A longstanding tax dispute between the Miccosukee Indian tribes in Florida and the Internal Revenue Service (IRS) has snowballed into a major controversy. The dispute is over whether or not gaming profits should be subject to federal tax withholding. In this post, we discuss the regulatory framework about gaming on Native American lands.
The Indian Gaming Regulatory Act of 1988 (IGRA)
Until 1988, there were no federal laws to regulate the gaming structure on Indian owned land. That’s when the US government came up with The Indian Gaming Regulatory Act that established a legal framework to govern Indian gaming. The Act was formed to:
- Prevent gaming as a means of generating revenue for the Native American tribes
- Provide a legislative basis for the operation/regulation of Indian gaming
- Encourage economic development of the Native American tribes
- Protect the enterprises from negative influences (such as organized crime)
This law requires Native American tribes to submit a ‘Revenue Allocation Plan’ to the Bureau of Indian Affairs specifying how various funds or gains are to be spent on developmental works such as housing, education, and health care. This act has brewed up some extensive controversy over the years, and the Miccosukee Indians have long been reluctant to comply.
Tax Exemptions
Native American Tribes
The US Supreme Court, in the case of California v. Cabazon Band of Mission Indians, exempted the tribes that conduct gaming on Native American, from taxes. In 2011, for instance, 236 Native American tribes operated 422 gaming facilities across 28 states and earned $26.5 billion. They, however, were not subject to federal taxes.
Native American Individuals
Tax exemption does not apply to individual Native Americans because they are considered US citizens, and need to pay federal income taxes. Despite the fact that the tribes are exempted from paying taxes out of gaming profits, the same when distributed among individual members of the tribe are subject to taxation. This is where the controversy intensifies as the Miccosukee Tribe distributes between $120,000 and $160,000 of their gambling profits among its 600 members every year. The distribution of profits is no longer flying under the radar of the IRS.
Conclusion
There has been a lack of clarity regarding enforcement of tax regulations on gaming profits of Native Americans. It has led to controversy and murky legal battles with no concrete solutions in sight. In such a scenario, having transparency in the legal system and regular communication between both parties can help resolve this issue. Stayed tuned to find out the rest of the story.
