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HIGHLIGHTS
OF THIS ISSUE




Bulletin No. 2026–5
January 26, 2026

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

ADMINISTRATIVE
REG-112829-25, page 452.

These proposed regulations would amend regulations under
section 3406 to change the threshold for when certain third
party settlement organizations (TPSOs) are required to perform backup withholding. These proposed regulations would
clarify that in the case of certain payments made through
third parties, the amount subject to backup withholding
under section 3406 is determined by taking into account
the exception for de minimis payments by TPSOs in section
6050W(e). These proposed regulations would also clarify the
amount subject to backup withholding and clarify situations
when the threshold does not apply. The proposed regulations
reflect recent changes to the statutory law.

ADMINISTRATIVE, INCOME TAX
REG-113515-25, page 455.

This document contains proposed regulations regarding the
deduction for certain taxpayers for an amount up to $10,000
of qualified passenger vehicle loan interest. This document
also contains proposed regulations regarding new information reporting requirements for certain persons who, in a
trade or business, receive from any individual interest aggregating $600 or more for any calendar year on a specified
passenger vehicle loan, including applicable penalties for failures to file information returns or furnish payee statements
as required. The proposed regulations would affect taxpayers that may deduct qualified passenger vehicle loan interest, and also persons subject to these information reporting
requirements. This document also provides notice of a public
hearing on these proposed regulations.

Finding Lists begin on page ii.

ADMINISTRATIVE, EMPLOYMENT TAX,
EXCISE TAX, INCOME TAX
T.D. 10039, page 403.

These final regulations contain amendments to provisions
of 26 CFR part 1 (Income Tax Regulations) under section
6417 of the Internal Revenue Code (Code) and 26 CFR part
301 (Procedure and Administration Regulations) under
section 7701 of the Code that address the Federal tax
treatment of an entity wholly owned by one or more Indian
Tribal governments within the meaning of section 7701(a)
(40) that is organized or incorporated under the laws of
the Tribe or Tribes that own it (final regulations). Specifically, the final regulations provide that such an entity is
not recognized as an entity separate from its owner for
Federal income tax purposes, but is recognized as separate for employment and excise tax purposes. Additionally, the final regulations provide that such entities, as
well as corporations incorporated under section 17 of
the Indian Reorganization Act of 1934, as amended, 25
U.S.C. 5124, or under section 3 of the Oklahoma Indian
Welfare Act, as amended, 25 U.S.C. 5203, are treated
solely for purposes of section 6417 (“Elective payment of
applicable credits”) as instrumentalities of the Indian Tribal
government(s) that own them.

EXCISE TAX
Announcement 2026-2, page 447.

Announcement 2026-2 provides important information for
taxpayers who are liable for the tax on petroleum under
§ 4611 of the Internal Revenue Code.

REG-103430-24, page 447.

These proposed regulations would amend the Branded Prescription Drug Fee Regulations regarding the annual fee
imposed on covered entities engaged in the business of
manufacturing or importing certain branded prescription
drugs by section 9008 of the Patient Protection and Affordable Care Act, as amended. These proposed regulations
reflect statutory changes made to Medicare Part D that,
in turn, affect the calculation of the branded prescription
drug fee.

INCOME TAX
T.D. 10040, page 416.

This document contains final regulations regarding the exclusion from gross income of certain Tribal general welfare benefits. The regulations address the requirements that apply to
determine whether the benefits an Indian Tribal government
program provides qualify as Tribal general welfare benefits.
These regulations affect Indian Tribal governments, agencies
or instrumentalities of such governments, Federally recognized
Tribes, members of such Tribes, such members’ spouses and
dependents, and other Tribal program participants.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.

Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

January 26, 2026 

Bulletin No. 2026–5

Part I
26 CFR 1.6417-1: Elective payment election of
applicable credits; 26 CFR 301.7701-1: Classification of organizations for federal tax purposes

T.D. 10039

DATES: Effective date: These regulations
are effective on January 15, 2026.
Applicability dates: For dates of applicability, see §§ 301.7701-1(f) and 1.64171(q).

DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Parts 1 and 301

FOR FURTHER INFORMATION
CONTACT: Concerning the final regulations, contact Iris Chung of the Office of
Associate Chief Counsel (Passthroughs,
Trusts, and Estates) at (202) 317-5279
(not a toll-free number).

Entities Wholly Owned by
Indian Tribal Governments

SUPPLEMENTARY INFORMATION:

AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final rule.
SUMMARY: This document contains
final regulations regarding the Federal tax
classification of entities wholly owned by
Indian Tribal governments (Tribes). The
final regulations provide that entities that
are wholly owned by Tribes and organized
or incorporated under the laws of one or
more of the Tribes that own them generally
are not recognized as separate entities for
Federal tax purposes. The final regulations
also provide that such entities, as well as
certain Tribal corporations chartered by
the Department of the Interior (DOI), are
recognized as separate entities for Federal
employment and certain Federal excise
tax purposes. In addition, the final regulations provide that, for purposes of making elective payment elections (including
determining eligibility for and the consequences of such elections) for energy
credits under the Inflation Reduction Act
of 2022, each of these types of Tribal entities is treated as an instrumentality of one
or more Indian Tribal governments.

Authority
This document contains amendments
to provisions of 26 CFR part 1 (Income
Tax Regulations) under section 6417 of
the Internal Revenue Code (Code) and
26 CFR part 301 (Procedure and Administration Regulations) under section 7701
of the Code that address the Federal tax
treatment of certain Tribal entities wholly
owned by one or more Indian Tribal governments1 (final regulations).
Section 6417(h) provides an express
delegation of authority to the Secretary of
the Treasury or the Secretary’s delegate
(Secretary) relating to elective payment
elections under section 6417 (section 6417
elections), stating, “[t]he Secretary shall
issue such regulations or other guidance
as may be necessary to carry out the purposes of this section, including guidance
to ensure that the amount of the payment
or deemed payment made under this section is commensurate with the amount of
the credit that would be otherwise allowable (determined without regard to section
38(c)).”
Section 7701(a)(40) provides an express
delegation of authority to the Secretary
related to identifying Indian Tribal gov-

ernments for Federal tax purposes, stating,
“[t]he term ‘Indian tribal government’
means the governing body of any tribe,
band, community, village, or group of
Indians, or (if applicable) Alaska Natives,
which is determined by the Secretary, after
consultation with the Secretary of the Interior, to exercise governmental functions.”
Finally, section 7805(a) of the Code
provides an express delegation of authority to the Secretary to “prescribe all needful rules and regulations for the enforcement of [the Code], including all rules and
regulations as may be necessary by reason
of any alteration of law in relation to internal revenue.”
Background
I. Overview of Prior Guidance
The Federal government has long
recognized the unique aspects of Tribal
sovereignty and Tribal sovereign immunity. Tribes themselves are not subject to
Federal income tax under the Code.2 IRS
guidance on the issue in the 1960s raised
questions about the extent to which Tribal
corporations incorporated under section
17 of the Indian Reorganization Act of
1934 (IRA), as amended, 25 U.S.C. 5124
(section 17 corporations) or under section
3 of the Oklahoma Indian Welfare Act,
as amended, 25 U.S.C. 5203 (section 3
corporations) should share the Tribe’s
Federal income tax status. In response,
the IRS published further guidance and
issued proposed regulations in 1996 on
the treatment of section 17 corporations
and section 3 corporations for Federal
tax purposes. See the notice of proposed
rulemaking, Simplification of Entity Classification Rules (PS–43–95), published in
the Federal Register (61 FR 21989) on
May 13, 1996 (explaining the basis for the

The term “Indian Tribal government,” also referred to as a “Tribe” herein, is defined as a federally recognized Tribe pursuant to the Federally Recognized Indian Tribe List Act of 1994,
Public Law 103-454, 108 Stat. 4791 (List Act). Pursuant to the List Act, the Secretary of the Interior is required to publish annually a list of all federally recognized Tribes. This definition is
also consistent with Revenue Procedure 2008-55 (2008-39 I.R.B. 768), which provides that the Treasury Department and the IRS utilize current or future lists of federally recognized Tribes
published annually under the List Act by the DOI Bureau of Indian Affairs, for identification of Indian Tribal governments for purposes of section 7701(a)(40). See 89 FR 944 (January 8,
2024) for the most current list published by the DOI, Bureau of Indian Affairs.
2
See Rev. Rul. 67-284, 1967-2 C.B. 55. However, Tribes generally are subject to Federal employment taxes. Employment taxes refers to Federal Insurance Contributions Act (FICA) (consisting of both social security and Medicare taxes), Federal Unemployment Tax Act (FUTA), and Income Tax Withholding. Section 3306(c)(7) of the Code provides an exception from FUTA
taxes under certain circumstances. Further, subject to applicable law, including statutes (such as section 7871 of the Code) and treaties or agreements with the United States, Tribes are subject
to Federal excise taxes. See Rev. Rul. 94-81, 1994-2 C.B. 412.
1

Bulletin No. 2026–5

403

January 26, 2026

proposed rule later adopted in § 301.77011(a)(3)).
On December 18, 1996, the Department of the Treasury (Treasury Department) and the IRS published final
regulations (TD 8697) in the Federal
Register (61 FR 66584) under section
7701, known as the entity classification regulations. These regulations (at
§ 301.7701-1(a)(3)) make clear that
entities formed under local laws are not
always recognized as separate entities
for Federal tax purposes. For example,
an organization wholly owned by a State
is not recognized as a separate entity for
Federal tax purposes if it is an integral
part of the State. Similarly, these regulations (until their amendment by this Treasury decision) provided that section 17
corporations and section 3 corporations
are not recognized as separate entities for
Federal tax purposes. These regulations,
however, did not specifically address
whether an entity organized or incorporated under Tribal law and wholly owned
by a Tribe (that is, a wholly owned Tribal
entity) is recognized as a separate entity
for Federal tax purposes.
The preamble to TD 8697 stated that
the IRS received a number of comments
asking for clarification of the tax treatment of wholly owned Tribal entities. 61
FR 66584. The preamble also indicated
that the Treasury Department and the IRS
continued to study the issue and would
issue additional guidance, if necessary. Id.
at 66585-86.
II. Tribal Consultation
Over the past several decades, Tribes
have sought clarity concerning the Federal tax status of wholly owned Tribal
entities, in part to provide certainty for
Tribal economic development and to support the generation of revenue for Indian
Tribal governments. To obtain Tribal
input on the issue before publishing the
proposed regulations, and in accordance
with Executive Order 13175 (November
6, 2000), “Consultation and Coordination
with Indian Tribal Governments,” and the
Treasury Department’s Tribal Consultation Policy (80 FR 57434, September 23,
2015), superseded by Treasury Order 11204 (November 22, 2023), the Treasury
Department and the IRS held Tribal con-

January 26, 2026

sultations on the issue on June 21 and June
22, 2023, October 8 and 10, 2019, and a
listening session on December 3, 2019.
During Tribal consultations, Tribes
have explained that they view incorporating corporations under Tribal law as
an exercise of their inherent sovereign
authority to generate governmental revenue, self-govern the use of that revenue
according to their own laws, and self-determine the use of that revenue for their
citizenry. Tribes highlighted that incorporating corporations under Tribal law
enables Tribes to create entities that meet
their emerging revenue opportunities,
establish guidelines for the operation of
these entities that are culturally appropriate and protect Tribal assets, and dissolve
them when they are no longer needed.
Tribes also highlighted that clarifying the
status of corporations incorporated under
Tribal law is consistent with recent Federal policy to promote Tribal sovereignty,
self-governance, and self-determination in
economic development activities.
In contrast, Tribes highlighted that section 17 and section 3 corporations are not
always sufficient to meet their needs. The
incorporation process for these entities is
a lengthy multi-step Federal process that
subjects Tribal authority to Federal oversight and approval and results in increased
administrative costs to Tribes. In addition,
an act of Congress is required to dissolve
the chartered entity.
This issue has taken on increased
salience in recent years with the enactment of laws that extend greater access
to capital and new economic opportunities to certain governments (including
Indian Tribal governments), tax-exempt
organizations, and other entities. Tribes
have reiterated their requests for guidance
through meetings of the Treasury Tribal
Advisory Committee and other Tribal
consultations.
III. Proposed Regulations
In light of the considerations of Tribal
sovereignty
and
self-determination
described previously, on October 9, 2024,
the Treasury Department and the IRS published a notice of proposed rulemaking
(REG-113628-21) in the Federal Register
(89 FR 81871), which provided proposed
guidance under sections 6417 and 7701

404

(proposed regulations). See the preamble
to the proposed regulations for additional
information regarding the developments
leading to this rulemaking.
The proposed regulations proposed to
amend the existing section 7701 regulations to make clear that entities wholly
owned by Tribes and organized, incorporated, or authorized under the laws of
the Tribes that own them generally are not
recognized as separate entities for Federal tax purposes. As has been the case
with Tribes and section 17 corporations
or section 3 corporations, the proposed
regulations proposed that an entity wholly
owned by one or more Indian Tribal governments, within the meaning of section
7701(a)(40), that is organized or incorporated under the laws of the Tribe or
Tribes that own the entity, or organized
or incorporated under the laws of one or
more of the owning Tribes and authorized
by all of the other owning Tribes (wholly
owned Tribal entity), would not be recognized as a separate entity for Federal tax
purposes (and thus not subject to Federal
income tax). The use of the term “organized” includes the creation of Tribal entities other than corporations. For instance,
a single member limited liability company (LLC) organized under the laws of
the Tribe that owns the LLC would be a
wholly owned Tribal entity covered by the
proposed regulations. Accordingly, such
wholly owned entities generally would be
viewed as one and the same as the Tribes
that own them for Federal income tax purposes and therefore are not subject to Federal income tax.
In addition, the proposed regulations
proposed to amend the existing section
6417 regulations to provide that wholly
owned Tribal entities, section 17 corporations, and section 3 corporations are
treated, for purposes of making section
6417 elections (including determining
eligibility for and the consequences of
such elections), as instrumentalities of
the Indian Tribal government(s) that
wholly own them. As a result, the wholly
owned Tribal entity itself, rather than the
Indian Tribal government(s) owning the
entity, would be required to make a section 6417 election for an applicable credit
determined with respect to any applicable
credit property held directly by the wholly
owned Tribal entity.

Bulletin No. 2026–5

A. Wholly Owned Tribal Entity
Requirements Under Proposed
Regulations
1. Tribal law
The proposed regulations recognized
that Tribal law is established by each
individual Tribe. The notice of proposed
rulemaking stated that, where multiple
Tribes work together to establish an entity
that is owned by more than one Tribe,
each Tribe would need to provide for the
entity under its own laws.
2. Wholly owned
The notice of proposed rulemaking
noted that, as is the case for determining
the ownership of all corporations (including a corporation wholly owned by a State
or other government), the determination
of whether an outside investor (a person
other than a Tribe) holds equity in a Tribal
entity, such that it would fail to be wholly
owned by one or more Indian Tribal governments for Federal tax purposes, would
take into account principles of Federal tax
law, such as the substance over form doctrine, debt versus equity analyses, and the
economic substance doctrine.
Under the proposed regulations, an
entity could satisfy the wholly owned
requirement through a multi-Tribe ownership structure, so long as the entity is organized or incorporated under each Tribe’s
laws. Proposed § 301.7701-1(a)(4)(iii)(D)
(Example 4) illustrates an example of the
organizational structure of such an entity.
The proposed regulations did not
address an entity formed under Tribal law
that was not also wholly owned by one or
more Indian Tribal governments for Federal tax purposes.
IV. Elective Payment Elections
Under 26 CFR 1.6417-1(f) as of April
1, 2025, section 17 corporations and section 3 corporations were treated as “disregarded entities” for purposes of section
6417, and the applicable entity owner of
a disregarded entity that directly holds
applicable credit property was required
to make a section 6417 election for applicable credits determined with respect to
such property pursuant to § 1.6417-2(a)

Bulletin No. 2026–5

(1)(ii). Under the proposed regulations,
for purposes of making a section 6417
election (including determining eligibility for and the consequences of such
election), entities described in proposed
§ 301.7701-1(a)(4)(i) (that is, section 17
corporations, section 3 corporations, and
wholly owned Tribal entities), would
be treated as instrumentalities of Indian
Tribal governments. This change would
mean that an entity described in proposed
§ 301.7701-1(a)(4)(i) that directly owns
applicable credit property, rather than the
entity’s owner or owners, would make the
section 6417 election. Such an entity generally would do so by filing a Form 990T, Exempt Organization Business Income
Tax Return, as described in § 1.6417-1(b)
(2), using its own name and employer
identification number.
Given that proposed § 301.7701-1(a)
(4)(i) generally provided that an entity
owned by multiple Tribes is not recognized
as a separate entity from those Tribes for
Federal income tax purposes, treating the
entity as a “disregarded entity” for section
6417 purposes would have required each
of the entity’s owners to make a section
6417 election with respect to an applicable credit determined with respect to an
applicable credit property owned directly
by the entity. That approach would have
been administratively burdensome and
complex for the Tribes that own the entity
as well as for the IRS. Given the need for
coordination among these Tribes in making consistent tax filings, that approach
could also have resulted in cases in which
the amount of the total payments or
deemed payments claimed under section
6417 might not be commensurate with the
amount of the underlying credit. In addition, even for an entity owned by a single
Tribe, the entity directly owning the applicable credit property may be better positioned to fulfill the pre-filing registration
and other requirements to make the section 6417 election. Accordingly, the proposed regulations were intended to simplify the filing obligations for Tribes and
their wholly owned entities and ensure
that the amount of any payment or deemed
payment made under section 6417 will be
commensurate with the amount of the
credit that would be otherwise allowable.
In general, the determination of
whether an entity is an agency or instru-

405

mentality is analyzed on a facts and circumstances basis. In determining whether
an entity is an agency or instrumentality
for Federal tax purposes, Federal courts
have applied the six-factor test in Rev.
Rul. 57-128, 1957-1 C.B. 311, which generally provides guidance on whether an
entity is an instrumentality for purposes
of the exemptions from employment taxes
under sections 3121(b)(7) and 3306(c)(7)
of the Code. See, e.g., Rose v. Long Island
Railroad Pension Plan, 828 F.2d 910, 918
(2d Cir. 1987), cert. denied, 485 U.S. 936
(1988); Berini v. Federal Reserve Bank of
St. Louis, Eighth District, 37 Employee
Benefits Cas. 1072, 420 F. Supp. 2d 1021
(E.D. Mo. 2005).
The special rule in proposed § 1.64171(c)(7) is informed in part by administrative considerations and would be issued
under the express delegation of authority
in section 6417(h) to promulgate rules that
carry out the purposes of section 6417 and
ensure that the amount of the payment or
deemed payment made thereunder is commensurate with the amount of the underlying credit. No inferences should be drawn
from the instrumentality treatment in proposed § 1.6417-1(c)(7) as to whether any
particular entity is or is not an instrumentality for any other Federal tax purpose.
Summary of Comments and
Explanation of Revisions
The Treasury Department and the IRS
conducted Tribal consultations on December 16 -18, 2024, to obtain additional input
on questions involving the proposed regulations. The content of these consultations
is published in a Tribal consultation summary available at: https://home.treasury.
gov/system/files/136/Tax-Status-of-Tribally-Chartered-Corporations-Consultation-Summary.pdf. In addition, the Treasury Department and the IRS received
written comments in response to the proposed regulations. A public hearing on the
proposed regulations was held on January
17, 2025. Copies of written comments and
the list of speakers at the public hearing
are available at https://www.regulations.
gov or upon request.
After full consideration of all comments received on the proposed regulations, including through the Tribal consultations, and the testimony presented at

January 26, 2026

the public hearing, this Treasury decision
adopts the proposed regulations as final
regulations with clarifying changes and
modifications as described in this Summary of Comments and Explanation of
Revisions. Overall, commenters largely
supported the proposed regulations’ recognition of a Tribe’s inherent authority
to create businesses under Tribal law and
that wholly owned Tribal entities should
have parity with federally chartered Tribal
corporations.
Section I of this Summary of Comments and Explanation of Revisions
addresses the comments and revisions
applicable to § 301.7701-1. Section II of
this Summary of Comments and Explanation of Revisions addresses the comments
and revisions applicable to § 1.6417-1.
Unless otherwise indicated in this
Summary of Comments and Explanation
of Revisions, provisions of the proposed
regulations for which no comments were
received are adopted without substantive
change. Comments that merely summarize the proposed regulations, recommend
statutory revisions to section 7701, section 6417, or other statutes, address issues
that are outside the scope of this rulemaking (such as proposed changes to other
guidance), or recommend changes to IRS
forms are beyond the scope of these regulations and are not adopted. In addition,
comments that are related to executive
orders and prior guidance described in
the preamble to the proposed regulations
are beyond the scope of these regulations
and are not adopted. The final regulations
include non-substantive modifications,
including modifications that promote consistency across rules and examples, rearrange provisions, and improve the overall
clarity of the guidance. Such non-substantive modifications are not addressed in
this Summary of Comments and Explanation of Revisions.
I. Wholly Owned Tribal Entities Under
the Final Regulations
The final regulations under section
7701 provide that a wholly owned Tribal
entity (including a single member LLC
organized under the laws of the Tribe that
owns it) is not recognized as a separate
entity for Federal income tax purposes,
but is recognized as separate and treated

January 26, 2026

as a corporation for Federal employment
tax purposes and certain Federal excise
tax purposes. The final regulations also
provide that section 17 corporations and
section 3 corporations are recognized as
entities separate from the Tribe(s) that own
these entities for Federal employment and
certain Federal excise tax purposes.
A. Multi-Tribe ownership
The majority of commenters expressed
support for the recognition that Tribes may
organize or incorporate an inter-Tribal
entity serving multiple Tribes. However,
some commenters stated that it is impractical and unworkable to require that an
inter-Tribal entity wholly owned by more
than one Indian Tribal government (within
the meaning of section 7701(a)(40) of the
Code) be organized or incorporated under
the laws of each of the Indian Tribal governments with an ownership stake in the
entity. Commenters stated that the rules
should provide that an inter-Tribal entity
with a single charter authorized by each
Tribe’s governing body, or other body or
official acting pursuant to authority delegated by the Tribe’s governing body,
shares the tax status of the Tribe(s) that
own it. These commenters recommended
that, although authorized under each
Tribe’s legislative or administrative process, the inter-Tribal entity charter should
allow for a choice of law or forum clause
that subjects the inter-Tribal entity to the
corporate or limited liability company
laws of just a single Tribe. To clarify the
proposed regulations, the same commenters requested amendments to the language
of the regulations to require that the interTribal entity be authorized under each
owner Tribe’s law and to allow Tribes
to adopt their choice of law and forum.
Additionally, a commenter requested the
regulations be amended to allow Tribes
to enter into co-ownership arrangements
with respect to existing entities previously
organized and incorporated under the laws
of one or more Tribes.
Other commenters suggested that entities owned solely by multiple Tribal governments should be disregarded where (a)
the entity is formed under the laws of one
of the member Tribes, (b) the Tribe’s laws
permit ownership by the other Tribes, and
(c) each owner Tribe agrees to such out-

406

come by resolution or other suitable document.
Based on these comments, the final
regulations provide that an inter-Tribal
entity is not recognized as a separate
entity when organized or incorporated
exclusively under the laws of one or more
of the Indian Tribal governments that own
it. The final regulations also add a sentence that clarifies that whether an entity
is organized or incorporated under the
laws of one or more Indian Tribal government(s) is determined without regard
to any specified choice of law or forum.
These changes are intended to minimize
the administrative burden on Tribes seeking to form or acquire interests in interTribal entities that would generally not be
recognized as separate entities under these
final regulations.
The word “exclusively,” as used in
these regulations, means that the entity
must be formed under the laws of one or
more of the Indian Tribal governments
that own it and not the laws of an Indian
Tribal government that does not have
an interest in the entity or the laws of a
state or foreign government. Therefore,
an entity formed solely under the laws
of one owning Indian Tribal government
that is also owned by several other Indian
Tribal governments would be considered
as organized or incorporated exclusively
under the laws of one or more of the Indian
Tribal governments that own it and would
generally not be recognized as a separate
entity for Federal tax purposes.
B. State-recognized Tribes
One commenter expressed concern
that entities organized or incorporated
under the laws of a Tribe that is not federally recognized but recognized by a
State (State- recognized Tribe) would not
be covered under these proposed regulations and requested clarity as to how the
result might change, if at all, in proposed
§ 301.7701-1(a)(4)(iii)(D) (Example 4)
if one or more of the four participating
Tribes were State‑recognized Tribes.
The United States has a government-to-government relationship with
and recognizes the sovereignty of federally recognized Tribes. Revenue Procedure 2008-55 (2008-39 I.R.B. 768) treats
all federally recognized Tribes as Indian

Bulletin No. 2026–5

Tribal governments under section 7701(a)
(40). Federally recognized Tribes are not
subject to Federal income taxes. Section
301.7701-1(a)(3) has long provided that
section 17 corporations and section 3 corporations chartered under Federal law and
wholly owned by federally recognized
Tribes are not recognized as separate entities for Federal tax purposes. These final
regulations extend the same treatment to
entities organized or incorporated under
Tribal law and wholly owned by Tribes.
Because section 17 corporations, section
3 corporations, and wholly owned Tribal
entities are not recognized as separate
entities, they, like the Tribes that own
them, are not subject to Federal income
tax.
Corporations wholly owned by
State-recognized Tribes were not covered
by the proposed regulations and are not
covered by these final regulations. If one
or more of the four participating Tribes
in § 301.7701-1(a)(4)(iii)(D) (Example 4)
were a State-recognized Tribe or an entity
created by a State-recognized Tribe, then
the jointly owned corporation would not
satisfy the requirements of § 301.77011(a)(4) and would be respected as a separate legal entity that could be subject to
Federal income taxation.
C. State-chartered Tribally owned entities
Some commenters suggested that not
only entities wholly owned by Indian
Tribal governments and organized or
incorporated under the laws of their
Indian Tribal government owner, section
3, or section 17, but also Tribally owned
entities organized under State law should
be treated as not separate from the Tribe
for Federal tax purposes. The Treasury
Department and the IRS have previously
ruled that a corporation organized by an
Indian Tribe under State law is subject to
Federal income tax on the income earned
in the conduct of a commercial business
on and off the Tribe’s reservation. See Rev.
Rul. 94-16, situation 3, 1994-1 C.B. 19
(1994). The commenters proposed that the
relevant consideration for Federal income
tax purposes is not which government
created the corporate entity but, rather,
the tax status of the owner. Commenters
explained the advantages of State-chartered entities to include that their structure

Bulletin No. 2026–5

is more familiar to outside investors and
offers a broader spectrum of opportunities, particularly for business ventures
outside of the Tribe’s reservation. These
regulations only address the Federal tax
treatment of entities chartered by DOI or
under Tribal law. Accordingly, the Federal
tax treatment of State-chartered entities
is outside the scope of these regulations,
and, therefore, the final regulations do not
adopt this comment.
D. Majority-owned entities
Many commenters recommended
extending Federal income tax exemption
to entities with 51 percent or greater ownership by Tribes so that they are on parity with State and local governments to
receive the same tax advantages afforded
to State and local government entities in
public-private partnerships. Commenters
also requested clarifying guidance on the
tax treatment of partially owned entities,
including distinctions between wholly
owned, partially owned, and majority
owned entities.
As these matters are outside the scope
of the guidance contained in the proposed
regulations that these regulations finalize,
the final regulations do not adopt these
comments. The Treasury Department
and the IRS continue to consider possible
guidance on the Federal tax treatment of
corporations incorporated under Tribal
law that are owned in part by persons other
than Tribes. The Treasury Department and
the IRS would conduct Tribal consultation
prior to issuing any guidance in that area.
E. Wholly owned Tribal entities as
separate from the Tribe(s)
Some commenters suggested that
wholly owned corporations incorporated
under Tribal law should be considered
exempt from Federal income tax without the fiction that such corporations are
not separate from the parent Tribe. These
commenters explained that Revenue Ruling 94-16, 1994-1 C.B. 19, does not rely
on this concept. The commenters indicated that section 17 corporations share
the same tax status as the Tribe without
relying on a fiction that the section 17
corporation is not separate from the Tribe.
As support, the commenters indicated that

407

Federal law permits a Tribe to organize
both section 16 corporations and section
17 corporations, separate classes of entities with differing powers, purpose, and
function. Commenters further explained
that if a corporation incorporated under
Tribal law is not distinct from the Tribal
government, this could prohibit Tribes
from qualifying a wholly owned Tribal
entity for section 501(c)(3) status and,
thus, would require Tribes to charter nonprofit corporations under State law, contrary to Federal policy.
Under the existing framework of the
section 7701 regulations, an entity recognized as separate from the Tribe does
not share the same tax status as the Tribe.
Thus, in order to be an entity not subject
to Federal income tax under those regulations, section 17 corporations and section 3 corporations cannot be recognized
as separate and distinct from the Tribe for
Federal income tax purposes. These final
regulations treat wholly owned Tribal
corporations similarly to section 17 corporations and section 3 corporations. The
commenter is correct that a wholly owned
corporation incorporated under Tribal
law that is not separate and distinct from
the Tribal government cannot qualify for
section 501(c)(3) status. However, there
is nothing in these regulations to prevent
Tribes from creating non-stock Tribal
law entities that are described in section
501(c)(3), nor would doing so be contrary
to Federal policy.
F. Limited liability companies
Commenters requested the addition of
clarifying language to confirm that LLCs
that qualify as wholly owned Tribal entities are not recognized as separate entities for Federal income tax purposes and,
therefore, would not be subject to Federal
income tax. The commenters indicated
that confusion arises because an entity can
be classified as one type of entity for local
law purposes such as an LLC or partnership, and then make an entity classification election by filing Form 8832, Entity
Classification Election, with the IRS to be
taxed differently for Federal tax purposes.
A majority of commenters supported
the addition to the final regulations of a
separate illustrative example of an LLC
that qualifies as a wholly owned Tribal

January 26, 2026

entity that is not regarded as a separate
entity and, therefore, not subject to Federal income tax. Other commenters suggested that it is unnecessary for the proposed regulations to apply to entities other
than corporations that qualify as wholly
owned Tribal entities. Those commenters explained that since the section 7701
regulations treat a domestic eligible entity
with a single owner as disregarded unless
the owner otherwise elects, many Tribes
have created LLCs that qualify as wholly
owned Tribal entities with the understanding that the rules under the existing regulations apply. Commenters expressed
concern that adopting a rule that automatically disregards the separateness of all
wholly owned Tribal entities for Federal
tax purposes disrupts that understanding.
The treatment of limited liability companies for Federal tax purposes is determined under the general classification
rules of § 301.7701-3(a). However, the
term “organized” used in § 301.7701-1(a)
(4)(i) is meant to apply to LLCs organized
under Tribal law that are wholly owned by
one or more Tribe(s) (Tribally organized
LLC), which is consistent with both the
preamble to the proposed regulations and
proposed § 301.7701-1(a)(4)(iii)(C).
Comments indicate that taxpayers
understand that the proposed regulations
would treat a Tribally organized LLC with
a single member as not separate from the
Tribe for Federal tax purposes, and therefore not subject to Federal income tax under
these final regulations. Therefore, the final
regulations do not adopt these comments.
However, the Treasury Department
and the IRS understand the need for certainty in this area. Therefore, the final regulations adopt the general comments that
the examples provided in the regulation
should explicitly state that the rules apply
equally to Tribally organized LLCs.

subsidiary. A few commenters also suggested adding an example of a multi-tier
partnership entity similar to proposed
§ 301.7701-1(a)(4)(iii)(B) (Example 2).
Proposed § 301.7701-1(a)(4) did not
expressly state that entities that are owned
through a chain of entities that themselves are not recognized for Federal tax
purposes are not recognized as separate
entities for Federal tax purposes. In order
to ensure clarity on this point, the final
regulations add language in § 301.77011(a)(4) to clarify that the wholly owned
requirement can be met through ownership by other entities not recognized as
separate under § 301.7701-1(a)(4).
The final regulations, in § 301.77011(a)(4)(iii)(B) (Example 2), illustrate that
in a tiered structure where Corporation Z
is wholly owned by Corporation X and
Corporation X is wholly owned by Tribe
B, where both Corporation Z and Corporation X are organized or incorporated
exclusively under the laws of Tribe B,
both entities are not recognized as separate from Tribe B for Federal tax purposes
and are not subject to Federal income tax.
This example was intended to be a general illustration of the proposed rule that
subsidiaries in a tiered entity structure of
wholly owned Tribal entities are not recognized as separate entities for Federal
tax purposes and are, therefore, exempt
from Federal income tax. Revising the
example as suggested by the commenters
to specify that proposed § 301.7701-1(a)
(4)(iii)(B) (Example 2) involves a holding
company and a subsidiary would unnecessarily narrow the scope and relevancy
of this example, which was intended to be
a general illustration. Therefore, the final
regulations do not adopt this comment.

G. Multi-tier entity structures

One commenter requested adding an
example to confirm that a Tribally organized LLC would retain its status as not
regarded when it enters into a partnership
with a third-party for-profit corporation
formed under State law. Though the final
regulations do not add such an example,
the Treasury Department and the IRS confirm that the Federal tax status of a Tribally organized LLC would not be affected
by holding an interest in a partnership

Many commenters requested clarification in the final regulations that the
treatment of wholly owned Tribal entities
as not separate entities from their Tribal
owners applies equally to subsidiary entities. Similarly, many commenters also
suggested revising proposed § 301.77011(a)(4)(iii)(B) (Example 2) to indicate
that it involves a holding company and a

January 26, 2026

H. Partnerships with non-Tribally owned
entities

408

regardless of who the other partners in the
partnership were.
I. Section 17 corporation
A commenter recommended clarifying
that a section 17 corporation is a federally
chartered corporation created through a
lengthy incorporation process for a corporation with the DOI and the eventual
approval of such corporation’s charter.
These final regulations do not adopt
the recommendation in this comment concerning detailing the processes by which a
section 17 corporation is created because
the regulations do not modify or otherwise affect the incorporation process of
section 17 corporations and section 3 corporations. They do provide certainty that
wholly owned Tribal entities are accorded
the same tax treatment as section 17 corporations and section 3 corporations. The
final regulations do, however, adopt the
recommendation to change the description
of section 17 corporations and section 3
corporations to reflect that they are federally chartered corporations.
J. Tribal entity formation
Several commenters also requested
clarification that entities formed under
resolutions or interim measures, rather
than formal ordinances, are also afforded
Federal income tax exemption if established under Tribal law. The proposed
regulations did not address the specific
mechanisms or administrative processes
by which Tribes organize or incorporate
a wholly owned entity under their sovereign laws. While the final regulations do
not specifically adopt these comments by
providing the requested clarification, the
Treasury Department and the IRS confirm
that any acts to organize or incorporate a
wholly owned Tribal entity under the laws
of the Tribes would satisfy the requirements of being “organized under Tribal
law” for such entity to not be recognized
as a separate entity from the Tribe under
§ 301.7701-1(a)(4)(i).
K. Not subject to Federal income tax
A commenter recommended expressly
stating in the text of proposed § 301.77011(a)(4)(i) that section 17 corporations,

Bulletin No. 2026–5

section 3 corporations, and wholly owned
Tribal entities are not subject to Federal
income tax on income earned by them
in the conduct of commercial business,
investment, and/or other activities on or
off the organizing Tribe’s reservation or
Tribes’ reservations (as applicable). The
commenter suggested that, although proposed § 301.7701-1(a)(4)(iii)(A) through
(C) (Examples 1 through 3) illustrated
that entities wholly owned by one or more
Tribes and organized or incorporated
exclusively under the laws of such Tribe
or Tribes are both not recognized as separate entities for Federal tax purposes and
not subject to Federal income tax, additional language explicitly stating that such
entities are not subject to Federal income
tax is necessary in proposed § 301.77011(a)(4)(i) for consistency and to avoid any
ambiguity on this issue.
This commenter also indicated that
the use of the phrase “in the conduct of
commercial business” in connection with
the statement of exemption from Federal
income tax in the preamble to the proposed regulations creates uncertainty as
to the scope of the exemption from Federal income tax of section 17 corporations
and section 3 corporations, creating the
possibility of disputes regarding whether
income from investments or other activities or sources is excluded from the
exemption from Federal income tax.
Thus, the commenter requests clarification in the final regulations on the scope
of the exemption from Federal income tax
for section 17 corporations and section 3
corporations.
The Treasury Department and the IRS
adopt the recommendation and added language to § 301.7701-1(a)(4)(i) to clarify
that such entities are not subject to Federal
income tax. As such, the source of their
income is not relevant because their Federal tax status is not based on the source or
type of income earned. Accordingly, the
final regulations do not comment on the
nature or source of income excluded from
Federal income tax derived by section 17
corporations, section 3 corporations, or
wholly owned Tribal entities.
L. Federal income tax refunds
Some commenters requested that the
IRS defer to Tribes’ sole discretion to

Bulletin No. 2026–5

determine whether wholly owned Tribal
entities that have been in existence
for decades have consistently applied
§ 301.7701-1(a)(4) and relied on that provision for tax years prior to the final regulations’ publication date. By providing such
deference, these commenters suggest, the
IRS would respect Tribal sovereignty and
self-governance, and reduce administrative burdens. To that effect, some commenters suggested developing a specific
streamlined refund process for wholly
owned Tribal entities that may have paid
Federal income taxes for a period before
the final regulations’ publication date.
While the final regulations do not
adopt the foregoing comments, the Treasury Department and the IRS confirm that
Federal income tax refund requests may
be processed under the general principles of tax administration. In particular,
wholly owned Tribal entities that choose
to apply the final regulations retroactively
may seek income tax refunds by filing
Form 1120-X, Amended U.S. Corporation Income Tax Return, for tax years for
which the applicable period of limitations
is open and obtain the assistance of the
Indian Tribal Governments office of the
Tax Exempt and Government Entities
Division of the IRS to process their refund
requests.
M. Federal excise tax
1. Entity classification
The majority of commenters recommended that the final regulations treat section 17 corporations, section 3 corporations, and wholly owned Tribal entities as
entities that are separate from the Tribe(s)
that own these entities for Federal excise
tax purposes because Tribes create these
entities to limit the risk of liability to the
Tribes themselves. The commenters’ suggestion would be consistent with the treatment of disregarded entities as separate
from their owners for purposes of certain
Federal excise taxes under the special rule
in § 301.7701-2(c)(2)(v). Additionally, the
Background section of the preamble to the
proposed regulations notes at footnote 2
that while Tribes are not subject to Federal
income tax, they generally are subject to
Federal excise taxes absent a rule (such as
section 7871 of the Code) providing oth-

409

erwise. Other commenters requested that
the final regulations allow Tribes to elect
to treat a wholly owned entity as either
regarded or disregarded for Federal excise
tax purposes. These commenters asserted
that Tribes have a sovereign right to elect
specific Federal tax treatment.
In addition, several commenters
expressed concern that the rules applying
to “business entities” in § 301.7701-2(c)
(2)(i) and (v) may not include section
17 corporations, section 3 corporations,
or wholly owned Tribal entities. Section
301.7701-2(a) defines a “business entity”
as an entity recognized for Federal tax purposes, and § 301.7701-1(a)(3), as of April
1, 2025, provided that section 17 corporations and section 3 corporations were not
“recognized” for Federal tax purposes.
Similarly, proposed § 301.7701-1(a)(4)
(i) generally would not have recognized
section 17 corporations, section 3 corporations, or wholly owned Tribal entities as
separate entities for Federal tax purposes.
These commenters requested that the final
regulations explicitly treat these three
types of Tribal entities as separate entities
for Federal excise tax purposes. Specifically, commenters suggested modifying
§ 301.7701-2(c)(2)(v) to apply both to
business entities described in § 301.77012(c)(2)(i) and to Tribal entities described
in proposed § 301.7701-1(a)(4)(i). In
conjunction with this change, commenters also suggested modifying proposed
§ 301.7701-1(a)(4)(i) to provide an exception for cases where the (newly modified)
special rule relating to Federal excise
taxes at § 301.7701-2(c)(2)(v) applies to
Tribal entities.
The Treasury Department and the IRS
agree with the recommendation of the
majority of commenters to treat section 17
corporations, section 3 corporations, and
wholly owned Tribal entities as entities
separate from the Tribe(s) that own them
for Federal excise tax purposes. The final
regulations do not adopt these commenters’ specific recommendation to amend
§ 301.7701-2(c)(2)(v) because the rules
of § 301.7701-2 apply solely to “business
entities.” Instead, the final regulations
provide for this separate entity treatment
in § 301.7701-1. Specifically, while the
final regulations in § 301.7701-1(a)(4)
(i) provide the general rule that section
17 corporations, section 3 corporations,

January 26, 2026

and wholly owned Tribal entities are not
recognized as separate entities for Federal tax purposes, the final regulations in
§ 301.7701-1(a)(4)(iii) provide an exception under which such entities are treated
as separate entities for certain Federal
excise tax purposes under rules identical
to those of § 301.7701-2(c)(2)(v). This
aligns the rules applicable to section 17
corporations, section 3 corporations, and
wholly owned Tribal entities with the
existing rules under § 301.7701-2(c)(2)
(v) that treat disregarded entities as separate from their owners for certain Federal
excise tax purposes.
The Treasury Department and the IRS
decline to adopt the suggestion of some
commenters that Tribes be allowed to
elect the treatment of wholly owned Tribal
entities for Federal excise tax purposes.
Instead, as explained in the previous paragraph, the final regulations provide that
wholly owned Tribal entities (as well as
section 17 corporations and section 3 corporations) will, in all cases, be regarded as
separate entities for the Federal excise tax
purposes identified in § 301.7701-2(c)(2)
(v). This approach is consistent with most
commenters’ requests and aligns with the
existing Federal excise tax regime under
§ 301.7701‑2(c)(2)(v).
This approach also avoids a number
of administrative difficulties that taxpayers and the IRS have experienced with
respect to disregarded entities generally,
due to the interaction of the disregarded
entity rules and certain Federal excise tax
provisions. Many Federal excise tax provisions rely on State law, rather than Federal law, to determine when tax attaches
or whether to allow an excise tax credit
or refund. Federal excise taxes are generally transaction-based, and State law
often governs one or more aspects of a
transaction, such as when title to an article passes. As such, difficulties arose prior
to the 2007 regulations, TD 9356 (72 FR
45891, August 16, 2007), when an entity
that was regarded under State law, but disregarded under Federal tax law, engaged
in transactions subject to a Federal excise
tax. To address these problems, in 2007,
the Treasury Department and the IRS promulgated § 301.7701-2(c)(2)(v) to treat
wholly owned business entities otherwise
disregarded for Federal tax purposes as
separate from their owners for certain

January 26, 2026

Federal excise tax purposes. See TD 9356
(72 FR 45891, August 16, 2007) (adopting
final regulations and stating no comments
were received regarding the excise tax
provisions of the proposed regulations);
REG‑114371‑05 (70 FR 60475-60476,
October 18, 2005) (preamble to proposed
§ 301.7701-2(c)(2)(v), explaining reasons
for the change).
To prevent similar problems with
respect to Tribal entities, the final regulations adopt separate Federal excise tax
treatment, identical to that of § 301.77012(c)(2)(v), for section 17 corporations,
section 3 corporations, and wholly owned
Tribal entities. Having all wholly owned
Tribal entities on a uniform system for
Federal excise tax purposes that conforms
with the existing § 301.7701-2(c)(2)(v)
rules avoids inconsistency and promotes
sound tax administration.
Finally, other commenters requested
that wholly owned Tribal entities be not
recognized as separate entities for excise
tax exemption purposes but recognized
as separate entities for excise tax liability
purposes. These commenters requested
that the final regulations allow Tribes to
extend their sovereign privileges, such as
a tax exemption, to their wholly owned
entities while also permitting Tribes to
shield their assets from potential liabilities
by forming business entities. The Treasury Department and the IRS decline to
adopt this suggestion because excise tax
exemptions, such as those provided in
section 7871, are outside the scope of this
rulemaking.
2. Section 7871
In expressing their views on the classification of Tribal entities as separate
from the Tribe for Federal excise tax purposes, some commenters expressed concern about the potential impact of such
treatment on the section 7871 exemption
from certain Federal excise taxes. Those
commenters stated that section 17 corporations, section 3 corporations, and wholly
owned Tribal entities should be explicitly
permitted to claim Federal excise tax
exemptions to the same extent as Tribes
under section 7871. Some of those commenters suggested that language be added
to proposed § 301.7701-1(a)(4) to provide
that section 17 corporations, section 3 cor-

410

porations, and wholly owned Tribal entities are treated as an “Indian Tribal government” for purposes of section 7871 and
obsolete § 305.7871-1. Other commenters
requested that such entities be deemed
a “subdivision” for purposes of section
7871.
The final regulations do not adopt these
commenters’ suggestions, as section 7871
and any regulations thereunder are outside
the scope of this rulemaking. The proposed regulations did not address section
7871 or obsolete § 305.7871-1. Accordingly, the final regulations do not address
the existing law under section 7871 or
the availability of the section 7871(a)(2)
exemption from certain Federal excise
taxes for Tribes, section 17 corporations,
section 3 corporations, or wholly owned
Tribal entities.
N. Employment tax
Prior to the publication of this Treasury
decision, § 301.7701-1(a)(3) provided that
section 17 corporations and section 3 corporations are not recognized as separate
entities for Federal tax purposes. However, the regulations did not specifically
address whether a wholly owned Tribal
entity is recognized as a separate entity for
Federal employment tax purposes.
In general, employment tax responsibilities rest with an employer. Employers
are required to deduct and withhold Federal income taxes and Federal Insurance
Contributions Act (FICA) taxes from their
employees’ wages under sections 3402(a)
and 3102(a) of the Code, and are separately
liable for their share of FICA taxes as well as
for Federal Unemployment Tax Act (FUTA)
taxes under sections 3111 and 3301 of the
Code. These Federal income tax withholding, FICA, and FUTA taxes are collectively
referred to herein as “Federal employment
taxes.” Sections 3403, 3102(b), 3111, and
3301 provide that the employer is the person liable for the withholding and payment
of Federal employment taxes. In addition,
the employer is required to make timely
tax deposits, file Federal employment tax
returns, and issue wage statements (Forms
W-2) to employees, which are collectively
referred to herein as “other Federal employment tax obligations.”
An employer is generally defined as
the person for whom an individual per-

Bulletin No. 2026–5

forms services as an employee. See sections 3401(d), 3121(d), and 3306(a) of
the Code. If an entity were not recognized
as separate from its owner for Federal
employment tax purposes, the owner of
the entity would be treated as the employer
for purposes of Federal employment tax
liabilities and all other Federal employment tax obligations related to wages
paid to employees performing services for
the disregarded entity. In the context of
wholly owned Tribal entities, the IRS has
not previously issued guidance regarding
their employment tax treatment.
Outside the context of wholly owned
Tribal entities, § 301.7701-2(c)(2)(iv)(A)
and (B) treat business entities that are disregarded for Federal tax purposes as separate corporations for purposes of Federal
employment taxes and related reporting
requirements. Specifically, certain other
single-owner eligible entities (under
§§ 301.7701-1 through 301.7701-3) that
are disregarded as entities separate from
their owners for other Federal tax purposes are treated as entities separate from
their owners for Federal employment tax
purposes. See § 301.7701-2(c)(2)(iv)(A)
and (B).
Several commenters requested a provision treating wholly owned Tribal entities
separately for employment tax purposes
to ensure that such entities can assume
direct responsibility without burdening
the Tribes that own them. The final regulations adopt these comments and treat
wholly owned tribal entities as separate from their Tribal owners for Federal
employment tax purposes. As discussed
above, this approach is consistent with
the treatment of disregarded entities in
§ 301.7701-2(c)(2)(iv)(A) and (B), which
generally are disregarded as separate from
their owners for Federal tax purposes, but
regarded as separate for Federal employment tax purposes. Further, this approach
would generally not subject Tribes to liability for Federal employment taxes owed
with respect to employees performing
services for their wholly owned Tribal
entities, a result that many commenters
support. This approach also minimizes
administrative burdens, particularly for
inter-Tribal entities.
Other commenters expressly requested
that FICA and FUTA tax benefits applicable to Tribes be applied to wholly owned

Bulletin No. 2026–5

Tribal entities. Another commenter suggested that the final regulations should
confirm that wholly owned Tribal entities
share their owner’s Federal tax exemption
benefits from certain Federal employment
taxes and provide a wide range of hypothetical examples.
There are some Federal employment
tax provisions that specifically apply to
services performed in the employ of a
Tribe. For example, an exception from
FUTA taxes exists for service performed
in the employ of a Tribe, or any instrumentality that is wholly owned by a Tribe.
See section 3306(c)(7). Section 3306(u)
provides that, for FUTA purposes, the
term “Indian tribe” has the meaning given
to such term by section 4(e) of the Indian
Self-Determination and Education Assistance Act (codified at 25 U.S.C. 5304(e)),
and includes any subdivision, subsidiary,
or business enterprise wholly owned by
such an Indian tribe. 25 U.S.C 5304(e)
provides that “Indian Tribe” means,
inter alia, any Indian tribe, band, nation,
or other organized group or community
which is recognized as eligible for the
special programs and services provided
by the United States to Indians because of
their status as Indians.
Accordingly, even though wholly
owned Tribal entities are treated as separate from the Tribes for employment tax
purposes, they remain eligible for the
FUTA tax exception in section 3306(c)
(7) because section 3306(u) makes it clear
that for purposes of FUTA tax, the term
“Indian Tribe” has the meaning given
to such term by 25 U.S.C. 5304(e) and
includes “any subdivision, subsidiary, or
business enterprise wholly owned by such
an Indian tribe.”
As an example, if a Tribe establishes a
wholly owned Tribal entity, under the final
regulations, it will generally be treated as
a separate corporation for Federal employment tax purposes, but it will be treated as
an Indian Tribe for purposes of the FUTA
tax exception provided by section 3306(c)
(7) because it is a subdivision, subsidiary,
or business enterprise wholly owned by
the Tribe as defined in section 3306(u).
II. Elective Payment Elections
The final regulations provide that
wholly owned Tribal entities, section 17

411

corporations, and section 3 corporations
are treated, for purposes of making section 6417 elections (including determining eligibility for and the consequences of
such elections), as instrumentalities of the
Indian Tribal government(s) that wholly
own them. This is the same rule contained
in proposed § 1.6417-1, which stated that
an entity described in § 301.7701-1(a)(4)
(i) is treated as an instrumentality of the
Indian Tribal government(s) or subdivision(s) thereof that own(s) it.
Commenters generally supported the
proposed rule treating wholly owned
Tribal entities as instrumentalities of the
Tribes that own them for purposes of the
section 6417 elective payment election.
Some commenters requested clarification
on the application of the elective payment
election rules when an applicable credit is
generated by a wholly owned Tribal entity
jointly owned by multiple Tribes. As a
clarification, a wholly owned Tribal entity
that is jointly owned by multiple Tribes
would be treated as an instrumentality
for purposes of section 6417. The wholly
owned Tribal entity will determine any
applicable credit generated by the Tribal
entity’s activities and make the elective
payment election for any applicable credit
so determined. This avoids each Tribe
having to separately determine a credit
and separately make an elective payment
election. By following the procedural
rules in the section 6417 final regulations,
TD 9988 (89 FR 17584, March 11, 2024),
the wholly owned Tribal entity generally
will make the elective payment election
by completing pre-filing registration and
then filing a return including a completed
Form 990-T, Exempt Organization Business Income Tax Return, as described in
§ 1.6417-1(b)(2), using its own name and
employer identification number, any relevant source credit form(s), Form 3800,
General Business Credit (or its successor),
and any additional information, including supporting calculations, required in
instructions to the relevant forms. Any
refund resulting from the elective payment election would be paid to the wholly
owned Tribal entity. This treatment should
reduce overall complexity for Tribes and
the IRS as it reduces the number of necessary credit calculations and elective
payment elections and also helps ensure
any elective payment amount is commen-

January 26, 2026

surate with the amount of the otherwise
allowable credit.
Another commenter suggested that the
proposed regulations be revised to allow
Tribes the choice of having the Tribe or
the wholly owned Tribal entity make the
elective payment election because in some
cases it may be impractical for the wholly
owned Tribal entity to do so. The final regulations do not adopt this suggestion, consistent with the view of most commenters
who supported the rule providing that the
wholly owned Tribal entity that is treated
as an instrumentality must make the election. There also are additional administrative benefits gained for both Tribes and
the IRS by having certainty on how to
file elective payment elections. For example, it will be clear that the wholly owned
Tribal entity makes the elective payment
election when an entity is wholly owned
by multiple tribes. Thus, the final regulations provide that a wholly owned Tribal
entity is treated as an instrumentality of
an Indian Tribal government and such
instrumentality (and not the Indian Tribal
government) would make the elective
payment election.
A commenter suggested that, rather
than being treated as a payment of tax,
the elective payment amount should be
treated as a grant and paid prior to the
time a project is placed in service. The
statutory text of section 6417(a) expressly
requires the entity making an elective payment election with respect to an applicable credit to be treated as making a payment of tax equal to the amount of such
credit. Furthermore, the statutory text of
section 6417(d)(4) controls the timing of
an elective payment and provides that the
payment is treated as being made by the
applicable entity on the later of the due
date for the return or the date the return
is actually filed. As this comment could
only be adopted if statutory revisions were
made, these final regulations do not adopt
the commenter’s suggestions.
Several commenters recommended
that Tribes be given the option to monetize credits through transferability under
section 6418 of the Code, rather than only
being able to make elective payment elections under section 6417. The commenters
also suggested additional changes to the
section 6418 rules if Tribes were allowed
to make transfers. Tribal governments

January 26, 2026

(and their instrumentalities, pursuant to
§1.6417-1(c)(7)) are listed as applicable
entities under section 6417(d)(1)(A)(iv)
and section 6418(f)(2) expressly provides that an eligible taxpayer for section
6418 is any taxpayer not listed in section
6417(d)(1)(A). Thus, Tribal governments
(and their instrumentalities) are only
allowed to make elective payment elections under section 6417. As the comment
requesting the option to use section 6418
and the other comments suggesting additional section 6418 changes would require
statutory revisions, these final regulations
do not adopt the commenters’ suggestions.
Applicability Dates
The final regulations apply to taxable
periods, or taxable years for purposes of
section 6417, beginning on or after January 1, 2026. The final regulations provide that section 17 corporations, section
3 corporations, and wholly owned Tribal
entities are treated as instrumentalities
for purposes of making a section 6417
election, and as entities separate from
their owners for the Federal employment
and excise tax purposes identified in
§ 301.7701-2(c)(2)(iv) and (v). Accordingly, each such entity must have its own
employer identification number (EIN)
for these purposes. Each such entity must
separately calculate, report, and pay all
employment tax obligations identified in
§ 301.7701-2(c)(2)(iv) with respect to
its employees under its own name and
EIN for wages paid on or after January
1, 2026. With respect to taxable periods
beginning on or after January 1, 2026,
each such entity must separately report,
calculate, and pay taxes for any purpose
identified in § 301.7701-2(c)(2)(v) under
its own name and EIN. To ensure that
taxpayers have sufficient time to make
any necessary changes to their systems
in response to these final regulations, the
final regulations apply only to taxable
periods beginning on or after January 1,
2026.
For Federal income tax purposes only,
an entity may choose to apply § 301.77011(a)(4) to taxable periods beginning before
January 1, 2026, for which the applicable
period of limitations is open.
For section 6417 purposes, an entity
described in § 301.7701-1(a)(4)(i) may

412

choose to apply § 1.6417-1(c)(7) and (f)
to taxable years beginning before January
1, 2026, but only if the Indian Tribal government(s) that own the entity also apply
§ 1.6417-1(c)(7) and (f) consistently with
such entity for all such taxable years.
Special Analyses
I. Executive Order 13175: Consultation
and Coordination With Indian Tribal
Governments
Executive Order 13175 (Consultation and Coordination With Indian Tribal
Governments) prohibits an agency from
publishing any rule that has Tribal implications if the rule either imposes substantial, direct compliance costs on Indian
Tribal governments and is not required
by statute, or preempts Tribal law, unless
the agency meets the consultation and
funding requirements of section 5 of the
Executive order. This final rule would neither impose substantial, direct compliance
costs on Indian Tribal governments nor
preempt Tribal law within the meaning of
the Executive order.
II. Regulatory Planning and Review
The Office of Management and Budget’s Office of Information and Regulatory Analysis has determined that this regulation is not significant and is not subject
to review under section 6(b) of Executive
Order 12866. Therefore, a regulatory
impact assessment is not required.
The Executive Order 14192 designation for this final rule is anticipated to be
deregulatory.
III. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) (PRA) generally
requires that a Federal agency obtain the
approval of the Office of Management and
Budget (OMB) before collecting information from the public, whether such
collection of information is mandatory,
voluntary, or required to obtain or retain
a benefit. An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information displays a valid control number.

Bulletin No. 2026–5

The collection of information in these
regulations contain reporting and recordkeeping requirements. The recordkeeping requirements mentioned within these
final regulations are considered general
tax records under § 1.6001-1(e). These
records are required for the IRS to validate that taxpayers have met the regulatory requirements and are entitled to make
an elective payment election and to verify
the Federal tax classification of entities
described in these final regulations. For
PRA purposes, general tax records are
already approved by OMB under 15450047 for tax-exempt organizations and
government entities.
These regulations also mention reporting requirements related to making elections under section 6417. These elections
will be made by taxpayers on Forms 990T, and credit calculations will be made on
Form 3800 and supporting forms. These
forms are approved under 1545-0047 for
tax-exempt organizations and government
entities.

Pursuant to section 7805(f) of the Code,
the notice of proposed rulemaking preceding this Treasury decision was submitted to
the Chief Counsel for the Office of Advocacy of the Small Business Administration
for comment on its impact on small business, and no comments were received.

IV. Regulatory Flexibility Act

VI. Executive Order 13132: Federalism

Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6), the Secretary of
the Treasury hereby certifies that the final
regulations will not have a significant
economic impact on a substantial number
of small entities pursuant to the Regulatory Flexibility Act. These final regulations would affect entities that are wholly
owned by Tribes. Additionally, no added
burden is created through these final regulations; rather, these final regulations
would expand the definition of an eligible entity for section 6417 of the Code
but does not expand the requirements for
entities to make the elective payment election. Although data is not readily available
about the number of small entities that are
potentially affected by this rule, it is possible that a substantial number of small
entities may be affected.
To the extent the entities described in
these regulations make elections under
section 6417, the Treasury Department
and the IRS certify the final regulatory
flexibility analysis undertaken in TD 9988
(89 FR 17584, March 11, 2024).
For the reasons stated, a regulatory
flexibility analysis under the Regulatory
Flexibility Act is not required.

Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local governments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Executive
order. These final regulations do not have
federalism implications and do not impose
substantial, direct compliance costs on
State and local governments or preempt
State law within the meaning of the Executive order.

Bulletin No. 2026–5

V. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandate
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal mandate that may result in expenditures in any
one year by a State, local, or Indian Tribal
government, in the aggregate, or by the
private sector, of $100 million (updated
annually for inflation). These final regulations do not include any Federal mandate
that may result in expenditures by State,
local, or Indian Tribal governments or by
the private sector in excess of that threshold.

VII. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs designated this rule as not a major rule, as
defined by 5 U.S.C. 804(2).
Statement of Availability of IRS
Documents
The Revenue Rulings and Revenue
Procedure cited in this preamble are pub-

413

lished in the Internal Revenue Bulletin
and are available from the Superintendent
of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by
visiting the IRS website at https://www.
irs.gov.
Drafting Information
The principal author of these final
regulations is the Office of Associate
Chief Counsel (Passthroughs, Trusts, and
Estates). However, other personnel from
the Treasury Department and the IRS participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 301
are amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
*****
Par. 2. Section 1.6417-1 is amended
by:
1. Revising paragraph (c) introductory
text;
2. Removing the semicolons from the
end of paragraphs (c)(1)(ii) and (c)(2)
through (5) and adding periods in their
places;
3. Removing the language “; and” from
the end of paragraph (c)(6) and adding a
period in its place; and
4. Revising paragraphs (c)(7), (f), and
(q).
The revisions read as follows:

January 26, 2026

§ 1.6417-1 Elective payment election of
applicable credits.

§ 1.6417-1 as contained in 26 CFR part 1,
revised April 1, 2025.

*****
(c) Applicable entity. The term applicable entity means any entity described in
paragraphs (c)(1) through (7) of this section.
*****
(7) An agency or instrumentality of any
applicable entity described in paragraph
(c)(1)(ii) or (c)(2) or (3) of this section.
For purposes of making an elective payment election under section 6417 (including determining eligibility for and the
consequences of such election), an entity
described in § 301.7701-1(a)(4)(i) of this
chapter is treated as an instrumentality of
the Indian Tribal government(s) or subdivision(s) thereof that own(s) it.
*****
(f) Disregarded entity. The term disregarded entity means an entity that is
disregarded as, or not recognized as, an
entity separate from its owner for Federal
income tax purposes under § 301.77011(a)(3) or §§ 301.7701-2 and 301.7701-3
of this chapter. See paragraph (c)(7) of
this section regarding entities described in
§ 301.7701-1(a)(4)(i) of this chapter.
*****
(q) Applicability dates—(1) In general.
Except as provided in paragraph (q)(2) of
this section, this section applies to taxable
years ending on or after March 11, 2024.
For taxable years ending before March
11, 2024, taxpayers may choose to apply
the rules of this section and §§ 1.6417-2
through 1.6417-4 and 1.6417-6, provided
the taxpayers apply the rules in their
entirety and in a consistent manner.
(2) Paragraphs (c)(7) and (f) of this
section. Paragraphs (c)(7) and (f) of this
section apply to taxable years beginning
on or after January 1, 2026. For taxable
years beginning before January 1, 2026,
an entity described in § 301.7701-1(a)(4)
(i) of this chapter may choose to apply
paragraphs (c)(7) and (f) of this section,
but only if the Indian Tribal government(s)
that own the entity also apply paragraphs
(c)(7) and (f) of this section consistently
with such entity for all such taxable years.
For the rules that apply to entities that
do not choose to apply paragraphs (c)(7)
and (f) of this section in accordance with
the preceding sentence for taxable years
beginning before January 1, 2026, see

PART 301—PROCEDURE AND
ADMINISTRATION

January 26, 2026

Par. 3. The authority citation for part
301 is amended by adding an entry for
§ 301.7701-1(a)(4) in numerical order to
read in part as follows:
Authority: 26 U.S.C. 7805.
*****
Section 301.7701-1(a)(4) also issued
under 26 U.S.C. 7701(a)(40).
*****
Par. 4. Section 301.7701-1 is amended
by:
1. Revising paragraph (a)(3);
2. Redesignating paragraph (a)(4) as
paragraph (a)(5);
3. Adding a new paragraph (a)(4); and
4. Revising paragraph (f).
The revisions and addition read as follows:
§ 301.7701-1 Classification of
organizations for federal tax purposes.
(a) * * *
(3) Certain State and local law entities
not recognized. An entity formed under
State or local law is not always recognized as a separate entity for Federal tax
purposes. For example, an organization
wholly owned by a State is not recognized
as a separate entity for Federal tax purposes if it is an integral part of the State.
(4) Certain Tribal entities—(i) In general—(A) Rule. Except as provided in
paragraphs (a)(4)(ii) and (iii) of this section, section 17 corporations, section 3 corporations, and wholly owned Tribal entities
(as defined, respectively, in paragraphs (a)
(4)(i)(B) through (D) of this section) are
not recognized as separate entities for Federal tax purposes and, therefore, are not
subject to Federal income tax.
(B) Definition of section 17 corporation. The term section 17 corporation
means a federally chartered corporation
incorporated under section 17 of the
Indian Reorganization Act of 1934, as
amended (25 U.S.C. 5124), by the Bureau
of Indian Affairs, as the authorized delegate of the Secretary of the Interior.
(C) Definition of section 3 corporation. The term section 3 corporation

414

means a federally chartered corporation
incorporated under section 3 of the Oklahoma Indian Welfare Act, as amended (25
U.S.C. 5203), by the Bureau of Indian
Affairs, as the authorized delegate of the
Secretary of the Interior.
(D) Definition of wholly owned Tribal
entity. The term wholly owned Tribal entity
means an entity wholly owned by one or
more Indian Tribal governments (within
the meaning of section 7701(a)(40) of the
Code), directly or through other entities
that are not recognized as separate entities for Federal income tax purposes, that
is organized or incorporated exclusively
under the laws of one or more of the owning Indian Tribal governments. Whether an
entity is organized or incorporated under
the laws of one or more Indian Tribal government(s) is determined without regard to
any specified choice of law or forum.
(ii) Elections under section 6417. See
§ 1.6417-1(c)(7) of this chapter for the
treatment of section 17 corporations, section 3 corporations, and wholly owned
Tribal entities described in paragraph (a)
(4)(i) of this section for the purposes of
making an elective payment election under
section 6417 of the Code (section 6417
election), including determining eligibility
for and the consequences of such election.
(iii) Federal employment taxes and
excise taxes. Section 17 corporations,
section 3 corporations, and wholly owned
Tribal entities are treated as separate entities for Federal employment and certain
Federal excise tax purposes in a manner
identical to the treatment described in
§ 301.7701-2(c)(2)(iv) and (v).
(iv) Examples. The following examples
illustrate the application of paragraphs (a)
(4)(i) through (iii) of this section. For purposes of these examples, all references to
a Tribe are references to an Indian Tribal
government within the meaning of section
7701(a)(40).
(A) Example 1. Tribe B incorporates Corporation X pursuant to Tribe B’s Corporations Ordinance,
which governs the purpose, formation, and operation
of commercial entities. Tribe B owns all the shares
of Corporation X. Corporation X is therefore wholly
owned by Tribe B and organized or incorporated under
the laws of Tribe B. As a result, Corporation X is not
recognized as a separate entity from Tribe B for Federal tax purposes, except for the purposes described
in § 1.6417-1(c)(7) of this chapter and paragraph (a)
(4)(iii) of this section. Accordingly, Corporation X is
not subject to Federal income tax. Under § 1.64171(c)(7) of this chapter, Corporation X is treated as an

Bulletin No. 2026–5

instrumentality of Tribe B for purposes of making a
section 6417 election (including determining eligibility for and the consequences of such election).
Thus, Corporation X, rather than Tribe B, would be
the applicable entity for purposes of making a section
6417 election for any applicable credit (as defined in
section 6417(b)) relating to property held or activities
conducted by Corporation X. Corporation X is treated
as a corporation separate from its owner for Federal
employment tax purposes governed under subtitle C
of the Internal Revenue Code, and as separate from its
owner for the Federal excise tax purposes identified in
§ 301.7701-2(c)(2)(v)(A). The analysis would be the
same if Tribe B had organized its business as a single
member limited liability company (LLC) pursuant
to the Tribe’s business code instead of incorporating
Corporation X.
(B) Example 2. The facts are the same as in
paragraph (a)(4)(iv)(A) of this section (Example
1), except that the board of Corporation X, pursuant to Tribe B’s Corporations Ordinance, organizes
a subsidiary, Corporation Z, to pursue a limited line
of new business. Corporation X owns all the shares
of Corporation Z. Corporation Z is therefore wholly
owned by Tribe B and organized or incorporated
under the laws of Tribe B. As a result, neither Corporation X nor Corporation Z is recognized as an entity
separate from Tribe B for Federal tax purposes,
except for the purposes described in § 1.6417-1(c)
(7) of this chapter and paragraph (a)(4)(iii) of this
section. Accordingly, Corporation Z is not subject
to Federal income tax. Under § 1.6417-1(c)(7) of
this chapter, Corporation X and Corporation Z are
each treated as an instrumentality of Tribe B for the
purposes of making a section 6417 election (including determining eligibility for and the consequences
of such election). Thus, Corporation Z, rather than
Corporation X or Tribe B, is the applicable entity for
purposes of making a section 6417 election for any
applicable credit relating to property held or activities conducted by Corporation Z. As in paragraph
(a)(4)(iv)(A) of this section (Example 1), Corporation X would continue to be the applicable entity for
purposes of making a section 6417 election for any
applicable credit relating to property held or activities conducted by Corporation X. Both Corporation
X and Corporation Z are treated as corporations separate from their owner for Federal employment tax
purposes governed under subtitle C of the Internal
Revenue Code, and as separate from their owner
for the Federal excise tax purposes identified in
§ 301.7701-2(c)(2)(v)(A). The analysis would be the
same if Tribe B had organized its businesses as single member LLCs pursuant to the Tribe’s business
code instead of incorporating Corporations X and Z.
(C) Example 3. Tribe B incorporates a section 17
corporation. The section 17 corporation subsequently
incorporates Corporation J pursuant to Tribe B’s
Corporations Ordinance, which governs the purpose,
formation, and operation of commercial entities. The
section 17 corporation owns all the shares of Corporation J. Corporation J is therefore treated as wholly
owned by Tribe B and organized or incorporated under
the laws of Tribe B. As a result, Corporation J is not
recognized as a separate entity from Tribe B for Federal tax purposes, except for the purposes described in
§ 1.6417-1(c)(7) of this chapter and paragraph (a)(4)
(iii) of this section. Accordingly, neither the section

Bulletin No. 2026–5

17 corporation nor Corporation J is subject to Federal income tax. Under § 1.6417-1(c)(7) of this chapter, the section 17 corporation and Corporation J are
each treated as an instrumentality of Tribe B for the
purposes of making a section 6417 election (including determining eligibility for and the consequences
of such election). Thus, the section 17 corporation,
rather than Tribe B, would be the applicable entity for
purposes of making a section 6417 election for any
applicable credit relating to property held or activities
conducted by the section 17 corporation. In addition,
Corporation J, rather than Tribe B or the section 17 corporation, would be the applicable entity for purposes
of making a section 6417 election for any applicable
credit relating to property held or activities conducted
by Corporation J. Both the section 17 corporation and
Corporation J are treated as corporations separate from
their owner for Federal employment tax purposes governed under subtitle C of the Internal Revenue Code,
and as separate from their owner for the Federal excise
tax purposes identified in § 301.7701-2(c)(2)(v)(A).
The analysis would be the same if the section 17 corporation had organized its business as a single member
LLC pursuant to the Tribe’s business code instead of
incorporating Corporation J.
(D) Example 4. Tribe A, Tribe B, Tribe C, and
Tribe D through resolutions approved by their
respective Indian Tribal governments incorporate
Corporation K which is chartered under the Corporations Ordinance of Tribe A. Each Tribe owns 25% of
the shares of Corporation K. Corporation K is incorporated under the laws of one of its owners, Tribe A.
As a result, Corporation K is a wholly owned Tribal
entity and is not recognized as a separate entity from
the Tribes for Federal tax purposes, except for the
purposes described in § 1.6417-1(c)(7) of this chapter and paragraph (a)(4)(iii) of this section. Accordingly, Corporation K is not subject to Federal income
tax. Under § 1.6417-1(c)(7) of this chapter, Corporation K is treated as an instrumentality of Tribe A,
Tribe B, Tribe C, and Tribe D for the purposes of
making a section 6417 election (including determining eligibility for and the consequences of such
election). Thus, Corporation K, rather than Tribe A,
Tribe B, Tribe C, or Tribe D, would be the applicable
entity for purposes of making a section 6417 election
for any applicable credit relating to property held or
activities conducted by Corporation K. Corporation
K is treated as a corporation separate from its owners for Federal employment tax purposes governed
under subtitle C of the Internal Revenue Code, and
as separate from its owners for the Federal excise tax
purposes identified in § 301.7701-2(c)(2)(v)(A). The
analysis would be the same if Tribe A, Tribe B, Tribe
C, and Tribe D had organized their business as an
LLC pursuant to Tribe A’s business code instead of
incorporating Corporation K.
(E) Example 5. Tribe A incorporates Corporation L pursuant to Tribe A’s Corporations Ordinance, which governs the purpose, formation, and
operation of commercial entities. Corporation L
subsequently incorporates Corporation M pursuant
to Tribe A’s Corporations Ordinance. Tribe A owns
all the shares of Corporation L, and Corporation L
owns all the shares of Corporation M. Corporations
L and M are therefore wholly owned by Tribe A and
organized or incorporated under the laws of Tribe
A. In a later year, Tribe B, in agreement with Tribe

415

A, acquires some, but not all, shares of Corporation
M. Corporations L and M continue to be considered
as wholly owned by Indian Tribal governments and
were incorporated under the laws of an Indian Tribal
government that owns them. As a result, neither Corporation L nor Corporation M is recognized as a separate entity from the Tribes that own them for Federal tax purposes, except for the purposes described
in § 1.6417-1(c)(7) of this chapter and paragraph (a)
(4)(iii) of this section. Accordingly, Corporations L
and M are not subject to Federal income tax. Under
§ 1.6417-1(c)(7) of this chapter, Corporation L is
treated as an instrumentality of Tribe A, and Corporation M is treated as an instrumentality of Tribe A
and Tribe B, for the purposes of making a section
6417 election (including determining eligibility for
and the consequences of such election). Thus, Corporations L and M, rather than Tribe A or Tribe B,
would be the applicable entities for purposes of making a section 6417 election for any applicable credit
relating to property held or activities conducted by
Corporations L and M, respectively. Both Corporation L and Corporation M are treated as corporations
separate from their owners for Federal employment
tax purposes governed under subtitle C of the Internal Revenue Code, and as separate from their owners for the Federal excise tax purposes identified in
§ 301.7701-2(c)(2)(v)(A). The analysis would be
the same if Tribe A had organized its businesses as
LLCs pursuant to Tribe A’s business code instead of
incorporating Corporations L and M, and had Tribe
B acquired a membership interest instead of stock.

*****
(f) Applicability dates—(1) In general.
Except as provided in paragraph (f)(2) of
this section, the rules of this section are
applicable as of January 1, 1997.
(2) Exceptions—(i) Paragraph (a)(4)
of this section. The rules of paragraph (a)
(4) of this section apply to taxable periods
beginning on or after January 1, 2026. An
entity may choose to apply paragraph (a)
(4) of this section to taxable periods beginning before January 1, 2026, for which the
applicable period of limitations is open.
(ii) Paragraph (c) of this section. The
rules of paragraph (c) of this section are
applicable on January 5, 2009.
Frank J. Bisignano,
Chief Executive Officer.
Approved: November 12, 2025.

Kenneth J. Kies,
Assistant Secretary of the Treasury
(Tax Policy).
(Filed by the Office of the Federal Register December 15, 2025, 8:45 a.m., and published in the issue
of the Federal Register for December 16, 2025, 90
FR 58151)

January 26, 2026

26 CFR 1.139E-1: Tribal General Welfare Benefits

T.D. 10040
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Tribal General Welfare
Benefits
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final rule.
SUMMARY: This document contains
final regulations regarding the exclusion from gross income of certain Tribal
general welfare benefits. The regulations
address the requirements that apply to
determine whether the benefits an Indian
Tribal government program provides
qualify as Tribal general welfare benefits. These regulations affect Indian Tribal
governments, agencies or instrumentalities of such governments, Federally recognized Tribes, members of such Tribes,
such members’ spouses and dependents,
and other Tribal program participants.
DATES: Effective date: These final regulations are effective on December 16,
2025.
Applicability date: These final regulations apply for taxable years beginning
after December 16, 2025.
FOR FURTHER INFORMATION
CONTACT: Jonathan A. Dunlap at (202)
317-4718 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Authority
This document contains amendments
to the Income Tax Regulations (26 CFR
part 1) under sections 139E and 7872 of
the Internal Revenue Code (Code).
Section 139E(c)(3) provides an express
delegation of authority for the Secretary
of the Treasury or the Secretary’s dele-

January 26, 2026

gate (Secretary), “in consultation with
the Tribal Advisory Committee (as established under section 3(a) of the Tribal
General Welfare Exclusion Act of 2014),
[to] establish guidelines for what constitutes lavish or extravagant benefits with
respect to Indian tribal government programs.”
The regulations are also issued under
the express delegations of authority under
sections 7805(a) and 7872(i) of the Code.
Section 7805(a) authorizes the Secretary
to “prescribe all needful rules and regulations for the enforcement of [the Code],
including all rules and regulations as may
be necessary by reason of any alteration
of law in relation to internal revenue.”
Section 7872(i) authorizes the Secretary
to “prescribe such regulations as may be
necessary or appropriate to carry out the
purposes of this section, including…regulations exempting from the application of
this section any class of transactions the
interest arrangements of which have no
significant effect on any Federal tax liability of the lender or the borrower.”
Background
I. The Tribal General Welfare Exclusion
Act of 2014
The Tribal General Welfare Exclusion
Act of 2014 (Act), Public Law 113-168,
128 Stat. 1883 (2014), as enacted on September 26, 2014, among other things,
amended the Code by adding section
139E. Under section 139E, gross income
of an individual does not include the value
of any “Indian general welfare benefit.”
Section 139E(b) defines an Indian general welfare benefit as any payment made
or services provided to or on behalf of
a member of a Tribe (or any spouse or
dependent of such a member) pursuant
to an Indian Tribal government program,
but only if: (1) the program is administered under specified guidelines and does
not discriminate in favor of members of
the governing body of the Tribe, and (2)
the benefits provided under such program
are (A) are available to any Tribal member
who meets such guidelines, (B) for the promotion of general welfare, (C) not lavish
or extravagant, and (D) not compensation
for services. Further, section 139E(c)(5)
provides that any items of cultural signif-

416

icance, reimbursement of costs, or cash
honorarium for participation in cultural or
ceremonial activities for the transmission
of Tribal culture “shall not be treated as
compensation for services” for purposes
of section 139E. This preamble and the
final regulations refer to an Indian general
welfare benefit as a “Tribal General Welfare Benefit.”
Section 2(c) of the Act provides that
ambiguities in section 139E are to be
resolved in favor of Indian Tribal governments. Section 2(c) of the Act also
requires that deference be given to Indian
Tribal governments for the programs
administered and authorized by the Tribe
to benefit the general welfare of the Tribal
community.
Section 2(d)(1) of the Act provides that
section 139E applies to taxable years for
which the period of limitation on refund
or credit under section 6511 of the Code
has not expired. Section 2(d)(2) of the Act
provides that if the period of limitation on
a credit or refund resulting from the enactment of section 139E expires before the
end of the 1‑year period beginning on the
date of the enactment of the Act, refund or
credit of such overpayment (to the extent
attributable to such amendments) may,
nevertheless, be made or allowed if claim
therefor is filed before the close of such
1-year period.
Section 3 of the Act requires the Secretary of the Treasury to establish a Tribal
Advisory Committee. The Department of
the Treasury Tribal Advisory Committee (TTAC) held its inaugural meeting
on June 20, 2019. Under section 3(b) of
the Act, the TTAC’s mandate is to advise
the Secretary of the Treasury on matters
relating to the taxation of Indians, and
the Secretary of the Treasury is required
to consult with the TTAC to establish and
require training and education for internal revenue field agents who administer
and enforce internal revenue laws. This
includes (A) training and education with
respect to Federal Indian law and the Federal Government’s unique legal treaty and
trust relationship with Indian Tribal governments, and (B) training of such internal revenue field agents, and provision of
training and technical assistance to Tribal
financial officers, about implementation of
the Act and the amendments made by the
Act.

Bulletin No. 2026–5

Section 4(a) of the Act requires the
Secretary of the Treasury to temporarily
suspend “all audits and examinations of
Indian tribal governments and members of
Tribes (or any spouse or dependent of such
a member), to the extent such an audit or
examination relates to the exclusion of a
payment or benefit from an Indian tribal
government under the general welfare
exclusion” until the training and education previously described is completed.
Section 4(a) further provides that the
running of the period of limitation under
section 6501 of the Code with respect to
Indian Tribal governments and members
of Indian Tribes is suspended during the
period in which such audits and examinations are suspended.
II. Prior Guidance
Revenue Procedure 2014-35 (201426 I.R.B. 1110), which was issued before
section 139E was enacted, provided safe
harbors under which the IRS conclusively
presumed the individual need requirement of the administrative general welfare exclusion is met for benefits provided
under Indian Tribal government programs
that meet the safe harbor requirements. In
addition, the revenue procedure provided
that the IRS will not assert that recipients of benefits under a safe harbor must
include the value of those benefits in gross
income or that the benefits are subject to
the information reporting requirements of
section 6041 of the Code.
Following the enactment of section
139E, the Department of Treasury (Treasury Department) and the IRS published
Notice 2015-34 (2015-18 I.R.B. 942),
providing guidance to taxpayers regarding the effect of section 139E on Revenue
Procedure 2014-35. Notice 2015-34 provides that taxpayers can rely on Revenue
Procedure 2014-35 for the safe harbors
under which certain benefits provided by
Indian Tribal government programs may
be excluded from gross income under the
administrative general welfare exclusion.
Additionally, Notice 2015-34 requested
comments on issues that future guidance
might address regarding the implementation of section 139E and other parts of the
Act.
On June 16, 2021, the TTAC’s General
Welfare Exclusion Subcommittee (TTAC

Bulletin No. 2026–5

GWE Subcommittee) submitted to the
TTAC a report (TTAC Report) containing
the TTAC GWE Subcommittee’s interpretation of the core principles underlying
section 139E, and an Appendix containing draft proposed regulations interpreting
section 139E (TTAC draft proposed regulations), consistent with those core principles. On October 26, 2022, the TTAC
formally recommended and approved
the TTAC Report to be submitted for the
record and published for Tribal comment.
The Treasury Department sent a Tribal
consultation letter, dated October 27, 2022
(2022 Dear Tribal Leader Letter), to Tribal
leaders to request consultation on the Act
and the TTAC Report. The 2022 Dear
Tribal Leader Letter announced consultation meetings to be held on December 14,
15, and 16, 2022 (December 2022 Consultations), to discuss the Act and the TTAC
Report. In response to the 2022 Dear Tribal
Leader Letter, and after the December
2022 Consultations, the Treasury Department received 65 written comments from
Tribes and two Tribal organizations (collectively, 2022 Tribal Comments).
On September 17, 2024, following
extensive consultation with TTAC, the
Treasury Department and the IRS published a notice of proposed rulemaking
(REG-106851-21) in the Federal Register
(89 FR 75990) under section 139E (proposed regulations). The proposed regulations reflect consideration of the TTAC
Report, December 2022 Consultations,
2022 Tribal Comments, and consultation
with the TTAC and the TTAC GWE Subcommittee.
The Treasury Department sent a Tribal
consultation letter, dated September 13,
2024 (2024 Dear Tribal Leader Letter), to
Tribal leaders to request consultation on
the proposed regulations. The 2024 Dear
Tribal Leader Letter announced consultation meetings to be held on November 18,
19, and 20, 2024 (November 2024 Consultations), to discuss the proposed regulations. In response to the 2024 Dear Tribal
Leader Letter and after the November
2024 Consultations, the Treasury Department received 103 written comments from
Tribes and Tribal organizations (collectively, 2024 Tribal Comments).
A public hearing on the proposed regulations was held on January 13, 2025, at
which five speakers provided testimony.

417

The Treasury Department and the IRS
received 41 public comments in response
to the notice of proposed rulemaking.
Copies of the comments are available for
public inspection at http://www.regulations.gov or upon request.
After considering all of the public comments, 2024 Tribal Comments, speaker
outlines, and testimony (collectively,
comments) received in response to the
proposed regulations, and extensive consultation with the TTAC GWE Subcommittee, the Treasury Department and the
IRS adopt the proposed regulations, as
revised in response to such comments, as
final regulations. The comments and the
revisions are discussed in the following
Summary of Comments and Explanation
of Revisions section of this preamble.
The Treasury Department and the IRS
emphasize that the scope of tribal general welfare under section 139E and these
regulations is broader than the scope of
general welfare under the administrative
general welfare doctrine, which is generally limited to governmental programs
providing benefits based on need. This
broader scope is due both to specific language in section 139E itself, such as the
language in section 139E(c)(5) providing
that certain benefits for participating in
certain cultural or ceremonial activities
shall not be treated as compensation, and
to the language in section 2(c) of the Act
providing that ambiguities in the Act are
to be resolved in favor of Indian Tribal
governments and that deference must be
given to Indian Tribal governments with
respect to the programs they determine are
to benefit the general welfare of the tribal
community. Accordingly, section 139E
and these final regulations do not provide
any basis for analyzing the applicability
of the administrative general welfare doctrine to any benefit.
Summary of Comments and
Explanation of Revisions
I. Overview
This Summary of Comments and
Explanation of Revisions summarizes
the formal written public comments submitted in response to the proposed regulations; comments made at the public
hearing announced in the preamble to the

January 26, 2026

proposed regulations and held on January
13, 2025; written Tribal comments provided in connection with Treasury Tribal
consultations; and comments made in
connection with the TTAC GWE Subcommittee consultations addressing the
proposed regulations. Comments merely
summarizing or interpreting the proposed
regulations generally are not discussed in
this preamble.
Most of the commenters expressed general approval of the proposed regulations
and support for the deference provided
for Tribal sovereignty; Tribal self-determination; Tribal self-governance; and the
diverse traditions, governance structures,
cultures, geographies, and economic conditions of Tribal Nations and their citizens. Several commenters appreciated
the clarity provided in the proposed regulations, noting that the lack of guidance
on this topic has hampered Tribal general
welfare programs and that the regulations
will enable Tribes to review and update
existing Tribal general welfare programs
to meet the requirements of section
139E. One commenter underscored the
importance of excluding benefit amounts
for housing and education, which are
designed to address the negative impacts
of prior policies, from tax.
A few commenters expressed opposition to all Federal taxation of Tribes;
opposition to what a commenter describes
as the proposed regulations’ “racist, paternalistic, ethnocentric, contrary to international law, and contrary to self-determination” character and the proposed
regulations’ purported failure to put Tribal
general welfare issues under the sole jurisdiction of Tribes; opposition to purported
interference with Congressional intent
regarding the taxation, self-determination,
and self-governance of Tribes; opposition
to changes to current regulations; and
opposition to the placement of arbitrary
barriers on Tribal general welfare.
The Treasury Department and the IRS
have engaged in extensive consultation
with the TTAC and Tribal leaders, prior to
and following the issuance of the proposed
regulations. The Treasury Department and
the IRS have worked to address all concerns expressed in public comments and

consultation to the extent permitted by
the Act and section 139E. The comments
received are addressed in more detail in
parts II through X of this Summary of
Comments and Explanation of Revisions.
Many commenters supported the deference provided to Indian Tribal governments in the proposed regulations and the
acknowledgment that Tribal governments
are best positioned to define, establish,
and administer general welfare programs
for their citizens, particularly with regard
to Tribal determinations of the promotion of the general welfare and the identification of activities as having cultural
significance. These commenters further
appreciated that this approach recognizes
the Indian Tribal governments’ inherent
sovereignty, right to self-determination,
and right to self-governance.
A few commenters referred to section
2(c) of the Act as evincing Congressional
intent for deference to be given to Indian
Tribal governments in the design and
implementation of their general welfare
programs without undue interference from
the Federal government. Some commenters recommended that section 2(c) of the
Act be specifically included in the final
regulations because it is a key foundation of the Act and would be important to
understanding section 139E and the regulations in the future.
The Treasury Department and the
IRS agree with commenters that section
2(c) of the Act is central to the interpretation of section 139E and that ambiguities in section 139E must be resolved
in favor of Indian Tribal governments
and deference to Indian Tribal governments must be provided for the programs
that are administered and authorized by
the Tribe to benefit the general welfare
of the Tribal community. The Treasury
Department and the IRS applied section
2(c) of the Act when drafting these regulations in a manner that provides deference to Indian Tribal governments and
interprets ambiguities in section 139E in
favor of the Indian Tribal governments.
Notwithstanding that section 2(c) of the
Act supplied these central principles that
were used when drafting these final regulations, the Treasury Department and

the IRS agree with commenters that it is
helpful to include the language from section 2(c) of the Act in new §1.139E-1(f)
and remaining paragraphs are renumbered accordingly. Section 1.139E-1(f)
thus ensures the Congressional intent of
deference to Tribes for programs administered and authorized under the Act
is preserved when interpreting section
139E.
II. Section 139E Definitions
A. Definition of Indian Tribal
Government
Under section 7701(a)(40)(A) of the
Code, the term “Indian Tribal government” when used in the Code and “where
not otherwise distinctly expressed or
manifestly incompatible with the intent
thereof,”1 means “the governing body of
any tribe, band, community, village, or
group of Indians, or (if applicable) Alaska
Natives, which is determined by the Secretary, after consultation with the Secretary
of the Interior, to exercise governmental functions.” Section 7701(a)(40)(B)
further provides that “[n]o determination
under subparagraph (A) with respect to
Alaska Natives shall grant or defer any
status or powers other than those enumerated in section 7871 [of the Code]. Nothing in the Indian Tribal Governmental Tax
Status Act of 1982, or in the amendments
made thereby, shall validate or invalidate
any claim by Alaska Natives of sovereign
authority over lands or people.”
Section 139E(c)(1) of the Code
expressly provides a broader meaning of
the term “Indian Tribal government” for
purposes of section 139E. The broader
meaning is arrived at by adding two additional sets of entities to the Code’s general definition of “Indian Tribal government.” The first set of additional entities
includes “any agencies or instrumentalities of an Indian Tribal government.” The
second set of additional entities includes
“any Alaska Native regional or village
corporation, as defined in, or established
pursuant to, the Alaska Native Claims
Settlement Act (43 U.S.C. 1601 et seq.).”
An entity described in this second set of

Per the flush language of section 7701(a), each definition provided therein is generally applicable under provisions of the Code “where not otherwise distinctly expressed or manifestly
incompatible with the intent thereof.”
1

January 26, 2026

418

Bulletin No. 2026–5

additional entities is referred to in this
preamble as an “Alaska Native regional
or village corporation.”
Proposed §1.139E-1(b)(4) addressed
only the first set of entities included in
the definition of Indian Tribal government
in section 139E(c)(1) and clarified that
for purposes of proposed §1.139E-1, the
term “Indian Tribal Government” has the
meaning provided in section 7701(a)(40)
of the Code, and, as provided in section
139E(c)(1), also includes agencies and
instrumentalities of such Indian Tribal
governments. The proposed regulations
did not address Alaska Native regional
or village corporations in the definition
of Indian Tribal government for purposes
of the rules in §1.139E-1. Instead, the
proposed regulations reserved proposed
§1.139E-2 for future rules to clarify the
application of section 139E to benefits
provided by Alaska Native regional or village corporations.
While one commenter expressed support for the application of the proposed
regulations to “Alaska Native Americans,”
several commenters objected to the omission of Alaska Native regional or village
corporations from the definition of Indian
Tribal government and from consultation
prior to the issuance of the proposed regulations. These commenters argued that
Alaska Native regional or village corporations should have been included in the
definition in proposed §1.139E-1 and
invited to participate in the Tribal consultation, and that their omission is contrary
to Congressional intent, the statutory language of section 139E, the holding in Yellen v. Confederated Tribes of the Chehalis Reservation, 594 U.S. 338 (2021), the
Indian Self-Determination and Education
Assistance Act (ISDEAA), Public Law
93-638, 88 Stat. 2203 (1975), and Executive Order 13175, Consultation and Coordination with Indian Tribal Governments
(November 9, 2000).
These commenters expressed concern that the omission of Alaska Native
regional or village corporations from this
definition may suggest section 139E is not
applicable to Alaska Native regional or
village corporations, with one commenter
suggesting shareholders of Alaska Native
regional or village corporations who are
not otherwise members of Tribes could be
disproportionately impacted.

Bulletin No. 2026–5

One commenter requested consultation with Alaska Native regional or village corporations be held immediately
and that the Treasury Department and the
IRS publish a proposed regulation under
§1.139E-2 with notice and comment on
such regulation prior to issuing final regulations under §1.139E-1.
The Treasury Department and the IRS
understand the concerns raised by these
comments and agree with commenters
that section 139E(c)(1) includes Alaska
Native regional or village corporations in
the definition of Indian Tribal government
for purposes of section 139E. The omission of Alaska Native regional or village
corporations from the definition of Indian
Tribal government in proposed §1.139E-1
was never intended to suggest Indian general welfare benefits cannot be provided
by an Alaska Native regional or village
corporation to or on behalf of its members
(or any spouse or dependent of such members). Thus, the Treasury Department and
the IRS agree that section 139E permits
Alaska Native regional or village corporations to provide Indian general welfare
benefits, and that other provisions of the
Act also apply to Alaska Native regional
or village corporations.
The Treasury Department and the IRS
therefore held consultation with Alaska
Native regional or village corporations
on section 139E on July 29, 2025. The
feedback received during this consultation will help the Treasury Department
and the IRS determine what customizations of the rules in §1.139E-1 may be
useful in promulgating regulations under
§1.139E-2 that will apply specifically to
Alaska Native regional or village corporations and make more clear their ability
to provide benefits under section 139E.
As part of this consultation, the Treasury
Department and the IRS asked questions of Alaska Native regional or village corporations, the answers to which
will inform the drafting of regulations
tailored to the needs of Alaska Native
regional or village corporations to implement section 139E more effectively. The
Treasury Department and the IRS expect
the process of promulgating additional
final regulations under §1.139E-2 will be
similar to the process used to promulgate
§1.139E-1 applicable to Federally recognized Tribes.

419

Accordingly, these final regulations
under §1.139E-1 do not include Alaska
Native regional or village corporations in
the definition of Indian Tribal government
found in §1.139E-1(b)(4). However, see
part X.B. of this Summary of Comments
and Explanation of Revisions for a discussion of the consultation and the ability of Alaska Native regional or village
corporations to choose to apply the rules
of §1.139E-1 as included in this Treasury
decision pending the promulgation of
additional regulations under §1.139E-2.
B. Definition of Tribe
Proposed §1.139E-1(b)(7) would
define “Tribe” as any Indian Tribe, band,
nation, pueblo, or other organized group
or community, including any Alaska
Native village as defined in 43 U.S.C.
1602(c), that is recognized as eligible
for the special programs and services
provided by the United States to Indians
because of their status as Indians. Alaska
Native regional or village corporations are
excluded from this definition of Tribe.
Two commenters requested Alaska
Native regional or village corporations
be included in the definition of Tribe in
§1.139E-1(b)(7) of the final regulations.
The Treasury Department and the IRS
decline to modify the definition of Tribe in
§1.139E-1(b)(7) of these final regulations
because subsequent guidance promulgated
at §1.139E-2 will specifically address the
application of the requirements of section
139E to Alaska Native regional or village
corporations. The Treasury Department
and the IRS acknowledge that Alaska
Native regional or village corporations
can have programs that qualify to provide
general welfare benefits that are excludible from gross income under section
139E. However, the Treasury Department
and the IRS intend to issue future guidance specific to the unique circumstances
of Alaska Native regional or village corporations. See, however, part X.B. of this
Summary of Comments and Explanation of Revisions for further discussion
of the consultation with Alaska Native
regional or village corporations and the
ability of an Alaska Native regional or
village corporation to choose to apply
the rules of §1.139E-1 as included in this
Treasury decision pending the promulga-

January 26, 2026

tion of additional final regulations under
§1.139E-2.
C. Definition of Tribal Program
Participant
1. In General
Proposed §1.139E-1(b)(8) would provide that the term “Tribal program participant” means a Tribal member, spouse
of a Tribal member within the meaning
of §301.7701-18 of the Procedure and
Administration Regulations (26 CFR part
301), spouse of a Tribal member under
applicable Tribal law, dependent of a
Tribal member, or other individual who
has been determined by the Indian Tribal
government to be eligible for a Tribal general welfare benefit because such individual is, with respect to a Tribal member,
an ancestor, descendant, former spouse,
widow or widower, legally recognized
domestic partner or former domestic partner.
Most commenters supported the
breadth of, and deference provided by, the
definition of Tribal program participant in
proposed §1.139E-1(b)(8) and supported
the use of Tribal law to determine eligible
program participan

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A045fb5d330e9a4cc. Public record. Not legal advice.