June 6, 2012 | LXXII, No. 10

Tribal leaders explain $193 million settlement split

Upset members prepare to present petition for larger share

Colville Tribal leadership released a statement explaining their decision to only distribute to members one fifth of $193 million set talent with the federal government. Friday afternoon a woman leading a push to increase that share to half will deliver them a petition she says has more than 1,000 tribal member signatures demanding the bigger split.

Colville Business Council Chaiman Michael O. Finley's statement characterizes the settlement as a successful negotiation that spared members from paying taxes on the money and protected their ability to participate in federal benefit programs.

Paying members a larger share could also trigger cuts in such programs administered by the Tribes, he indicated.

"We were able to bring about a long overdue compensation for our mismanaged resources," he said. "We did not intend for the federal government to be allowed to recoup a large portion of the Tribes’ settlement on the back end through taxation of our Tribal members."

Complete tribal statement:

NESPELEM, WA – Over the past several weeks, the Colville Business Council has received numerous questions regarding the $193 million settlement between the United States and the Confederated Tribes of the Colville Reservation.  The settlement, which resolved the Colville’s claims against the US government for trust mismanagement, was recently approved by the federal judge overseeing Colville’s and several other tribes’ trust claims.  The settlement funding is expected to be disbursed by the US to the Tribes within two months.

​Twenty percent of the settlement will be retained in a trust account for distribution to Colville members.  Any part of the remaining 80 percent, if distributed as an additional “per capita payment,” would be subject to federal income taxes and could affect a recipient’s eligibility for federal, state and tribal benefit programs.  

“The Colville Business Council was able to negotiate an agreement with the United States which put more than $38 million of our trust claims settlement into a special trust account,” CBC Chairman Michael O. Finley said today.  “Any distribution from the remaining settlement funds would be subject to income taxes.”  

The federal government’s presumption is that income in any form that is received by an individual is taxable unless specifically exempted by federal law.  The Colville claims settlement agreement negotiators took this into account, and crafted the agreement with the intent of ensuring that a portion of the funds, if distributed, would be exempt from taxation.  

Finley noted that the US initially did not want to keep any settlement proceeds in trust.  Of the 40 other tribal trust settlements that the US publicly announced in April 2012, the Colville Tribes was one of only four tribes that was able to successfully negotiate to keep settlement proceeds in trust.      

It has been longstanding practice for the federal government not to consider per capita distributions from tribal trust accounts to be taxable.  No general exemption exists, however, for per capita distributions made from non-trust sources.  

Funds disbursed from a settlement approved by an act of Congress—a “legislative settlement”—may be nontaxable, but only if the legislation approving the settlement specifically exempts them from taxation.   For example, the annual payment the Tribes receives from the Bonneville Power Administration under the 181-D settlement (a percentage of the revenue generated from Grand Coulee Dam) may be distributed tax-free because this exemption was part of the legislation approving the settlement.  The Colville Tribes’ $193 million settlement and the 40 other publicly announced tribal trust settlements are not legislative settlements.  

For any taxable distribution over $600 in one year, the Colville Tribes would be required by federal law to issue a “1099” form to the Internal Revenue Service and to the recipient, as with other taxable income.  The amount on the 1099 would have to be reported in that tax year.  Depending on other income received, the tax burden on a recipient of taxable per capita income could increase considerably.  

Per capita payments from a non-trust source could also affect the eligibility of tribal members currently receiving assistance from TANF, Medicaid, SSI, Veterans Affairs, Energy Assistance, Child Care Assistance, and other programs where services are conditioned on financial need.  This means that any per capita payment from a non-trust source has the potential to make tribal members ineligible for these and other need-based programs if the payment were to put the members over the income or resource threshold for a particular program.  Also, the effect of having fewer eligible clients in these programs could decrease the federal and state funds available in the future, as programmatic funding for these programs is generally based on the number of clients served.  For tribal college students receiving financial aid, per capita payments received this year could decrease the amount of aid provided next year.

In addition, per capita distributions from a non-taxable trust source are not categorically exempt in determining eligibility for financial, medical and other benefits administered under federal or federally-assisted programs. Per capita payments in excess of $2,000 may count as income or resources in determining eligibility for federal or federally-assisted benefit programs, even if distributed from a trust account, depending on the eligibility requirements of a particular program.  

Finley said the “Colville team negotiated hard and achieved one of the best settlements in the nation on behalf of our land, forests, past and future generations.  We were able to bring about a long overdue compensation for our mismanaged resources.  We did not intend for the federal government to be allowed to recoup a large portion of the Tribes’ settlement on the back end through taxation of our Tribal members. The effects of any per capita distribution, whether taxable or not, need to be taken into account.”

Finley also stated that the CBC will soon select an investment firm to assist the Tribes in making the best choices for mid- and long-term investments of the funding.  In addition to providing investment advice and services to the Tribes, the firm chosen will be required to provide free “financial literacy” courses to all Tribal members.  These courses are intended to help participants make good choices for the future. 

Aside from providing appropriate payments to Tribal members, the CBC intends to use a portion of the settlement funding to improve the health of Colville Tribal forests and other natural resources.

“It is in the best interests of our people that those priceless natural resources are restored and preserved. Managed wisely, our lands can provide a sustained income to the Tribes and our people for generations to come,” Finley said.

Reader Comments

(5)

JamesG writes:

since this is a one time event what is stopping them from giving out 50% as a gift? enrolled adults could get paid from the taxed account as a gift. enrolled minors could get their share paid into their IIM accounts paid from the untaxed account. 50% falls well under the $13,000 threshold where a gift is taxable.

joannesan writes:

25 USC § 1071 - PER CAPITA PAYMENTS TO ENROLLED TRIBAL MEMBERS; TAX EXEMPTION The funds on deposit in the Treasury of the United States to the credit of the Colville Tribe, San Poeils-Nespelem Tribe, Okanogan Tribe, Methow Tribe, and Lake Tribe (certain constituent groups of the Confederated Tribes of the Colville Reservation) that were appropriated to pay a judgment of the Indian Claims Commission dated March 1, 1960, in docket numbered 181, and the funds which may be deposited in the Treasury of the United States to the credit of the said constituent groups or any other constituent groups of the Confederated Tribes of the Colville Reservation to pay any judgments arising out of claims presently pending before the Indian Claims Commission and the interest on said judgments, after payment of attorney fees and expenses, shall be credited to the account of the Confederated Tribes of the Colville Reservation and the Secretary of the Interior is authorized and directed to make a per capita distribution from such funds, to the extent that such funds are available, to each enrolled member of the Confederated Tribes of the Colville Reservation. Any part of such funds distributed per capita to the members of the tribes shall not be subject to Federal or State income tax.

joannesan writes:

This is a complete Scare Tactic we had a rally on Friday June 8, 2012. The council are making up rules at we go, at the rally council in attendence were Ricky Gabriel, Harvey Moses, Sylvia Peasley, Ernest Brooks, Darlene Zacherle, Brian Nissen...quorum was established to accept OUR petition for 50% distribution of the 193 million. I would like to see proof that this will effect people because according WAC 388-455-0005...We got 1783 signatures on our petition and still need 618 to have the legal amount that is needed to be able to vote on how the 193 is distributed. Please call me if you have any question 509-575-8720

Editor writes:

The 181-D settlement does not have an end date I'm aware of. The recent settlement that is the subject here is a one-time event.

CuriousNDN writes:

From the article: ...the annual payment the Tribes receives from the Bonneville Power Administration under the 181-D settlement (a percentage of the revenue generated from Grand Coulee Dam) may be distributed tax-free... How long is this settlement in effect? Is there an end date?