The General Welfare Exclusion Act (GWE) passed and was signed into law by President Obama in 2014. If you are an Elder, you are probably more aware of this legislation. Our Elder’s Pension qualifies under this umbrella and as a result we now are no longer taxed for this benefit. That is a personal savings of 30% depending on one’s tax bracket. That is no small change. Under our current benefit that is almost $450 per month that is not going to federal or state income taxes and instead is kept where the benefit was intended.
Yet, I still get asked this question. What is the GWE?
It is an IRS doctrine recognizing that payments made under legislatively provided social benefit programs for promotion of the general welfare are excludable from gross income. This is important for those on disability as per cap is counted towards gross income. This is a recognition of sovereignty as all governments, and especially tribal governments, have a better understanding of what is best for their people. In the United States, the House of Representatives and the Senate are our legislative body, and the President is the executive branch. For us, Tribal Council is the legislative body and the executive branch. You will notice that we pass things on Tuesdays as part of the Legislative Action Committee and vote on them during the bi-weekly Wednesday Tribal Council meetings as the executive function.
There are four items of consideration to qualify:
- Process (“legislatively provided”)
- Purpose (“promotion of the general welfare”)
- Payments must not be compensation for services
- Exception for nominal stipends or benefits for programs with community service ties such as our committees or cultural programs.
- It must not be extravagant in nature.
- While this has not been defined and there is not any real guidance from the IRS, my definition starts with the current IRS code that allows wealthy individuals to give $16,000 to an unlimited amount of individuals without any tax liability for either party. The monthly payments are well under this threshold. However, even that should not be a limitation for items such as down payment assistance or education.
Importantly, tribal programs, which benefit the general welfare of the tribe, should be excluded from taxation regardless of whether the recipient demonstrates ‘financial need’, i.e., means testing should not be a requirement for programs to qualify as general welfare programs. While we have done some important work for low income members, here is where we need to pay more attention. Not doing so clearly penalizes those with marginally higher incomes without recognizing the sacrifices and struggles incurred to do so, or the historical traumas that are still playing out in all of our lives regardless of our income levels. It also ignores our tribal values, in which many of us are helping our family members and incurring costs to do so.
There is a federal trust responsibility that has historically fallen short of the needs of tribes. There are 566 federally recognized tribes with diverse histories, needs, and policy approaches. We see that such in the areas of education, cultural preservation, healthcare, housing, and elder programs, although that is not a complete list. For a terminated tribe such as our own, there are even more challenges to face. Maintaining and promoting culture, including language preservation, intercultural exchanges between tribes, and heritage education, are definitely a community need. Living in a food desert and the challenges and additional costs of healthy eating is another. Since where we live has a profound effect on our well being, a benefit that allows one to live in an area with better education, child care affordability and availability, as well as livability and safety is also an obvious concern that needs to be addressed. Emergency preparedness also has differing needs depending on where we live. All of these items many use their current per cap to be able to afford the expenses, all while they could qualify under GWE as a nontaxable benefit.
Our Tribal Council has the ability and the authority to legislate for these needs. In fact, our legal team has evaluated this and we currently can start offering a monthly benefit for adult members as long as we pass legislation to do so. The piece we are still working on is how we can keep the benefit for the Minor’s Trust. I believe we can do the same for Minor’s Trust. However, that is still a work in progress. The fall-back plan would be to make a separate per cap benefit at the end of the year to keep this benefit moving forward as is. We are working with legal to explore other options that would get us there. I know Senator Cory Booker and others have attempted to set up similar accounts for minors in the United States that would be tax-free, so the idea is not far-fetched.
I would like to provide a $450 monthly General Welfare benefit that addresses the needs of our people, especially in this high inflation environment. The fact that our people are spread throughout the United States and abroad due to termination makes this flexibility even more necessary. This benefit is $5400 on an annual basis. However, it is equivalent of around $7000 if it was a taxable benefit like per cap. Many tribes are doing this. I also see other tribes doing a December bonus or a per cap payment in good years, and if the budgets allow it. There is nothing that would prevent us from doing the same.
One of the hang-ups is how to communicate this to you folks. I have heard that it is too complicated. It will open us up to being attacked for trying to do something different instead of the easy per cap process. It is easy to understand reluctance because it does seem like any time we try to introduce an idea, others step forward to try to use the conversations to drive a political wedge. Yet, this is very important moving forward, especially if we ever pass a Constitutional Amendment that has the potential to increase our membership rolls by even more than the 30% in tax and budget savings this provides us.
Whether I am re-elected or not, I will continue to push for this change. There should be a targeted program start date of January 1, 2024, as that gives ample time to provide and develop the process and necessary ordinance changes. It most certainly would need a once per year form that is not based on income to qualify, much like we did during the COVID closures. If you are looking for other examples, the Puyallup Tribe is a good source that you can find online. Here’s a link to their online form if interested. You can also explore their ordinances on their site.
https://app.smartsheet.com/b/form/91dcec3e2b274fbda799941252973e7f
Michael A. Langley 