal taxes.
Because tribal code refers to the twice-yearly distributions as “per capita,” they’re automatically taxable, Secretary of Finance Cory Blankenship told Tribal Council during a Sept. 20 work session.
However, the Tribal General Welfare Exclusion Act of 2014 excludes “any Indian general welfare benefit” from the calculation of gross income as long as several requirements are satisfied. The benefits must be for the promotion of general welfare, not be lavish and extravagant or compensation for services, and available to any tribal members who meets the guidelines. Programs must be administered under specific guidelines and may not discriminate in favor of members of the tribe’s governing body.
Like per capita, the new program, to be called GenWell, would provide tribal members with direct payments. The stated purpose of the payments would be for health and wellness-related expenditures —housing, education, transportation and medical costs, for example.
Combined with an ordinance change eliminating the term “per capita” from tribal law, this would bring the program into compliance with the Tribal General Welfare Exclusion Act. Tribal members would no longer have to pay federal taxes on their casino distributions or even report them on Tax Day.
“The idea is that we would adopt the general language as part of ordinance and Council by resolution would adopt the plan design,” Blankenship said. “Any amendments that are needed in the future to the plan design can only be done by resolution of the council.”
Blankenship aims to offer an annual open enrollment period, with the first one running throughout March 2023. During this period, tribal members could apply to leave the per capita program and enroll in the GenWell program instead. They would also have a choice as to how often to receive distributions. Participants could be paid twice per year when distributions are released or receive $800 per month, with any additional distributions over that amount paid in June and December each year.
The tribal government wants to run the two programs — per capita and GenWell — side by side for a while to familiarize tribal members with the idea. Eventually, Blankenship said, the tribe could eliminate per capita and distribute casino proceeds solely through GenWell.
“If we get the majority of tribal members moved over to the GenWell program, there may be a point in time in the future when we say, ‘Let’s make this change for everyone,’” Blankenship said. “But for now we’ll run these programs side-by-side.”
The program still requires action from Council, which has yet to formally consider the ordinance change and program design.
Leave a comment
My tax attorney advised me that If the percapita is distributed thru the secretary of interior then it would be state and federal exempt. Most tribes are taxed state and federal unless using this service or are living on the reservation they are from.