TO: Indian Gaming Association Member Tribes

FROM: David Z. Bean, Chairman
Jason Giles, Executive Director
Danielle Her Many Horses, Deputy Director/General Counsel

RE: UPDATED: Final Rules Published on Tribal General Welfare Benefits and Tax Treatment of Entities Wholly Owned by Indian Tribal Governments

Date: December 17, 2025

On December 15, 2025, during a public meeting of the Tribal Treasury Advisory Committee (TTAC), U.S. Department of the Treasury and the Internal Revenue Service (“IRS”) announced two final rules which offer greater deference to tribal governments in establishing tax exempt welfare programs and wholly owned business entities. The regulations are critical and timely, affirming that Tribal governments have the sole sovereign right and authority to determine how to best serve the needs of their community. The first rule implements the Tribal General Welfare Exclusion Act of 2014 (TGWEA), and the second confirms that Tribally Chartered Corporate Entities will have the same tax treatments as the Tribal government which owns them. These final rules are now published in the Federal Register, roughly a year after they were proposed in September and October 2024. The final regulations, after 10 years, are a result the Department’s collaboration of tribal consultation and input from the TTAC. The Indian Gaming Association (IGA) applauds the Department of Treasury, the Office of Native Affairs, and the TTAC for these historic regulations for Indian Country. A brief summary of both rules is provided below. 

I. Tribal General Welfare Benefits
The first final rule serves to provide guidance in implementing Section 139E of the Internal Revenue Code, as amended by the Tribal General Welfare Act of 2014. This final rule amending the Income Tax Regulations at 26 C.F.R. Part 1 confirms that welfare program benefits for tribal members, which are provided by Tribal governments, are exempt from federal income tax. Specifically, the final § 1.139E-1(a) states, “the gross income of a Tribal Program Participant for the taxable year does not include the value of any Tribal General Welfare Benefit (GWE) provided by an Indian Tribal Government Program during the year to or on behalf of the Tribal Program Participant.” This provision explicitly recognizes Tribal sovereign authority to govern and support their communities in a manner that also promotes economic growth.

In addition to this clarification, the final rule defers to the Tribal governments to determine what may constitute an “Indian Tribal Government Program”, and establishes a stand-alone regulatory clause that gives deference to a Tribe and that any ambiguities should be resolved in favor of a Tribe. These programs must only meet three criteria – the program must be (1) established by an Indian Tribal Government, or designated entity within the tribal government, if permitted under tribal law; (2) administered under specified guidelines, which must provide a description of the program including eligibility requirements and the types of benefits offered, but need not be written; and (3) may not discriminate in favor of governing members of the tribe. 

Also notable in this final rule is the explicit recognition that “[b]enefits under the Indian Tribal Government Program may be funded by net gaming revenues as permitted under the Indian Gaming Regulatory Act, 25 U.S.C. 2701-2721 (IGRA)”. This is significant because net gaming revenue often serves as a major source of revenue for tribal governments. The clarification to use any revenue source for welfare programs not only aids in recognizing Tribal sovereignty but also will increase the amount of revenue eligible to qualify for use in the Tribe’s general welfare program. According to the final rule, Tribes are given deference on the classification of revenue, to define as per capita payments or GWE, and allows the ability for a Tribe to amend their previous revenue allocation plan (“RAP”) to define previous per capita payments as GWE. Additionally, they do not impose a need requirement for the Tribe’s definition of revenue. 

II. Tax Treatment of Wholly Owned Business Entities
In addition to the updates to the regulations governing general welfare programs for Tribal citizens, the IRS and Treasury Department also published a shorter final rule clarifying that business entities that are wholly owned by Tribal governments are “not recognized as separate entities for Federal tax purposes and, therefore, are not subject to Federal income tax.” This clarification will ideally create smoother operations for such tribal business entities by removing uncertainties surrounding their tax status and financing. It will also hopefully allow these business entities to concentrate greater resources on generating revenue for government programs, such as the programs discussed above. 
Although the final rule is helpful in its clarification of the tax treatment for wholly owned business entities, the regulation did not address the federal tax treatment of state-chartered tribally owned entities as requested by some members of the public. Further guidance on the treatment for partially owned and majority owned entities will be released after consultation by the Department is conducted. 

Tribal governmental and business entities are hopeful that this will positively impact tribal economies and business growth. The final rule on TGWEA is effective as of December 16, 2025. The notice, as published in the Federal Register may be read here: https://www.govinfo.gov/content/pkg/FR-2025-12-16/pdf/2025-22873.pdf. The final rule discussing the federal tax classification of entities wholly owned by Indian tribal governments shall become effective on January 15, 2026. The notice, as published in the Federal Register may be read here: https://www.govinfo.gov/content/pkg/FR-2025-12-16/pdf/2025-22874.pdf. 

Additionally, we have included the fact sheets for both rules for your reference. Please contact Danielle Her Many Horses at dhermanyhorses@indiangaming.org with any questions or concerns regarding this alert.

Rule on Tribal General Welfare Exclusion Fact SheetRule on Tribal Entity Fact Sheet