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Native American taxation and Oregon personal income tax
Background
The mission of the Oregon Department of Revenue is to “make revenue systems work to fund the public services that preserve and enhance the quality of life for all citizens.” In support of that mission, the department is continuously reviewing its policy regarding Oregon’s personal income tax program and other programs in light of changing tax laws, legal interpretations, and stakeholders’ concerns.
 
Recently a committee of department policy staff, with the assistance of the Attorney General’s Office, completed a review of state and federal laws and regulations regarding Oregon’s personal income tax and Indian law. This area of tax law presents some interesting and unique challenges. One of the most challenging areas is balancing the sovereign rights of the Native American Tribes with those of the State of Oregon. This remained foremost in the minds of the committee during its discussions.
 
The purpose of this paper is to outline the results of that review. The department does not feel that this paper results in any change to our current policy. The policy reflects current statute and administrative rules. It does, however, clarify and explain application of the policy.

Statutory guidance
Oregon personal income tax law relating to the taxation of Native Americans is found under ORS 316.777 and OAR 150-316.777. This statute and the associated administrative rules exempt certain income earned by Native Americans in Oregon. Essentially the statute and rules attempt to define and clarify the three most important questions to be answered when dealing with Native American law. These are:
 
Who earned the income? To qualify for the exemption, the individual must be an enrolled member of a federally recognized Indian tribe.
 
Where did they reside? The tribal member must reside in “Indian Country” in Oregon. (Some states require a tribal member to live and work on their own reservation. This is not required under ORS 316.777.)
 
Where was the income earned? The income must be derived from sources within “Indian Country” in Oregon. This includes all income earned while working in “Indian Country” in Oregon. It also includes certain intangible income (i.e. interest, dividends, and per capita payments) as it is sourced to the individual.
 
All three of these conditions must be met in order to qualify for the exemption.

Policy clarification
The policy committee found that much of the confusion lies around the definition of “Indian Country” and its application to the personal income tax program. As part of our discussion, the department developed the attached diagram that visually represents our policy and the issues under discussion.
 
The common thread throughout the concept of “Indian Country” is the land, and how it is held. The committee and legal counsel agreed that for Oregon income tax law purposes, “Indian Country” includes:
  • Any land within the current defined boundaries of a federally recognized reservation, regardless of ownership.
  • Tribal or member owned land outside current reservation boundaries, if held in trust for the benefit of the tribe or its members.
  • Indian allotment land, if the Indian title to it has not been extinguished.
We feel that this policy recognizes and respects the sovereignty of both the Native American tribes and the State of Oregon. We also recognize the evolving nature of Native American law and feel that, at this particular point in time, our policy is well within accepted legal tenets.
 

Tribal Chart

Links

Tribal information home

Native American taxation and Oregon personal income tax

Native American taxpayers FAQ

Native American fishing rights

American Indian income tax subtraction

Legislative commission on Indian services (Oregon)

Tribal websites

Office of Indian tribal governments at the IRS

OAR 150-316.777

ORS 316.777