IRS Finalizes Rules on Tribal Government Tax Classification (1)

The Treasury Department and the IRS finalized rules Monday on tribal businesses’ exemption from federal income taxes.

The final regulations (TD 10039; RIN 1545-BQ13) provide that wholly owned tribal entities like tribally chartered corporations—for-profit businesses owned by tribes—generally aren’t recognized as separate entities and thus aren’t subject to federal income tax.

However, the tribal businesses are considered separate under the rules for purposes of assessing federal employment taxes and certain federal excise taxes.

The final rules also expand tribal access to clean energy tax credits, for which they became eligible under the 2022 tax-and-climate law. Previously, their tax-exempt ...