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Fishing for Retirement: IRS Proposed Rule Enables Indian Tribal Fishermen to Contribute to Retirement Plans

November 21, 2013

On November 15th, 2013, the Internal Revenue Service (IRS) proposed a new regulation which clarifies the rights of Indian tribal members who earn compensation for services they perform in fishing rights-related activities. Under the proposed IRS guidelines, these tribal members would be entitled to contribute the compensation they receive from these activities towards a qualified retirement plan.

Unlike most types of employee compensation, Indian fishing rights-related income is exempt from both income and employment taxes; thereby excluding it from the taxpayer's gross income. This has proven problematic for those who exclusively receive Indian fishing rights-related income. The IRS has traditionally taken the position that in order to make a contribution to a qualified retirement plan an individual must have "compensation" that is included in gross income.

The proposed regulation seeks to clarify that income from Indian fishing rights-related activity will not be excluded from the IRS' definition of "compensation", thus enabling employees receiving such payments to contribute to a qualified retirement plan.

The IRS is accepting public input on the proposed guidelines by February 13th, 2014. Comments can be submitted here.

Affected parties may rely on these proposed regulations for periods preceding the effective date, pending the issuance of final regulations. If, and to the extent that, the final regulations are more restrictive than the rules in these proposed regulations, those provisions of the final regulations will be applied without retroactive effect.

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