SB 855 impacts to tribal income November 2018 Tax News

Effective January 1, 2018, pursuant to Senate Bill 855, income of tribal members of federally recognized California Indian Tribe living in California Indian country earned from any federally recognized California Indian country as defined in 18 U. S. C. Section 1151 is exempt from California taxation. This exemption applies to "earned income" as defined in IRC Section 32(c)(2)(A)(i).

Enrolled tribal members who receive per capita income must reside in their affiliated tribe's Indian country for the income to be exempt from taxation.
(See table below for income exemption requirements)

Exemption Requirements
Earned Income (Wages) Received Income (Per Capita)
Individuals must be an enrolled member of a federally recognized California Indian tribe. Individual must be an enrolled member of a federally recognized California Indian tribe.
Individual must live within any California Indian country. Individual must reside in the tribe's California Indian country
Individual must earn reservation source income from California Indian country. Individual must receive reservation sourced income from the same California Indian country in which the individual lives and is an enrolled member.

Earned Income

Earned income means wages, salaries, commissions, or professional fees, and other amounts received as compensation for personal services actually rendered. There are two ways to get earned income:

  1. Individual worked for someone who pays you.
  2. Individual owned or ran a business or farm.

Per Capita Distribution

Indian tribes that conduct gaming activities on a California reservation may use gaming profits for all tribal members' general welfare. The law allows tribes to distribute gaming income to each tribal member (per capita) after meeting or accounting for tribal obligations. The tribal member's residence determines whether or not California taxes the per capita payments. Per capita income is received income. Per capita income is not earned income.

For more information, enrolled members, tribal governments, or designated representatives can contact our tribal hotline:

Tribal Hotline