On June 11, 2025, Senator Catherine Cortez Masto (D-NV) introduced S.2022, titled the Tribal Tax and Investment Reform Act of 2025 (the Bill).1 The bipartisan Bill, co-sponsored by Senator Lisa Murkowski (R-AK), aims to provide tax parity for tribal governments and stimulate economic development in Indian Country by providing tribal nations access to the same tax benefits and treatment as state governments.
Fraud Prevention
Senator Cortez Masto was motivated to introduce the Bill by a recent scandal involving “Native American Federal Income Tax Credits” or “Sovereign Tribal Tax Credits.”2 As the Internal Revenue Service (IRS) has confirmed, these tribal tax credits do not exist. Promoters engaged in a scheme to sell the fictitious credits, preying on investors’ lack of understanding of tribal governments as sovereign entities and the complexity of federal tax rules in Indian Country.3
This multimillion-dollar scheme resulted in a federal investigation and urgent appeals in Congress to modernize and simplify the federal tax code with respect to tribal governments.4 As Senator Cortez Masto explained, the tribal tax-credit scandal:
“shows exactly why we need clearer, simpler tax policy for tribes. Right now, the tax code is so complicated and inconsistent when it comes to tribes that it creates opportunities for bad actors. . . . That’s why I introduced the Tribal Tax Investment Reform Act. It gives tribes the same treatment as states under the tax code, and it makes it easier for investors to distinguish between legitimate programs and scams.”5
Although it is still under consideration before the Senate Finance Committee, the Bill’s bipartisan nature bodes well for its passage.6
Key Provisions
The Bill contains several key provisions that, if enacted, would guarantee tribal governments equitable access to financial instruments necessary to sustain healthy and sovereign economies, including tax-exempt bonds, pension plans, housing credits and more.7
- Section 3: Tax-Exempt Bonds. Eliminates the “essential government function test,” which previously restricted tribal use of tax-exempt bonds. Establishes a private activity bond volume cap of $400 million alongside a separate allocation for Alaska Native Corporations. Allows tribes to issue governmental bonds on the same terms as states, enabling financing for infrastructure, schools, hospitals and other public services.8
- Section 4: Pension and Employment Benefits. Ensures that tribal pension and employment benefits are treated the same as those from state governments. Protects Tribal General Welfare Benefits from being counted as income for federal assistance programs.9
- Sections 6–7: Family and Child Welfare. Revise tax rules to support tribal child adoption and child-support enforcement. Section 6 authorizes tribal child-support enforcement agencies, like their state counterparts, to enforce orders for support through withholding of past-due child-support obligations, using parents’ federal tax returns. Section 7 permits adopting parents to receive a federal Adoption Tax Credit when a tribal court determines that a child has “special needs.”10
a. Note: Section 7 was signed into law by President Donald Trump on July 4, 2025, as part of the One Big Beautiful Bill Act (OBBB). It is the only provision of the Bill included in the OBBB.11
- Section 8: New Markets Tax Credit (NMTC) for Tribal Areas. Establishes a $175 million annual NMTC allocation specifically for low-income tribal statistical areas. Encourages private investment in economically distressed tribal communities by offering tax credits to investors.12
- Section 9: Low-Income Housing Tax Credits (LIHTCs). Revises the definition of “difficult development areas” to include Indian areas for purposes of determining eligibility. Enhances tribal access to LIHTCs, supporting affordable housing development on tribal lands.13
- Sections 11–13: Tribal Workforce and Health Services. Creates incentives for the hiring and retention of employees in Indian Country, addressing high unemployment rates and healthcare professional shortages. Section 11 updates and extends the Indian Employment Tax Credit, a credit for employers who hire tribal members or their spouses who work on a reservation and live on or near a reservation. Sections 12 and 13 make health professionals at the Indian Health Service eligible for recruitment and retention tax incentives available to other public sector health professionals, including exclusion of loan repayment and scholarship payments from gross income.14
Conclusion
If passed, the Tribal Tax and Investment Reform Act would address long-standing inequities that have hindered the economic growth and self-determination of Native American communities. By providing tribal governments with access to the same tax incentives and investment opportunities enjoyed by state and local governments, this legislation would empower tribal governments to build critical infrastructure, attract private investment, decrease unemployment rates and strengthen their local economies.
Footnotes
