26 U.S.C. § 7873 — Income derived by Indians from exercise of fishing rights
submitted 38 years ago by Pub. L. 100-647 to r/title-26-INTERNAL-REVENUE-CODE · 561 words · no verdicts yet
Income tribal members earn from exercising treaty fishing rights is exempt from federal income and employment taxes. This covers fishing, processing, transporting, and selling fish caught under those rights. The exemption also covers Indian-owned businesses that do this work.
(a) In general.
(1) Income and self-employment taxes. Subtitle A does not tax income that (A) a member of an Indian tribe earns, either directly or through a qualified Indian entity, or (B) a qualified Indian entity earns, from a fishing rights-related activity of that tribe.
(2) Employment taxes. Subtitle C does not tax wages paid for work done in a tribe's fishing rights-related activity, when one tribal member pays another tribal member, or when a qualified Indian entity pays a tribal member.
(b) Definitions.
(1) Fishing rights-related activity. This means any activity directly tied to catching, processing, or transporting fish caught under the tribe's recognized fishing right, or to selling that fish — but only if tribal members did substantially all of the actual catching.
(2) Recognized fishing rights. This means fishing rights a tribe already had, as of March 17, 1988, under a treaty with the United States, an Executive order, or an Act of Congress.
(3) Qualified Indian entity. (A) An entity qualifies if: (i) it does a fishing rights-related activity of the tribe; (ii) tribal members of qualified tribes (or their spouses) own all of its equity; (iii) unless regulations say otherwise, if the entity does substantial processing or transporting of fish, at least 90% of its yearly gross income comes from fishing rights-related activities of one or more qualified tribes that each own at least 10% of the entity; and (iv) tribal members of qualified tribes handle substantially all of its management. (Equity owned by a member or spouse counts as owned by the tribe for test (iii).) (B) A tribe is a "qualified Indian tribe" for an entity if the entity is doing that tribe's fishing rights-related activity.
(c) Special rules.
(1) Distributions from a qualified Indian entity. If the entity pays a tribal member a distribution on their ownership share, that distribution counts as fishing-rights income to the extent it comes from the entity's fishing rights-related income.
(2) De minimis unrelated amounts may be excluded. If all but a tiny amount of what an entity (or an individual through the entity) earns would otherwise qualify for the tax break in (a)(1), or all but a tiny amount of what an individual is paid for services would otherwise qualify under (a)(2), then the whole amount gets the tax break — the small unrelated part doesn't disqualify it.
No tax shall be imposed by subtitle A on income derived—
by a member of an Indian tribe directly or through a qualified Indian entity, or
by a qualified Indian entity,
from a fishing rights-related activity of such tribe.
No tax shall be imposed by subtitle C on remuneration paid for services performed in a fishing rights-related activity of an Indian tribe by a member of such tribe for another member of such tribe or for a qualified Indian entity.
For purposes of this section—
The term “fishing rights-related activity” means, with respect to an Indian tribe, any activity directly related to harvesting, processing, or transporting fish harvested in the exercise of a recognized fishing right of such tribe or to selling such fish but only if substantially all of such harvesting was performed by members of such tribe.
The term “recognized fishing rights” means, with respect to an Indian tribe, fishing rights secured as of March 17, 1988, by a treaty between such tribe and the United States or by an Executive order or an Act of Congress.
The term “qualified Indian entity” means, with respect to an Indian tribe, any entity if—
such entity is engaged in a fishing rights-related activity of such tribe,
all of the equity interests in the entity are owned by qualified Indian tribes, members of such tribes, or their spouses,
except as provided in regulations, in the case of an entity which engages to any extent in any substantial processing or transporting of fish, 90 percent or more of the annual gross receipts of the entity is derived from fishing rights-related activities of one or more qualified Indian tribes each of which owns at least 10 percent of the equity interests in the entity, and
substantially all of the management functions of the entity are performed by members of qualified Indian tribes.
For purposes of clause (iii), equity interests owned by a member (or the spouse of a member) of a qualified Indian tribe shall be treated as owned by the tribe.
For purposes of subparagraph (A), an Indian tribe is a qualified Indian tribe with respect to an entity if such entity is engaged in a fishing rights-related activity of such tribe.
For purposes of this section, any distribution with respect to an equity interest in a qualified Indian entity of an Indian tribe to a member of such tribe shall be treated as derived by such member from a fishing rights-related activity of such tribe to the extent such distribution is attributable to income derived by such entity from a fishing rights-related activity of such tribe.
If, but for this paragraph, all but a de minimis amount—
derived by a qualified Indian tribal entity, or by an individual through such an entity, is entitled to the benefits of paragraph (1) of subsection (a), or
paid to an individual for services is entitled to the benefits of paragraph (2) of subsection (a),
then the entire amount shall be entitled to the benefits of such paragraph.
Source credit: (Added Pub. L. 100–647, title III, § 3041(a), Nov. 10, 1988, 102 Stat. 3640.)
- 1988Enacted · Pub. L. 100-647 · 102 Stat. 3640
A history note hasn’t been published yet. The record shows enactment by Pub. L. 100-647 on 1988-11-10.
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