
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC7871]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                Subtitle F--Procedure and Administration
 
                        CHAPTER 80--GENERAL RULES
 
        Subchapter C--Provisions Affecting More Than One Subtitle
 
Sec. 7871. Indian tribal governments treated as States for 
        certain purposes
        

(a) General rule

    An Indian tribal government shall be treated as a State--
        (1) for purposes of determining whether and in what amount any 
    contribution or transfer to or for the use of such government (or a 
    political subdivision thereof) is deductible under--
            (A) section 170 (relating to income tax deduction for 
        charitable, etc., contributions and gifts),
            (B) sections 2055 and 2106(a)(2) (relating to estate tax 
        deduction for transfers of public, charitable, and religious 
        uses), or
            (C) section 2522 (relating to gift tax deduction for 
        charitable and similar gifts);

        (2) subject to subsection (b), for purposes of any exemption 
    from, credit or refund of, or payment with respect to, an excise tax 
    imposed by--
            (A) chapter 31 (relating to tax on special fuels),
            (B) chapter 32 (relating to manufacturers excise taxes),
            (C) subchapter B of chapter 33 (relating to communications 
        excise tax), or
            (D) subchapter D of chapter 36 (relating to tax on use of 
        certain highway vehicles);

        (3) for purposes of section 164 (relating to deduction for 
    taxes);
        (4) subject to subsection (c), for purposes of section 103 
    (relating to State and local bonds);
        (5) for purposes of section 511(a)(2)(B) (relating to the 
    taxation of colleges and universities which are agencies or 
    instrumentalities of governments or their political subdivisions);
        (6) for purposes of--
            (A) section 105(e) (relating to accident and health plans),
            (B) section 403(b)(1)(A)(ii) (relating to the taxation of 
        contributions of certain employers for employee annuities), and
            (C) section 454(b)(2) (relating to discount obligations); 
        and

        (7) for purposes of--
            (A) chapter 41 (relating to tax on excess expenditures to 
        influence legislation), and
            (B) subchapter A of chapter 42 (relating to private 
        foundations).

(b) Additional requirements for excise tax exemptions

    Paragraph (2) of subsection (a) shall apply with respect to any 
transaction only if, in addition to any other requirement of this title 
applicable to similar transactions involving a State or political 
subdivision thereof, the transaction involves the exercise of an 
essential governmental function of the Indian tribal government.

(c) Additional requirements for tax-exempt bonds

                           (1) In general

        Subsection (a) of section 103 shall apply to any obligation (not 
    described in paragraph (2)) issued by an Indian tribal government 
    (or subdivision thereof) only if such obligation is part of an issue 
    substantially all of the proceeds of which are to be used in the 
    exercise of any essential governmental function.

             (2) No exemption for private activity bonds

        Except as provided in paragraph (3), subsection (a) of section 
    103 shall not apply to any private activity bond (as defined in 
    section 141(a)) issued by an Indian tribal government (or 
    subdivision thereof).

          (3) Exception for certain private activity bonds

        (A) In general

            In the case of an obligation to which this paragraph 
        applies--
                (i) paragraph (2) shall not apply,
                (ii) such obligation shall be treated for purposes of 
            this title as a qualified small issue bond, and
                (iii) section 146 shall not apply.

        (B) Obligations to which paragraph applies

            This paragraph shall apply to any obligation issued as part 
        of an issue if--
                (i) 95 percent or more of the net proceeds of the issue 
            are to be used for the acquisition, construction, 
            reconstruction, or improvement of property which is of a 
            character subject to the allowance for depreciation and 
            which is part of a manufacturing facility (as defined in 
            section 144(a)(12)(C)),
                (ii) such issue is issued by an Indian tribal government 
            or a subdivision thereof,
                (iii) 95 percent or more of the net proceeds of the 
            issue are to be used to finance property which--
                    (I) is to be located on land which, throughout the 
                5-year period ending on the date of issuance of such 
                issue, is part of the qualified Indian lands of the 
                issuer, and
                    (II) is to be owned and operated by such issuer,

                (iv) such obligation would not be a private activity 
            bond without regard to subparagraph (C),
                (v) it is reasonably expected (at the time of issuance 
            of the issue) that the employment requirement of 
            subparagraph (D)(i) will be met with respect to the facility 
            to be financed by the net proceeds of the issue, and
                (vi) no principal user of such facility will be a person 
            (or group of persons) described in section 144(a)(6)(B).

        For purposes of clause (iii), section 150(a)(5) shall apply.

        (C) Private activity bond rules to apply

            An obligation to which this paragraph applies (other than an 
        obligation described in paragraph (1)) shall be treated for 
        purposes of this title as a private activity bond.

        (D) Employment requirements

            (i) In general

                The employment requirements of this subparagraph are met 
            with respect to a facility financed by the net proceeds of 
            an issue if, as of the close of each calendar year in the 
            testing period, the aggregate face amount of all outstanding 
            tax-exempt private activity bonds issued to provide 
            financing for the establishment which includes such facility 
            is not more than 20 times greater than the aggregate wages 
            (as defined by section 3121(a)) paid during the preceding 
            calendar year to individuals (who are enrolled members of 
            the Indian tribe of the issuer or the spouse of any such 
            member) for services rendered at such establishment.
            (ii) Failure to meet requirements

                (I) In general

                    If, as of the close of any calendar year in the 
                testing period, the requirements of this subparagraph 
                are not met with respect to an establishment, section 
                103 shall cease to apply to interest received or accrued 
                (on all private activity bonds issued to provide 
                financing for the establishment) after the close of such 
                calendar year.
                (II) Exception

                    Subclause (I) shall not apply if the requirements of 
                this subparagraph would be met if the aggregate face 
                amount of all tax-exempt private activity bonds issued 
                to provide financing for the establishment and 
                outstanding at the close of the 90th day after the close 
                of the calender year were substituted in clause (i) for 
                such bonds outstanding at the close of such calendar 
                year.
            (iii) Testing period

                For purposes of this subparagraph, the term ``testing 
            period'' means, with respect to an issue, each calendar year 
            which begins more than 2 years after the date of issuance of 
            the issue (or, in the case of a refunding obligation, the 
            date of issuance of the original issue).

        (E) Definitions

            For purposes of this paragraph--
            (i) Qualified Indian lands

                The term ``qualified Indian lands'' means land which is 
            held in trust by the United States for the benefit of an 
            Indian tribe.
            (ii) Indian tribe

                The term ``Indian tribe'' means any Indian tribe, band, 
            nation, or other organized group or community which is 
            recognized as eligible for the special programs and services 
            provided by the United States to Indians because of their 
            status as Indians.
            (iii) Net proceeds

                The term ``net proceeds'' has the meaning given such 
            term by section 150(a)(3).

(d) Treatment of subdivisions of Indian tribal governments as political 
        subdivisions

    For the purposes specified in subsection (a), a subdivision of an 
Indian tribal government shall be treated as a political subdivision of 
a State if (and only if) the Secretary determines (after consultation 
with the Secretary of the Interior) that such subdivision has been 
delegated the right to exercise one or more of the substantial 
governmental functions of the Indian tribal government.

(e) Essential governmental function

    For purposes of this section, the term ``essential governmental 
function'' shall not include any function which is not customarily 
performed by State and local governments with general taxing powers.

(Added Pub. L. 97-473, title II, Sec. 202(a), Jan. 14, 1983, 96 Stat. 
2608; amended Pub. L. 98-21, title I, Sec. 122(c)(6), Apr. 20, 1983, 97 
Stat. 87; Pub. L. 98-369, div. A, title IV, Sec. 474(r)(41), title X, 
Sec. 1065(b), July 18, 1984, 98 Stat. 847, 1048; Pub. L. 99-514, title 
I, Secs. 112(b)(4), 123(b)(3), title XIII, Sec. 1301(j)(6), (7), title 
XVIII, Secs. 1878(i), 1899A(65), Oct. 22, 1986, 100 Stat. 2109, 2113, 
2658, 2905, 2962; Pub. L. 100-203, title X, Sec. 10632(a), (b), Dec. 22, 
1987, 101 Stat. 1330-455; Pub. L. 103-66, title XIII, Sec. 13222(d), 
Aug. 10, 1993, 107 Stat. 481.)


                               Amendments

    1993--Subsec. (a)(6)(B) to (D). Pub. L. 103-66 redesignated former 
subpars. (C) and (D) as (B) and (C), respectively, and struck out former 
subpar. (B) which read as follows: ``section 162(e) (relating to 
appearances, etc., with respect to legislation),''.
    1987--Subsec. (c)(2). Pub. L. 100-203, Sec. 10632(b)(2), substituted 
``Except as provided in paragraph (3), subsection (a)'' for ``Subsection 
(a)''.
    Subsec. (c)(3). Pub. L. 100-203, Sec. 10632(b)(1), added par. (3).
    Subsec. (e). Pub. L. 100-203, Sec. 10632(a), added subsec. (e).
    1986--Subsec. (a)(4). Pub. L. 99-514, Sec. 1301(j)(6), substituted 
``(relating to State and local bonds)'' for ``(relating to interest on 
certain governmental obligations)''.
    Subsec. (a)(6). Pub. L. 99-514, Sec. 123(b)(3), redesignated 
subpars. (C) to (E), as previously redesignated by section 112(b)(4) of 
Pub. L. 99-514, as (B) to (D), respectively, and struck out previously 
redesignated subpar. (B), which read as follows: ``section 117(b)(2)(A) 
(relating to scholarships and fellowship grants),''.
    Pub. L. 99-514, Sec. 112(b)(4), redesignated subpars. (B) to (F) as 
(A) to (E), respectively, and struck out former subpar. (A) which read 
as follows: ``section 24(c)(4) (defining State for purposes of credit 
for contribution to candidates for public offices),''.
    Pub. L. 99-514, Sec. 1878(i), made technical amendment to directory 
language of Pub. L. 98-369, Sec. 1065(b). See 1984 Amendment note below.
    Subsec. (a)(6)(D). Pub. L. 99-514, Sec. 1899A(65), substituted ``; 
and'' for period at end.
    Subsec. (c)(2). Pub. L. 99-514, Sec. 1301(j)(7), amended par. (2) 
generally. Prior to amendment, par. (2) read as follows: ``Subsection 
(a) of section 103 shall not apply to any of the following issued by an 
Indian tribal government (or subdivision thereof):
        ``(A) An industrial development bond (as defined in section 
    103(b)(2)).
        ``(B) An obligation described in section 103(l)(1)(A) (relating 
    to scholarship bonds).
        ``(C) A mortgage subsidy bond (as defined in paragraph (1) of 
    section 103A(b) without regard to paragraph (2) thereof).''
    1984--Subsec. (a)(6)(A). Pub. L. 98-369, Sec. 474(r)(41), 
substituted ``section 24(c)(4)'' for ``section 41(c)(4)''.
    Subsec. (a)(6)(B) to (F). Pub. L. 98-369, Sec. 1065(b), as amended 
by Pub. L. 99-514, Sec. 1878(i), added subpars. (B), (D), and (F), and 
redesignated former subpars. (B) and (C) as (C) and (E), respectively.
    1983--Subsec. (a)(6). Pub. L. 98-21 redesignated subpars. (B) to (D) 
as (A) to (C), respectively, and struck out former subpar. (A), which 
referred to section 37(e)(9)(A) (relating to certain public retirement 
systems).


                    Effective Date of 1993 Amendment

    Amendment by Pub. L. 103-66 applicable to amounts paid or incurred 
after Dec. 31, 1993, see section 13222(e) of Pub. L. 103-66 set out as a 
note under section 162 of this title.


                    Effective Date of 1987 Amendment

    Section 10632(c) of Pub. L. 100-203 provided that: ``The amendments 
made by this section [amending this section] shall apply to obligations 
issued after October 13, 1987.''


                    Effective Date of 1986 Amendment

    Amendment by section 112(b)(4) of Pub. L. 99-514 applicable to 
taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. 
L. 99-514, set out as a note under section 1 of this title.
    Amendment by section 123(b)(3) of Pub. L. 99-514 applicable to 
taxable years beginning after Dec. 31, 1986, but only in the case of 
scholarships and fellowships granted after Aug. 16, 1986, see section 
151(d) of Pub. L. 99-514, set out as a note under section 1 of this 
title.
    Amendment by section 1301(j)(6), (7) of Pub. L. 99-514 applicable to 
bonds issued after Aug. 15, 1986, except as otherwise provided, see 
sections 1311 to 1318 of Pub. L. 99-514, set out as an Effective Date; 
Transitional Rules note under section 141 of this title.
    Amendment by section 1878(i) of Pub. L. 99-514 effective, except as 
otherwise provided, as if included in the provisions of the Tax Reform 
Act of 1984, Pub. L. 98-369, div. A, to which such amendment relates, 
see section 1881 of Pub. L. 99-514, set out as a note under section 48 
of this title.


                    Effective Date of 1984 Amendment

    Amendment by section 474(r)(41) of Pub. L. 98-369 applicable to 
taxable years beginning after Dec. 31, 1983, and to carrybacks from such 
years, see section 475(a) of Pub. L. 98-369, set out as a note under 
section 21 of this title.
    Section 1065(c) of Pub. L. 98-369 provided that: ``The amendment 
made by subsection (b) [amending this section] shall apply to taxable 
years beginning after December 31, 1984.''


                    Effective Date of 1983 Amendment

    Amendment by Pub. L. 98-21 applicable to taxable years beginning 
after Dec. 31, 1983, except that if an individual's annuity starting 
date was deferred under section 105(d)(6) of this title as in effect on 
the day before Apr. 20, 1983, such deferral shall end on the first day 
of such individual's first taxable year beginning after Dec. 31, 1983, 
see section 122(d) of Pub. L. 98-21, set out as a note under section 22 
of this title.


                             Effective Date

    Section 204 of title II of Pub. L. 97-473, as amended by Pub. L. 98-
369, div. A, title X, Sec. 1065(a), July 18, 1984, 98 Stat. 1048; Pub. 
L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ``The 
amendments made by this title [enacting this section, amending sections 
41, 103, 164, 170, 2055, 2106, 2522, 4227, 4484, 6420, 6421, 6424, 6427, 
and 7701 of this title, and enacting provisions set out as a note under 
section 1 of this title]--
        ``(1) insofar as they relate to chapter 1 of the Internal 
    Revenue Code of 1986 [formerly I.R.C. 1954] [26 U.S.C. 1 et seq.] 
    (other than section 103 thereof), shall apply to taxable years 
    beginning after December 31, 1982,
        ``(2) insofar as they relate to section 103 of such Code, shall 
    apply to obligations issued after December 31, 1982,
        ``(3) insofar as they relate to chapter 11 of such Code [26 
    U.S.C. 2001 et seq.], shall apply to estates of decedents dying 
    after December 31, 1982,
        ``(4) insofar as they relate to chapter 12 of such Code [26 
    U.S.C. 2501 et seq.], shall apply to gifts made after December 31, 
    1982, and
        ``(5) insofar as they relate to taxes imposed by subtitle D of 
    such Code [26 U.S.C. 4041 et seq.], shall take effect on January 1, 
    1983.''


                               Short Title

    For short title of title II of Pub. L. 97-473 as the ``Indian Tribal 
Governmental Tax Status Act of 1982'', see Short Title of 1983 
Amendments note set out under section 1 of this title.


  Applicability of Certain Amendments by Pub. L. 99-514 in Relation to 
                   Treaty Obligations of United States

    For nonapplication of amendment by section 123(b)(3) of Pub. L. 99-
514 to the extent application of such amendment would be contrary to any 
treaty obligation of the United States in effect on Oct. 22, 1986, see 
section 1012(aa)(3), (4) of Pub. L. 100-647, set out as a note under 
section 861 of this title.


           Plan Amendments Not Required Until January 1, 1989

    For provisions directing that if any amendments made by subtitle A 
or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 1800-1899A] of Pub. L. 99-514 require an amendment to any plan, 
such plan amendment shall not be required to be made before the first 
plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. 
L. 99-514, as amended, set out as a note under section 401 of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 164, 170, 401, 2055, 2106, 
2522, 4227, 4484, 6420, 6421, 6427, 7701 of this title; title 25 section 
566.
