§7871 — Indian tribal governments treated as States for certain purposes
1 citing cases
Statute Text — 26 U.S.C. §7871
An Indian tribal government shall be treated as a State—
for purposes of determining whether and in what amount any contribution or transfer to or for the use of such government (or a political subdivision thereof) is deductible under—
section 170 (relating to income tax deduction for charitable, etc., contributions and gifts),
sections 2055 and 2106(a)(2) (relating to estate tax deduction for transfers of public, charitable, and religious uses), or
section 2522 (relating to gift tax deduction for charitable and similar gifts);
subject to subsection (b), for purposes of any exemption from, credit or refund of, or payment with respect to, an excise tax imposed by—
chapter 31 (relating to tax on special fuels),
chapter 32 (relating to manufacturers excise taxes),
subchapter B of chapter 33 (relating to communications excise tax), or
subchapter D of chapter 36 (relating to tax on use of certain highway vehicles);
for purposes of section 164 (relating to deduction for taxes);
subject to subsection (c), for purposes of section 103 (relating to State and local bonds);
for purposes of section 511(a)(2)(B) (relating to the taxation of colleges and universities which are agencies or instrumentalities of governments or their political subdivisions);
for purposes of—
section 105(e) (relating to accident and health plans),
section 403(b)(1)(A)(ii) (relating to the taxation of contributions of certain employers for employee annuities), and
section 454(b)(2) (relating to discount obligations); and
for purposes of—
chapter 41 (relating to tax on excess expenditures to influence legislation), and
subchapter A of chapter 42 (relating to private foundations).
Paragraph (2) of subsection (a) shall apply with respect to any transaction only if, in addition to any other requirement of this title applicable to similar transactions involving a State or political subdivision thereof, the transaction involves the exercise of an essential governmental function of the Indian tribal government.
Subsection (a) of section 103 shall apply to any obligation (not described in paragraph (2)) issued by an Indian tribal government (or subdivision thereof) only if such obligation is part of an issue substantially all of the proceeds of which are to be used in the exercise of any essential governmental function.
Except as provided in paragraph (3), subsection (a) of section 103 shall not apply to any private activity bond (as defined in section 141(a)) issued by an Indian tribal government (or subdivision thereof).
In the case of an obligation to which this paragraph applies—
paragraph (2) shall not apply,
such obligation shall be treated for purposes of this title as a qualified small issue bond, and
section 146 shall not apply.
This paragraph shall apply to any obligation issued as part of an issue if—
95 percent or more of the net proceeds of the issue are to be used for the acquisition, construction, reconstruction, or improvement of property which is of a character subject to the allowance for depreciation and which is part of a manufacturing facility (as defined in section 144(a)(12)(C)),
such issue is issued by an Indian tribal government or a subdivision thereof,
95 percent or more of the net proceeds of the issue are to be used to finance property which—
is to be located on land which, throughout the 5-year period ending on the date of issuance of such issue, is part of the qualified Indian lands of the issuer, and
is to be owned and operated by such issuer,
such obligation would not be a private activity bond without regard to subparagraph (C),
it is reasonably expected (at the time of issuance of the issue) that the employment requirement of subparagraph (D)(i) will be met with respect to the facility to be financed by the net proceeds of the issue, and
no principal user of such facility will be a person (or group of persons) described in section 144(a)(6)(B).
For purposes of clause (iii), section 150(a)(5) shall apply.
An obligation to which this paragraph applies (other than an obligation described in paragraph (1)) shall be treated for purposes of this title as a private activity bond.
The employment requirements of this subparagraph are met with respect to a facility financed by the net proceeds of an issue if, as of the close of each calendar year in the testing period, the aggregate face amount of all outstanding tax-exempt private activity bonds issued to provide financing for the establishment which includes such facility is not more than 20 times greater than the aggregate wages (as defined by section 3121(a)) paid during the preceding calendar year to individuals (who are enrolled members of the Indian tribe of the issuer or the spouse of any such member) for services rendered at such establishment.
If, as of the close of any calendar year in the testing period, the requirements of this subparagraph are not met with respect to an establishment, section 103 shall cease to apply to interest received or accrued (on all private activity bonds issued to provide financing for the establishment) after the close of such calendar year.
Subclause (I) shall not apply if the requirements of this subparagraph would be met if the aggregate face amount of all tax-exempt private activity bonds issued to provide financing for the establishment and outstanding at the close of the 90th day after the close of the calendar year were substituted in clause (i) for such bonds outstanding at the close of such calendar year.
For purposes of this subparagraph, the term “testing period” means, with respect to an issue, each calendar year which begins more than 2 years after the date of issuance of the issue (or, in the case of a refunding obligation, the date of issuance of the original issue).
For purposes of this paragraph—
The term “qualified Indian lands” means land which is held in trust by the United States for the benefit of an Indian tribe.
The term “Indian tribe” means any Indian tribe, band, nation, or other organized group or community which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians.
The term “net proceeds” has the meaning given such term by section 150(a)(3).
For the purposes specified in subsection (a), a subdivision of an Indian tribal government shall be treated as a political subdivision of a State if (and only if) the Secretary determines (after consultation with the Secretary of the Interior) that such subdivision has been delegated the right to exercise one or more of the substantial governmental functions of the Indian tribal government.
For purposes of this section, the term “essential governmental function” shall not include any function which is not customarily performed by State and local governments with general taxing powers.
The Secretary shall allocate the national tribal economic development bond limitation among the Indian tribal governments in such manner as the Secretary, in consultation with the Secretary of the Interior, determines appropriate.
There is a national tribal economic development bond limitation of $2,000,000,000.
In the case of a tribal economic development bond—
notwithstanding subsection (c), such bond shall be treated for purposes of this title in the same manner as if such bond were issued by a State,
the Indian tribal government issuing such bond and any instrumentality of such Indian tribal government shall be treated as a State for purposes of section 141, and
section 146 shall not apply.
For purposes of this section, the term “tribal economic development bond” means any bond issued by an Indian tribal government—
the interest on which would be exempt from tax under section 103 if issued by a State or local government, and
which is designated by the Indian tribal government as a tribal economic development bond for purposes of this subsection.
Such term shall not include any bond issued as part of an issue if any portion of the proceeds of such issue are used to finance—
any portion of a building in which class II or class III gaming (as defined in section 4 of the Indian Gaming Regulatory Act) is conducted or housed or any other property actually used in the conduct of such gaming, or
any facility located outside the Indian reservation (as defined in section 168(j)(6)).
The maximum aggregate face amount of bonds which may be designated by any Indian tribal government under subparagraph (A) shall not exceed the amount of national tribal economic development bond limitation allocated to such government under paragraph (1).
Treasury Regulations
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Treas. Reg. §305.7871-1Indian tribal governments treated as States for certain purposes
(a) In general. An Indian tribal government, as defined in section 7701 (a)(40) and the regulations thereunder, shall be treated as a State, and a subdivision of an Indian tribal government, as determined under section 7871(d) and paragraph (e) of this section, shall be treated as a political subdivision of a State, under the following sections and regulations thereunder—
(1) Section 170 (relating to income tax deductions for charitable, etc., contributions and gifts), sections 2055 and 2106(a)(2) (relating to estate tax deductions for transfers of public, charitable, and religious uses), and section 2522 (relating to gift tax deductions for charitable and similar gifts), for purposes of determining whether and in what amount any contribution or transfer to or for the use of an Indian tribal government (or subdivision thereof) is deductible;
(2) Section 164 (relating to deductions for taxes);
(3) Section 511(a)(2)(B) (relating to the taxation of colleges and universities which are agencies or instrumentalities of governments or their political subdivisions);
(4) Section 37(e)(9)(A) (relating to certain public retirement systems);
(5) Section 41(c)(4) (defining “State” for purposes of credit for contributions to candidates for public offices);
(6) Section 117(b)(2)(A) (relating to scholarships and fellowship grants);
(7) Section 403(b)(1)(A)(ii) (relating to the taxation of contributions of certain employers for employee annuities);
(8) Chapter 41 of the Code (relating to tax on excess expenditures to influence legislation); and
(9) Subchapter A of chapter 42 of the Code (relating to private foundations).
(b) Special rule for excise tax provisions. An Indian tribal government shall be treated as a State, and a subdivision of an Indian tribal government shall be treated as a political subdivision of a State, for purposes of any exemption from, credit or refund of, or payment with respect to, an excise tax imposed on a transaction under—
(1) Chapter 31 of the Code (relating to tax on special fuels);
(2) Chapter 32 of the Code (relating to manufacturers excise taxes);
(3) Subchapter B of chapter 33 of the Code (relating to communications excise tax); and
(4) Subchapter D of chapter 36 of the Code (relating to tax on use of certain highway vehicles), if, in addition to satisfying all requirements applicable to a similar transaction involving a State (or political subdivision thereof) under the Code, the transaction involves the exercise of an essential governmental function of the Indian tribal government, as defined in paragraph (d) of this section.
(c) Special rule for tax-exempt bonds. An Indian tribal government shall be treated as a State and a subdivision of an Indian tribal government shall be treated as a political subdivision of a State for purposes of any obligation issued by such government or subdivision under section 103 (relating to interest on certain governmental obligations) if such obligation is part of an issue substantially all of the proceeds of which are to be used in the exercise of an essential governmental function, as defined in paragraph (d) of this section. For purposes of section 7871 and this section, the “substantially all” test is the same as that provided in § 1.103-8(a)(1)(i). An Indian tribal government shall not be treated as a State and a subdivision of an Indian tribal government shall not be treated as a political subdivision of a State, however, for issues of the following private activity bonds—
(1) An industrial development bond (as defined in section 103(b)(2));
(2) An obligation described in section 103(l)(1)(A) (relating to scholarship bonds); or
(3) A mortgage subsidy bond (as defined in section 103A(b)(1), without regard to section 103A(b)(2)).
(d) Essential governmental function. For purposes of section 7871 and this section, an essential governmental function of an Indian tribal government (or portion thereof) is a function of a type which is—
(1) Eligible for funding under 25 U.S.C. 13 and the regulations thereunder;
(2) Eligible for grants or contracts under 25 U.S.C. 450 (f), (g), and (h) and the regulations thereunder; or
(3) An essential governmental function under section 115 and the regulations thereunder when conducted by a State or political subdivision thereof.
(e) Treatment of subdivisions of Indian tribal governments as political subdivisions. A subdivision of an Indian tribal government shall be treated as a political subdivision of a State for purposes of section 7871 and this section if the Internal Revenue Service determines that the subdivision has been delegated the right to exercise one or more of the substantial governmental functions of the Indian tribal government. Designation of a subdivision of an Indian tribal government as a political subdivision of a State will be by revenue procedure. If a subdivision of an Indian tribal government is not currently designated by the applicable revenue procedure as a political subdivision of a State, and such subdivision believes that it qualifies for such designation, the subdivision may apply for a ruling from the Internal Revenue Service. In order to qualify as a political subdivision of a State, for purposes of section 7871 and this section, such subdivision must receive a favorable ruling from the Internal Revenue Service. The request for a ruling shall be made in accordance with all applicable procedural rules set forth in the Statement of Procedural Rules (26 CFR part 601) and any applicable revenue procedures relating to submission of ruling requests. The request shall be submitted to the Internal Revenue Service, Associate Chief Counsel (Technical), Attention: CC:IND:S, Room 6545, 1111 Constitution Ave., NW., Washington, D.C. 20224.
(f) Effective dates—(1) In general. Except as provided in paragraph (f)(2) of this section, the provisions of this section are effective after December 31, 1982.
(2) Specific effective dates. Specific provisions of this section are effective as follows:
(i) Provisions relating to chapter 1 of the Internal Revenue Code of 1954 (other than section 103 and section 37(e)(9)(A)) shall apply to taxable years beginning after December 31, 1982, and before January 1, 1985;
(ii) Provisions relating to section 37(e)(9)(A) shall apply to taxable years beginning after December 31, 1982, and before January 1, 1984;
(iii) Provisions relating to section 103 shall apply to obligations issued after December 31, 1982, and before January 1, 1985;
(iv) Provisions relating to chapter 11 of the Code shall apply to estates of decedents dying after December 31, 1982, and before January 1, 1985;
(v) Provisions relating to chapter 12 of the Code shall apply to gifts made after December 31, 1982, and before January 1, 1985; and
(vi) Provisions relating to taxes imposed by subtitle D of the Code shall take effect on January 1, 1983 and shall cease to apply at the close of December 31, 1984.
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Treas. Reg. §305.7871-1(a)In general.
In general. An Indian tribal government, as defined in section 7701 (a)(40) and the regulations thereunder, shall be treated as a State, and a subdivision of an Indian tribal government, as determined under section 7871(d) and paragraph (e) of this section, shall be treated as a political subdivision of a State, under the following sections and regulations thereunder—
(1) Section 170 (relating to income tax deductions for charitable, etc., contributions and gifts), sections 2055 and 2106(a)(2) (relating to estate tax deductions for transfers of public, charitable, and religious uses), and section 2522 (relating to gift tax deductions for charitable and similar gifts), for purposes of determining whether and in what amount any contribution or transfer to or for the use of an Indian tribal government (or subdivision thereof) is deductible;
(2) Section 164 (relating to deductions for taxes);
(3) Section 511(a)(2)(B) (relating to the taxation of colleges and universities which are agencies or instrumentalities of governments or their political subdivisions);
(4) Section 37(e)(9)(A) (relating to certain public retirement systems);
(5) Section 41(c)(4) (defining “State” for purposes of credit for contributions to candidates for public offices);
(6) Section 117(b)(2)(A) (relating to scholarships and fellowship grants);
(7) Section 403(b)(1)(A)(ii) (relating to the taxation of contributions of certain employers for employee annuities);
(8) Chapter 41 of the Code (relating to tax on excess expenditures to influence legislation); and
(9) Subchapter A of chapter 42 of the Code (relating to private foundations).
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Treas. Reg. §305.7871-1(b)Special rule for excise tax provisions.
Special rule for excise tax provisions. An Indian tribal government shall be treated as a State, and a subdivision of an Indian tribal government shall be treated as a political subdivision of a State, for purposes of any exemption from, credit or refund of, or payment with respect to, an excise tax imposed on a transaction under—
(1) Chapter 31 of the Code (relating to tax on special fuels);
(2) Chapter 32 of the Code (relating to manufacturers excise taxes);
(3) Subchapter B of chapter 33 of the Code (relating to communications excise tax); and
(4) Subchapter D of chapter 36 of the Code (relating to tax on use of certain highway vehicles), if, in addition to satisfying all requirements applicable to a similar transaction involving a State (or political subdivision thereof) under the Code, the transaction involves the exercise of an essential governmental function of the Indian tribal government, as defined in paragraph (d) of this section.
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Treas. Reg. §305.7871-1(c)Special rule for tax-exempt bonds.
Special rule for tax-exempt bonds. An Indian tribal government shall be treated as a State and a subdivision of an Indian tribal government shall be treated as a political subdivision of a State for purposes of any obligation issued by such government or subdivision under section 103 (relating to interest on certain governmental obligations) if such obligation is part of an issue substantially all of the proceeds of which are to be used in the exercise of an essential governmental function, as defined in paragraph (d) of this section. For purposes of section 7871 and this section, the “substantially all” test is the same as that provided in § 1.103-8(a)(1)(i). An Indian tribal government shall not be treated as a State and a subdivision of an Indian tribal government shall not be treated as a political subdivision of a State, however, for issues of the following private activity bonds—
(1) An industrial development bond (as defined in section 103(b)(2));
(2) An obligation described in section 103(l)(1)(A) (relating to scholarship bonds); or
(3) A mortgage subsidy bond (as defined in section 103A(b)(1), without regard to section 103A(b)(2)).
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Treas. Reg. §305.7871-1(d)Essential governmental function.
Essential governmental function. For purposes of section 7871 and this section, an essential governmental function of an Indian tribal government (or portion thereof) is a function of a type which is—
(1) Eligible for funding under 25 U.S.C. 13 and the regulations thereunder;
(2) Eligible for grants or contracts under 25 U.S.C. 450 (f), (g), and (h) and the regulations thereunder; or
(3) An essential governmental function under section 115 and the regulations thereunder when conducted by a State or political subdivision thereof.
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Treas. Reg. §305.7871-1(e)Treatment of subdivisions of Indian tribal governments as political subdivisions.
Treatment of subdivisions of Indian tribal governments as political subdivisions. A subdivision of an Indian tribal government shall be treated as a political subdivision of a State for purposes of section 7871 and this section if the Internal Revenue Service determines that the subdivision has been delegated the right to exercise one or more of the substantial governmental functions of the Indian tribal government. Designation of a subdivision of an Indian tribal government as a political subdivision of a State will be by revenue procedure. If a subdivision of an Indian tribal government is not currently designated by the applicable revenue procedure as a political subdivision of a State, and such subdivision believes that it qualifies for such designation, the subdivision may apply for a ruling from the Internal Revenue Service. In order to qualify as a political subdivision of a State, for purposes of section 7871 and this section, such subdivision must receive a favorable ruling from the Internal Revenue Service. The request for a ruling shall be made in accordance with all applicable procedural rules set forth in the Statement of Procedural Rules (26 CFR part 601) and any applicable revenue procedures relating to submission of ruling requests. The request shall be submitted to the Internal Revenue Service, Associate Chief Counsel (Technical), Attention: CC:IND:S, Room 6545, 1111 Constitution Ave., NW., Washington, D.C. 20224.
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Treas. Reg. §305.7871-1(f)Effective dates—(1) In general.
Effective dates—(1) In general. Except as provided in paragraph (f)(2) of this section, the provisions of this section are effective after December 31, 1982.
(2) Specific effective dates. Specific provisions of this section are effective as follows:
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Treas. Reg. §305.7871-1(i)§305.7871-1(i)
Provisions relating to chapter 1 of the Internal Revenue Code of 1954 (other than section 103 and section 37(e)(9)(A)) shall apply to taxable years beginning after December 31, 1982, and before January 1, 1985;
(ii) Provisions relating to section 37(e)(9)(A) shall apply to taxable years beginning after December 31, 1982, and before January 1, 1984;
(iii) Provisions relating to section 103 shall apply to obligations issued after December 31, 1982, and before January 1, 1985;
(iv) Provisions relating to chapter 11 of the Code shall apply to estates of decedents dying after December 31, 1982, and before January 1, 1985;
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Treas. Reg. §305.7871-1(v)§305.7871-1(v)
Provisions relating to chapter 12 of the Code shall apply to gifts made after December 31, 1982, and before January 1, 1985; and
(vi) Provisions relating to taxes imposed by subtitle D of the Code shall take effect on January 1, 1983 and shall cease to apply at the close of December 31, 1984.
1 Citing Cases
appropriate to provide these - 16 - governments with a status under the Internal Revenue Code similar to what is now provided for the governments of the States of the United States", S. Rept. 97-646, at 11 (1982), 1983-1 C.B. 514, 518, and enacted section 7871. That section provides numerous instances where "Indian tribal governments"11 are treated as States for various Internal Revenue Code purposes. Section 1402(c)(1) is not one of those instances. As Congress has considered the issue of Indi