§7871: A Tool for Tribal Philanthropy

In 1982, Congress passed the Indian Tribal Governmental Tax Status Act, codified as Section 7871 of the Internal Revenue Code, treating Tribal Governments as State governments for a variety of specified tax purposes. One of these purposes was to allow Tribal Governments (and their political subdivisions) to receive tax-deductible donations.

While some tribal programs access this benefit without receiving a letter ruling, others have found it helpful to have a letter ruling from the IRS to provide for potential donors as an assurance of tax-deductibility for their gifts. If a tribe was not listed in one of the Revenue Procedures published by IRS in 1983 and 1984, it is required to get a Private Letter Ruling. However, if the tribe is so listed, it depends on the facts and circumstances whether a unit of the tribe needs to get its own ruling.

The awareness level of IRC 7871 in Indian Country and in the philanthropy world is varied. While some foundations, corporations and donors are familiar with the actual law, some simply know that Indian Tribes are eligible to receive tax-exempt contributions. Some may not understand the political subdivision aspect of the law (political subdivisions are determined by the power to tax, the power to police and the power of eminent domain). And some donors are unaware of the opportunity altogether.

More Native American tribes and their programs could take advantage of this opportunity. The utilization of this tax law opportunity will not only allow Indian Country to access “mainstream” philanthropy more easily, but it will help educate the broad range of people who interface with the philanthropy world about tribal sovereignty.