Per Capita Distribution

Governance and Economic Opportunities


Per capita payments from tribal trust funds are specifically excluded from both federal and state taxes under the 1983 Per Capita Act (25 U.S.C. 117a-117c). The Per Capita Act expressly prohibits federal and state taxation of all funds distributed from trust on a per capita basis. However, in recent years the IRS has embarked on a troubling effort to tax per capita payments made to tribal members from trust funds. 

On September 18, 2015 the Internal Revenue Service (IRS) issued final guidance (Notice 2015-67) on the per capita distribution of funds held in trust by the Secretary of the Interior. 

The final guidance provides clarity that per capita distributions made from funds held by the Secretary of the Interior or by an Indian tribe as part of a tribal trust are excluded from the gross income of tribal members. The Internal Revenue Service (IRS) issued Interim Guidance in June of 2016 on the income tax treatment of per capita distributions to tribal members on certain direct pay leases. The interim guidance directs IRS employees to apply the standards set forth in Notice 2015-67 when determining whether the per capita distributions of direct pay lease funds are subject to reporting or withholding

The final guidance lists eligible payments that are not subject to federal income tax as:

  • Payments resulting from money directly derived from title conveyance (e.g. sale, probate, condemnation) or use of trust lands or trust resources, including late payment penalties.
  • Payments resulting from penalties for trespass on trust lands or restricted fee lands.
  • Payments resulting from a final order from a court of competent jurisdiction for a cause of action related to trust assets.

The final guidance also states that if a trust account is used to mischaracterize taxable income as nontaxable per capita distributions, those distributions will constitute as taxable. For example, per capita distributions to tribal members from Indian gaming activity that are subject to the Indian Gaming Regulatory Act (net gaming revenues).

NAFOA will continue to work with the Office of the Special Trustee for American Indians and the IRS to expand the scope of the per capita distribution guidance.

Notice 2015-67

List of Funds Accepted into a Tribal Trust Account (25 C.F.R. § 115.702)

Per Capita Act (25 U.S.C. §§117a-c)