26 U.S.C. § 7871 — Indian tribal governments treated as States for certain purposes

(a) General rule. For the purposes listed below, an Indian tribal government^* is treated the same as a State:
(1) When figuring out whether — and how much of — a gift or contribution to (or for the use of) that tribal government (or one of its political subdivisions) can be deducted, under: (A) section 170 (the income-tax deduction for charitable contributions and gifts); (B) sections 2055 and 2106(a)(2) (the estate-tax deduction for transfers for public, charitable, and religious purposes); or (C) section 2522 (the gift-tax deduction for charitable and similar gifts).
(2) Subject to the extra rule in (b), for exemptions from, credits or refunds of, or payments related to excise taxes under: (A) chapter 31 (tax on special fuels); (B) chapter 32 (manufacturers' excise taxes); (C) subchapter B of chapter 33 (tax on communications); or (D) subchapter D of chapter 36 (tax on using certain highway vehicles).
(3) For section 164 (the deduction for taxes paid).
(4) Subject to the extra rules in (c), for section 103 (the tax exemption for State and local government bonds).
(5) For section 511(a)(2)(B) (about taxing colleges and universities that are arms of governments or their subdivisions).
(6) For (A) section 105(e) (accident and health plans), (B) section 403(b)(1)(A)(ii) (taxing certain employer contributions to employee^* annuities), and (C) section 454(b)(2) (discount obligations).
(7) For (A) chapter 41 (tax on excess spending to influence legislation) and (B) subchapter A of chapter 42 (private foundations).

(b) Additional requirements for excise tax exemptions. The excise-tax treatment in (a)(2) only applies to a transaction if — on top of whatever else the law normally requires for a similar State transaction — the transaction is carrying out an essential government function of the tribal government.

(c) Additional requirements for tax-exempt bonds.
(1) In general. The tax exemption in section 103(a) applies to a bond issued by a tribal government (or its subdivision) — other than a bond described in (2) — only if substantially all the proceeds of the bond issue are used for an essential government function.
(2) No exemption for private activity bonds. Except as allowed in (3), section 103(a)'s exemption does not apply to a "private activity bond^*" (as defined in section 141(a)) issued by a tribal government or its subdivision.
(3) Exception for certain private activity bonds. (A) In general. For a bond covered by this paragraph: (i) the ban in (2) doesn't apply; (ii) the bond is treated as a "qualified small issue bond"; and (iii) section 146 doesn't apply. (B) Which bonds qualify. This paragraph covers a bond if: (i) at least 95% of the issue's net proceeds go toward acquiring, building, or improving depreciable property that's part of a manufacturing facility (as section 144(a)(12)(C) defines it); (ii) the issuer is a tribal government or its subdivision; (iii) at least 95% of the net proceeds finance property that (I) sits on land that has been part of the tribe's "qualified Indian lands" for the full five years before the bond is issued, and (II) will be owned and run by the issuing tribe; (iv) the bond wouldn't otherwise count as a private activity bond, apart from (C) below; (v) at the time of issuance, it's reasonable to expect the employment rule in (D)(i) will be met; and (vi) no main user of the facility is a person described in section 144(a)(6)(B). Section 150(a)(5) applies when checking requirement (iii). (C) Private activity bond rules apply. A bond covered by this paragraph (other than one described in (1)) is still treated as a private activity bond for other purposes of this title. (D) Employment requirements. (i) The employment test is met, for each calendar year of the "testing period," if the total face value of outstanding tax-exempt private activity bonds for the facility's establishment is no more than 20 times the wages (as section 3121(a) defines them) paid the previous year to enrolled tribal members (or their spouses) working there. (ii) If the test fails at the end of any testing-period year, section 103's exemption stops applying to interest on those bonds earned after that year — unless the test would have passed using the bond balance as of 90 days after that year-end instead. (iii) The "testing period" means each calendar year starting more than two years after the bonds (or, for refinanced bonds, the original bonds) were issued. (E) Definitions. "Qualified Indian lands" means land the United States holds in trust for a tribe. "Indian tribe" means any tribe, band, nation, or organized group recognized as eligible for special U.S. programs and services because of Indian status. "Net proceeds" has the meaning given in section 150(a)(3).

(d) Treatment of subdivisions of tribal governments as political subdivisions. For the purposes listed in (a), a subdivision of a tribal government counts as a political subdivision of a State only if the Secretary^* decides — after consulting the Secretary of the Interior — that the subdivision has been given the power to carry out one or more major government functions of the tribe.

(e) Essential governmental function. This term does not include any function that State and local governments with general taxing power don't normally perform.

(f) Tribal economic development bonds. (1) Allocation of limitation. (A) The Secretary, consulting the Secretary of the Interior, must divide up the national limit on tribal economic development bonds among tribal governments however the Secretary thinks is appropriate. (B) That national limit is $2,000,000,000. (2) Bonds treated as tax-exempt. For a "tribal economic development bond": (A) despite the extra rules in (c), the bond is treated the same as if a State had issued it; (B) the issuing tribal government and its instrumentalities are treated as a State for section 141; and (C) section 146 doesn't apply. (3) What counts as a tribal economic development bond. (A) It's a bond issued by a tribal government that (i) would qualify for the section 103 tax exemption if a State or local government had issued it, and (ii) the tribal government designates as a tribal economic development bond. (B) It does not include a bond if any of the proceeds finance (i) part of a building where class II or III gaming (as the Indian Gaming Regulatory Act defines it) happens, or other gaming-related property, or (ii) a facility located outside the Indian reservation (as section 168(j)(6) defines it). (C) A tribal government cannot designate more bonds this way than its share of the national $2 billion limit under (1).