Quinaults leading challenge to IRS rules

Quinault Indian Nation President Fawn Sharp is leading a challenge to an Internal Revenue Service policy she says unfairly imposes taxes on traditional tribal practices.

Sharp on Friday issued a letter to Secretary of the Treasury Timothy Geithner objecting to the IRS practice of applying what is known as the General Welfare Exclusion revenue rule to cultural ceremonial practices.

The impact, Sharp said in a statement, is to tax gifts and money given to families engaged in cultural customs that include funerals, naming parties, potlatches and other customs involving sharing of money and material goods. The policy treats those as taxable forms of income.

Sharp contends the IRS is “attempting to extend its authority into Indian Country using an obscure rule that is normally used only in connection with state governments and county governments.”

“We reject the use of intimidation to exact payment from tribal governments and individual Indian people,” she said. Indian nations, Sharp said, have historically not been taxed in such a manner.

“It is my intention to exercise the full authority of the Quinault government to protect tribal members and our cultural practices from the unwarranted and illegal efforts of the Internal Revenue Service,” Sharp said.

The General Welfare Exclusion rule, according to Sharp, relates to payments made to individuals by governmental bodies under laws to provide social benefit programs and promotion of the general welfare. The IRS has determined that gifts from tribal governments for cultural ceremonies and the general welfare in the form of per capita payments constitutes taxable income, according to Sharp.

“Such new taxes impose a burden on tribal members already experiencing hardship, and the IRS actions constitute a U.S. governmental encroachment on the inherent authority of the Quinault government,” Sharp said.

In August, tribal leaders from Montana, Oregon, Idaho, Washington, California and New York met in Spokane and asked President Barack Obama to intervene and declare a three-year moratorium on the IRS taxation efforts.

Lummi Nation Chairman Clifford Cultee and Sycuan Band of the Kumeyaay Nation Chairman Daniel Tucker (in California) have agreed to join with the Quinault president “in a concerted effort to reverse the IRS General Welfare rule in Indian Country,” a news release said.

“The U.S. Internal Revenue Service will not be permitted to encroach on Lummi governmental authority and its taxation of cultural practices will be firmly rebuffed,” Cultee said.

As the president of the Affiliated Tribes of Northwest Indians, Sharp has requested a formal resolution from all 52 Indian government delegations at the upcoming 59th annual convention of that organization.

The group’s General Assembly is expected to endorse the Quinault position, according to the new release.