IRS Announces Updated Indian Gaming Regulatory Act Trust Guidance

The IRS announced the publication of Revenue Procedure 2011-56, which provides Indian Gaming Regulatory Act (IGRA) trust guidance. Under IGRA, an Indian tribe may make per capita payments to tribal members from gaming revenues if the interests of minors and other legally incompetent persons who are entitled to receive the per capita payments are protected and preserved. Indian tribes frequently use trusts to maintain and preserve the minor and incompetent members’ interests (IGRA trusts).

In 2003, the IRS released Revenue Procedure 2003-14, which provided safe harbor requirements for IGRA trusts. IGRA trusts meeting these requirements are treated as tribally-owned grantor trusts, and the per capita payments or trust earnings are not included in the beneficiaries’ incomes until actually or constructively received.

In addition to providing a safe harbor, Revenue Procedure 2003-14 sought public comments on the safe harbor requirements. After receiving and considering numerous comments, the IRS published Revenue Procedure 2011-56.  The revenue procedure:

  • clarifies that an IGRA trust must be an ordinary trust (pursuant to 26 C.F.R. §301.7701-4(a)) for federal tax law purposes
  • clarifies that trustees may make staggered distributions to beneficiaries at different ages or upon the occurrence of specific events rather than distributing all the trust assets when the beneficiary attains a specified age
  • eliminates the references to federal and local trust law, as the validity of trusts is governed by state or tribal law
  • broadens the class of survivors who may inherit a beneficiary’s trust interest
  • modifies the trustee discretion provisions for making health and welfare distributions

Revenue Procedure 2011-56 supersedes Revenue Procedure 2003-14.

For more information, click HERE.

 

New Federal Policy May Open Door For Off-Reservation Casinos

As reported in the Wall Street Journal, the Department of Interior is reconsidering a Bush administration policy that limited Tribes from developing off-reservation casinos unless the sites were within “commuting distance” of the reservation. The new policy would eliminate that proximity requirement and allow Tribes to build casinos on trust land farther from their reservations – and thereby likely closer to larger population centers that would offer more customers. Some areas Tribes are considering are actually on their ancestral lands, but were separated from the Tribe’s main land base through 19th Century treaties.

Over 20 Tribal casinos on non-reservation land exist, and about 20 tribes have off-reservation plans in the works. The Confederated Tribes of Warm Springs of Oregon want to develop a casino along the Columbia River Gorge, and the St. Regis Mohawks have plans for a site in the Catskill Mountains, about 350 miles away from the Tribe's reservation -- but less than a two-hour drive from New York City. Some state governors such as David Paterson of New York and Arnold Schwarzenegger of California have come out in favor of certain projects in recent months.

Despite concerns about the economy, some off-reservation casino projects near major population centers have been able to line up financing for construction and operations. A private investment company that has financed start-ups of major Indian casinos in Connecticut and New York, is acquiring a near 50% stake in Empire Resorts Inc., the company that has been working with the St. Regis Mohawks on plans for a casino in Monticello, N.Y.

Tribes across the country have opened hundreds of casinos since the 1987 U.S. Supreme Court ruling that loosened state restrictions on Tribal gaming. In 1988, Congress authorized development off-reservation casinos. Interestingly, some Tribes that developed the first casinos are now working to block off-reservation gaming by other Tribes, and Senators from Nevada, California and Arizona wrote Interior Secretary Ken Salazar to oppose off-reservation gaming, saying it "violates the spirit" of Tribal gaming law.

Federal Gaming Regulators Under Fire From Tribes

The National Indian Gaming Association has asked the Obama administration to replace the chairman of the National Indian Gaming Commission immediately, and stop the current commission from publishing proposed revisions to gaming regulations until the new official is in place. In a letter to the President, NIGA asserts the Commission violates government-to-government consultation rules and is revising gaming machine regulations that would impose huge and unnecessary compliance costs on Tribal gaming operations, and “overreaching” because they exceed the NIGC’s statutory authority.

NIGA is a nonprofit organization representing Tribal nations and businesses engaged in gaming enterprises, and acts as an educational, legislative and public policy resource for tribes, policymakers, and the public on gaming issues and Tribal community development. NIGA has asked Obama and Interior Secretary Ken Salazar to immediately replace NIGC Chairman Philip Hogen, who “is holding out for almost five years past his original term,” and appoint a new commissioner to fill a seat that has been vacant for years. The Chairman’s position is a Presidential appointment approved by the Senate.

Barbara Kyser-Collier, Quapaw Tribal Gaming Agency director, has written to Obama seeking “urgent action” in appointing a new NIGC chairman. “It is beyond understanding that a federal agency established to protect tribal gaming as a source of revenue for tribal governmental services and functions, in fact, would persist in efforts to disseminate regulations that will inflict financial damage to Native American tribes,” Kyser-Collier said.

The proposed new gaming rules would also extend NIGC’s authority beyond its statutory limits, Kyser-Collier wrote. For example, NIGC has inserted into the proposed regulations a new technical standard that would require a jackpot payout be validated by the backroom accounting system. This would require a type of technology that is usually patented in a manufacturer’s gaming system, requiring the gaming operation either to have that particular manufacturer’s system or to pay the manufacturer a royalty fee to use its proprietary technology. “The NIGC characterizes these potential regulations as ‘internal control standards,’ when in fact they constitute product standards. A most important danger is that such rules could favor certain manufacturers and drive tribal costs higher,” Kyser-Collier said.
 

Tribes' "Special Privileges" Under Attack In Oklahoma

"It is simply unfair..."  Rep. David Dank

Assailing what he calls “special privileges that give (Native Americans) unique advantages” and declaring “It’s time for our Legislature to restore sanity to Oklahoma’s dealings with the Tribes”, Oklahoma state Representative David Dank has introduced three bills before the state Congress: 1) a constitutional amendment to give private businesses the same right to make corporate campaign contributions as Tribes; 2) a second amendment requiring compacts between Tribes and state government be ratified by the state Legislature; and 3) a bill giving private businesses located close to competing Tribal stores the same sales tax exemptions as the Native-owned businesses. Dank outlines his plan and purpose in an article in this week’s Oklahoman newspaper.

Dank’s reasoning is based on his view that:

Tribes collect no sales taxes on items sold from their grocery and convenience stores, or other Tribal businesses. They collect about half of normal tobacco taxes from Indian smoke shop sales. Tribal businesses pay no property taxes, the state receives little or nothing from Tribal auto tags, and Tribes, unlike private businesses, are free to make millions in corporate campaign contributions.

Meanwhile, the Tribes reap millions from a state-issued monopoly on casino gambling in Oklahoma because of a 15-year compact that cannot be altered.

These are tax exemptions and breaks that siphon tens of millions of dollars each year from local school districts, city and county governments and our state treasury. Non-Tribal citizens and businesses are being taxed to make up those losses. In some cases, non-Tribal businesses are being driven into bankruptcy by the unfair competition made possible by these special privileges.

Dank’s article neglects to mention some other ways in which Native American Tribes are “special”. Unlike every other municipality in the country, and despite being recognized by the US government as sovereign, Tribal governments are not allowed to levy property taxes on the Tribe’s own land. This state of affairs deprives Tribes of untold millions in revenues each year that other municipalities use for roads, police, and other civic services. For Tribes fortunate enough to be located near population centers or interstate highways, gaming revenue is but a partial substitute for the lack of taxing authority, as illustrated by the endemic poverty and substandard infrastructure on reservations.

The private sector of Oklahoma’s economy also reflects a “special” place for Native Americans. As he laments the Tribes’ “special financial privileges” that “cost state and local governments millions and damages competing private businesses”, Dank omits the fact that Native American and Alaska Native householders in Oklahoma had a median income 18.1 percent less than the median level for all households, and an overall decline in median income of 24.2 percent since the year 2000 – the biggest drop of any demographic group in the state. Meanwhile, the Caucasian demographic in Oklahoma has realized a 42.8 percent increase in household income level since the year 2005.

Special indeed.

WIGA Announces Scholarship Program for 2009

The Washington Indian Gaming Association Scholarship Committee just announced that it is
taking applications for scholarships. The dead line is March 13, 2009 and applications can be found on the WIGA website.

WIGA has $30,000 for distribution for the 2009-2010 academic year and will announce scholarship recipients on April 15.

Here is list of available scholarships:

• Up to four graduate/professional level scholarships at $1,400 each;

• Up to six undergraduate level scholarships at $1,200 each;

• Up to eight community college/technical scholarships at $900 each.

This is a great opportunity for students of all levels who want to pursue more education to receive financial support from WIGA. For quesitons please call Jill A. Nanpuya at (360) 352-4819.