§7873 — Income derived by Indians from exercise of fishing rights
6 cases·3 followed·3 cited—50% support
Statute Text — 26 U.S.C. §7873
No tax shall be imposed by subtitle A on income derived—
by a member of an Indian tribe directly or through a qualified Indian entity, or
by a qualified Indian entity,
from a fishing rights-related activity of such tribe.
No tax shall be imposed by subtitle C on remuneration paid for services performed in a fishing rights-related activity of an Indian tribe by a member of such tribe for another member of such tribe or for a qualified Indian entity.
For purposes of this section—
The term “fishing rights-related activity” means, with respect to an Indian tribe, any activity directly related to harvesting, processing, or transporting fish harvested in the exercise of a recognized fishing right of such tribe or to selling such fish but only if substantially all of such harvesting was performed by members of such tribe.
The term “recognized fishing rights” means, with respect to an Indian tribe, fishing rights secured as of March 17, 1988, by a treaty between such tribe and the United States or by an Executive order or an Act of Congress.
The term “qualified Indian entity” means, with respect to an Indian tribe, any entity if—
such entity is engaged in a fishing rights-related activity of such tribe,
all of the equity interests in the entity are owned by qualified Indian tribes, members of such tribes, or their spouses,
except as provided in regulations, in the case of an entity which engages to any extent in any substantial processing or transporting of fish, 90 percent or more of the annual gross receipts of the entity is derived from fishing rights-related activities of one or more qualified Indian tribes each of which owns at least 10 percent of the equity interests in the entity, and
substantially all of the management functions of the entity are performed by members of qualified Indian tribes.
For purposes of clause (iii), equity interests owned by a member (or the spouse of a member) of a qualified Indian tribe shall be treated as owned by the tribe.
For purposes of subparagraph (A), an Indian tribe is a qualified Indian tribe with respect to an entity if such entity is engaged in a fishing rights-related activity of such tribe.
For purposes of this section, any distribution with respect to an equity interest in a qualified Indian entity of an Indian tribe to a member of such tribe shall be treated as derived by such member from a fishing rights-related activity of such tribe to the extent such distribution is attributable to income derived by such entity from a fishing rights-related activity of such tribe.
If, but for this paragraph, all but a de minimis amount—
derived by a qualified Indian tribal entity, or by an individual through such an entity, is entitled to the benefits of paragraph (1) of subsection (a), or
paid to an individual for services is entitled to the benefits of paragraph (2) of subsection (a),
then the entire amount shall be entitled to the benefits of such paragraph.
6 Citing Cases
Section 7873 provides in relevant part: SEC.
ations.2 From 1979 through 1992, petitioner was employed by the Lummi as a full-time worker in the tribal fish hatchery. The parties agree that petitioner's work at the fish hatchery is treaty fishing-rights-related activity as that term is used in section 7873. The parties further agree that in 1992 all employees of the hatchery received, in addition to wages, the choice to have an extra $160 per month paid for their benefit either into a health plan or a retirement account. Employees could not
ng-separate status for the year 1993. Discussion It is petitioner’s position that the income from discharge of indebtedness he received in 1993 is not subject to tax because it is income derived by an Indian from the exercise of fishing rights under section 7873. Section 7873 provides in relevant part: SEC. 7873(a). In General.— (1) Income and self-employment taxes. — No tax shall be imposed by subtitle A on income derived— (A) by a member of an Indian tribe directly or through a qualified India
ts of Washington State when they filed their petitions. The petitions stated that the Smiths disagreed with the fraction of Agripina Smith's tribal-council compensation that the IRS determined was derived from fishing rights-related activities under section 7873. In its answer, the IRS did not assert that the self-employment income of either Agripina Smith or James Smith should include Agripina Smith's tribal-council compensation. The Smiths have made the following concessions: (1) the $40 in in
Section 7873 does provide a tax exemption for income derived from a fishing-rights-related activity by a member of an Indian tribe directly or through a qualified Indian entity. Petitioner has not introduced any evidence, however, to establish that the requirements of this section were met during the years at issue. Specifically, petitio
Petitioners argue that "income derived by an Indian from activities which directly benefit the Tribe is tax-exempt." Petitioners argue also that income derived by an Indian from a "natural resource" on Indian reservation land is, by analogy to section 7873, exempt from income tax.