- Details
- By Brian Edwards
- Economic Development
There are federal policies that move slowly because they’re controversial. And then there are policies that move slowly because everyone agrees — but no one knows how to act.
The two tribal tax regulations finalized this week fall squarely into that second category.
For roughly 30 years, tribal governments have been telling the Treasury and the IRS the same thing: We are governments. We run modern economies. And we need tax rules that reflect that reality.
This week, Treasury finally said yes.
Congress recognized tribes as governments for tax purposes in 1982. Congress clarified tribes’ authority to provide tax-free general welfare benefits in 2014. No serious policymaker has argued that tribes shouldn’t be able to fund housing, scholarships, emergency aid or government services without triggering federal income taxes.
The problem wasn’t disagreement. It was execution.
In the absence of clear regulations, tribes spent decades operating under a fog of uncertainty — not because Congress said no, but because federal agencies never fully said yes. That uncertainty carried real costs. Tribes over-documented benefits. They delayed housing projects. They structured business deals defensively. Lenders quietly priced tax risk into loans.
To understand why that gap persisted, it helps to understand IRS culture.
The IRS is built to apply uniform rules across taxpayers. Tribal sovereignty, by definition, resists uniform treatment. When tribes began chartering corporations under tribal law to generate revenue for government services, the tax code did not clearly say how to treat them. In the absence of guidance, the IRS defaulted to familiar tools — including the vague “integral part” test and case-by-case audits — rather than a comprehensive framework.
The same dynamic played out with general welfare programs. Tribes provided housing assistance, education support and emergency aid grounded in tribal law and tradition, but without regulations, some IRS examinations treated those benefits as taxable income. Even after Congress passed the Tribal General Welfare Exclusion Act, tribes waited years for implementing rules.
What was missing was not authority, but an institutional mechanism to carry the work forward.
That began to change in 2019, when the Treasury established the Treasury Tribal Advisory Committee, or TTAC.
TTAC didn’t speed things up. It made delay harder — by creating a standing forum that required Treasury and the IRS to respond, document decisions and keep unresolved issues from quietly stalling.
To understand how that process finally translated into finished rules, I reached out to one of the people who sat at the center of both tribal consultation and internal Treasury work.
Two days after the Dec. 15 announcement, I spoke by Zoom with Marilynn “Many Hearts” Malerba, a citizen and lifetime chief of the Mohegan Tribe, who served as Treasurer of the United States during the Biden administration and was also a member of TTAC. She was closely involved in the consultation and internal Treasury work that ultimately produced both regulations.
Malerba said the real obstacle was not disagreement, but continuity. Without a standing institution, she said, no one was responsible for carrying the work forward year after year.
Tribal leaders used the forum to document the economic costs of uncertainty and reframe the issue as a business problem: uncertainty raises costs, distorts markets and undermines growth.
Over time, Treasury officials started echoing those arguments, acknowledging that unclear rules burdened both tribes and the IRS.
Malerba also pointed to the role of Treasury’s Office of Tribal and Native Affairs as critical to turning consultation into finished policy. The office, led by Fatima Abbas, an enrolled citizen of the Haliwa Saponi Indian Tribe, provided continuity across three administrations — carrying tribal feedback through the rulemaking process, draft by draft. That kind of institutional capacity, Malerba said, is how consultation becomes implementation.
One small irony: the rules now being finalized are deregulatory. They cut red tape. They reduce audits. They limit IRS discretion. And they do so by trusting tribes to define their own needs.
Malerba emphasized that the work was bipartisan, noting that support for tribal tax clarity has spanned Democratic and Republican administrations. “This was never about politics,” she said. “It was about getting the policy right.”
Taken together, the two regulations touch everyday tribal life more than most federal tax changes ever will.
The rules affect housing assistance, scholarships and emergency aid for individual citizens. They also affect how tribes finance, structure and grow the businesses that fund government services — enterprises that support everything from utilities and health care to energy projects and manufacturing.
Just as important, they eliminate decades of guesswork.
Tribes can now plan with clearer expectations. Lenders can assess risk more accurately. Tribal finance officers can focus less on defensive compliance and more on long-term strategy.
At the TTAC meeting Monday, a senior Treasury official summed it up bluntly: tribes know best the economic needs of their own communities. It took a surprisingly long time for that idea to become regulatory policy.
The work isn’t finished.
Tribal leaders used the Dec. 15 meeting to press Treasury on the next unresolved issue: partially owned tribal enterprises. Joint ventures and mixed-ownership structures are increasingly common in large-scale development, and the tax treatment of those entities remains unclear.
Implementation also matters. The IRS office charged with supporting tribes — the Office of Indian Tribal Governments — has seen staffing cuts, raising questions about whether the agency has the capacity to roll out the rules smoothly.
In other words, clarity on paper still has to become clarity in practice.
There’s no victory lap here. No one in Indian Country is pretending these rules solve every problem.
But there is a quiet significance to what happened this week.
After decades of navigating ambiguity, tribes now have something closer to what they asked for all along: clear rules that recognize them as governments, reduce friction with federal tax authorities and allow them to design economic strategies on their own terms.
For many in Indian Country, the question is no longer why it took 30 years — but how quickly clarity can translate into housing, scholarships, jobs and stronger tribal economies.
