Doing Business with Native American Tribes in Nevada– Part 6

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This is the sixth in a series of articles on doing business with Native American Tribes in Nevada.  These articles provide an overview of the political and business structures employed by Indian tribes, as well as the advantages and challenges of doing business in Indian Country.

Incentives for Doing Business With Indian Tribes

Accelerated Depreciation

Businesses operating on tribal reservations may accelerate the rate of depreciation of property used within the reservation.  Property normally depreciated over twenty years may be depreciated over twelve years.  Property normally depreciated over five years may be depreciated over three years.  Property normally depreciated over three years may be depreciated over two years.

Federal Governmental Contracting Preferences

Businesses with a majority of Indian ownership can participate in federal sole source bidding for federal contracts under the Small Business Administration’s (“SBA”) 8A program.

Under the Buy Indian Act, the BIA has the authority to give tribes and Indian-owned businesses preferences in its procurement contracts.  The Indian Incentive Program is part of the Buy Indian Act and provides a 5% rebate to Department of Defense prime contractors on all amounts paid to Indian-owned economic enterprises or Indian organizations with at least 51% Indian ownership.

Under the HUB Zone program, businesses located on tribal land with at least 35% of its workers residing on the reservation are eligible for bidding preference on contracts with the Department of Agriculture.  The preference extends to competitive and sole source contracting.  The program also allows a 10% price evaluation preference in full and open competitive contracts.

Foreign Trading Zones

Businesses on a reservation and engaged in international trade can defer, reduce, or, in some cases, eliminate U.S. Customs duties on products imported to land on the reservation designated as a Foreign-Trade Zone.

Indian Wages and Insurance Tax Credits

Through 2016, employers can receive a tax credit of up to 20% of the amount of wages and health insurance for qualified employees who live on an Indian reservation.

Investment Tax Credit (New Market Tax Credits)

The Community Renewal Tax Relief Act of 2000 created New Markets Tax Credits (“NMTC”), which are tax credits to entities or individuals who create jobs or material improvements in low-income communities.  The NMTC program is administered through the U.S. Department of the Treasury’s Community Development Financial Institutions (“CDFI”) Fund.  The NMTC program expired on December 31, 2011, but was retroactively renewed by the American Taxpayer Relief Act of 2012 for another 2 years until January 2014.  To date, the program has not been extended.

No Federal and State Income Tax

The IRS has concluded that federally-recognized tribes and their federally-chartered corporations are not subjected to federal or state income tax.[1]  Unincorporated tribal instrumentalities, as well as business enterprises run directly by tribes are generally treated the same, as they are inseparable from the tribe itself.  The IRS determines their tax status based upon several indicia of governmental purpose and function.[2]  Instrumentalities meeting the test are entitled to tax benefits belonging to the tribe, including the ability to issue tax exempt bonds and to receive charitable contributions.

No State Sales Tax

Most states exempt transactions on tribal land from sales tax.

No State Property Tax

Trust land is not subject to state or local property taxes.[3]

 


 

[1] Rev. Rul. 67-284, 1967-2 C.B. 55; Rev. Rul. 81-295, 1981-2 C.B. 15; Rev. Rul. 94-16, 1994-1 C.B. 19; and Rev. Rul. 94-65, 1994-2 C.B. 14; GAO/GGD-97-91, Tax Policy: A Profile of the Indian Gaming Industry (May 1997).

[2] Rev. Rul. 57-128, 1957-1 C.B. 311.

[3] 25 C.F.R. § 1.4.

About the Author

Jay Young is a Las Vegas, Nevada attorney. His practice focuses on business law, business litigation, and acting as an Arbitrator and Mediator. Peers have named him an AV-Rated Lawyer, Best Lawyers, a Top 100 Super Lawyers in the Mountain States multiple years, and to the Legal Elite and Top Lawyers lists for many years. Mr. Young has been appointed a part time Judge, a Special Master to the Clark County, Nevada Business Court, as an arbitrator by the Nevada Supreme Court. He has been appointed as an arbitrator or mediator of well over 250 legal disputes from business disputes to personal injury matters. He has been named Best Lawyers for Arbitration. Mr. Young is a respected author of ten books, including A Litigator’s Guide to Federal Evidentiary Objections, A Litigator’s Guide to the Federal Rules of Evidence, and the Federal Court Civil Litigation Checklist.
Mr. Young can be reached at 702.667.4868 or at jay@h2law.com.