On December 16, 2025, the Internal Revenue Service issued a Final Rule implementing section 139E-1 of the Internal Revenue Code and the Tribal General Welfare Exclusion Act of 2014. The rule governs when benefits provided through tribal programs are excluded from a recipient’s gross income for federal tax purposes.

Overall, the Final Rule largely reflects recommendations from the Treasury Tribal Advisory Committee (TTAC) and tribal consultation by affirming tribal sovereignty and granting broad deference to tribal governments to determine whether programs and benefits promote the general welfare of their communities. The regulations confirm that tribal governments have sole discretion to define general welfare, determine program eligibility, and assess whether benefits are lavish or extravagant, subject to limited factual review. The Final Rule also clarifies that benefits funded by gaming revenues may qualify for exclusion from gross income when provided through qualifying tribal welfare programs.

However, how this rule applies to Alaska Native regional or village corporations (ANCs) remains a central issue.

i. ANCs are Excluded from the Definition of Tribe & Enter an Unclear Interim Period

The Final Rule expressly removes ANCs from the definition of Tribe while also noting commenters’ obvious concern that “the omission of Alaska Native regional or village corporations from the proposed regulations creates confusion as to whether section 139E applies to Alaska Native regional or village corporations and that eliminating this uncertainty should be a top priority of the Treasury Department and the IRS.” Other commenters suggested that the Final Rule should wait until ANCs have been properly included in the rulemaking process and incorporated into the Final Rule.

However, the Treasury Department and IRS defend issuing the Final Rule as-is, providing little guidance on how ANCs are to actually apply the Final Rule while in an interim period, other than seemingly giving ANCs full access to the rule:

In the interest of sound tax administration, the Treasury Department and the IRS have decided to continue to limit the rules of § 1.139E-1 to Federally recognized Tribes.

[. . .]

The omission of Alaska Native regional or village corporations from the definition of Indian Tribal government in proposed § 1.139E-1 was never intended to suggest Indian general welfare benefits cannot be provided by an Alaska Native regional or village corporation to or on behalf of its members (or any spouse or dependent of such members). Thus, the Treasury Department and the IRS agree that section 139E permits Alaska Native regional or village corporations to provide Indian general welfare benefits, and that other provisions of the Act also apply to Alaska Native regional or village corporations.

The Treasury Department and IRS place the issue as a priority on the most recent Priority Guidance Plan, under Tribal Tax Issue, while stating in the Final Rule that more time for rulemaking is needed to adequately address the “unique circumstances” of ANCs:

The Treasury Department and the IRS acknowledge that Alaska Native regional or village corporations can have programs that qualify to provide general welfare benefits that are excludible from gross income under section 139E. However, the Treasury Department and the IRS intend to issue future guidance specific to the unique circumstances of Alaska Native regional or village corporations.

As a result, ANCs are in an unclear interim period without guidance as to how to apply the rule, other than to apply them in full. More details on the workings and intent of the Final Rule are provided below before addressing underlying questions and potential uses for ANCs during the interim period in Part V.

ii. Tribal General Welfare Benefits Definition and Program Requirements

The Final Rule excludes from gross income the value of Tribal General Welfare Benefits provided to or on behalf of a Tribal Program Participant. A Tribal Program Participant is defined as:

• • Tribal Member;
  • Spouse and dependents of Tribal Member (as determined under Tribal law);
  • Individuals determined by the Tribal government to be eligible for the benefit “because such individual is, with respect to a Tribal Member, an ancestor, descendant, former spouse, widow or widower, legally recognized domestic partner or former domestic partner, or an individual for whom a Tribal Member is a caregiver authorized under Tribal or State law”; or
  • For cultural or ceremonial purposes only, members of a different tribe that established and maintains the Tribal Government Program providing the Tribal General Welfare Benefit.

To qualify, a benefit must be provided pursuant to an Indian Tribal Government Program and must: (1) promote the general welfare; (2) be available to eligible participants; (3) not be lavish or extravagant; and (4) not constitute compensation for services.

An Indian Tribal Government Program must be established by the tribal government through tribal custom, government practice, or formal action consistent with tribal law. Programs must be administered under specified guidelines describing the program’s purpose, eligibility criteria, authorized benefits, and the process for receiving benefits. Written guidelines are not required unless tribal law mandates written documentation, which preserves flexibility for tribes that rely on customary or informal governance structures rather than codified program documents. However, programs may not discriminate in favor of members of the governing body of the Tribe, except if the governing body of a Tribe consists of the entire adult membership of the Tribe.

iii. Tribal Discretion and Deference

One of the most significant aspects of the Final Rule is its reaffirmation of tribal sovereignty. Tribal governments have sole discretion to determine whether a program and its benefits promote general welfare at the time the program is established, and the IRS must defer to that determination. In short, tribes decide:

1. 1. Whether a benefit is lavish or extravagant.
   2. Whether a program is “for promotion of general welfare” at the time it establishes the program.
   3. Whether a benefit promotes the general welfare, and whether tribal governments have exclusive power to decide
   4. Non-monetary benefits in the form of “items of cultural significance.”
   5. “Cultural or ceremonial activities” during which tribal governments may provide non-taxable benefits to their members and honoraria of value to non-member Indians who provide cultural services during such activities (e.g., blessings)

The determination of whether a benefit is “lavish or extravagant” is based on facts and circumstances that include culture, history, geography, resources, and economic conditions. Benefits provided under written program guidelines (at the time the program was established) are presumed not to be lavish or extravagant, which empowers tribes to give larger benefits based on need without concern about the benefit potentially not qualifying.

Again, the purpose of the rule is to allow a Tribal Program Participant to exclude from its gross income for the taxable year the “value of any Tribal General Welfare Benefit provided by an Indian Tribal Government Program.” Benefits from a program may also “be provided without regard to financial need and may be distributed on a uniform or pro-rata basis.” Appropriate program types may include:

[C]ultural programs, housing assistance programs, programs to provide education benefits, programs for training or retraining to acquire new skills or to obtain better employment opportunities, programs to provide assistance for disasters or emergency situations, funeral or burial assistance programs, legal aid programs, wellness and health-related programs, or any programs that provide benefits to specific categories of individuals, such as elderly individuals or minors. Moreover, an Indian Tribal Government may also determine that providing a benefit to a Tribal Program Participant to support, develop, operate, expand, or start a trade or business is a benefit for the promotion of general welfare. However, a benefit paid to or on behalf of a Tribal Program Participant for a trade or business must be paid to or on behalf of the Tribal Program Participant in the Tribal Program Participant’s capacity as an individual (for example, the benefit cannot be paid to or on behalf of the Tribal Program Participant’s corporation or partnership).

This final rule allows tribal governments to give benefits through programs tailored to the needs of their individual communities without having to follow a specific list of “qualifying” benefits. Additionally, it eliminates some uncertainty as to whether a benefit known by the tribal government to address the needs of its community might be included in a recipient’s gross income. Placing the power solely with tribal governments to address the unique needs of their communities, without the barriers of uncertainty and agency involvement, acknowledges the diversity of experience and unique cultural differences of each tribal nation.

iv. Audit Suspension & Other Notable Amendments

The Final Rule temporarily suspends IRS audits and examinations related to the exclusion of Tribal general welfare benefits for Tribal governments and program participants until—without setting a definitive timeline—Treasury and the IRS complete mandatory education and training on Federal Indian law and implementation of the Act. The suspension does not prevent eligibility inquiries and may not be lifted until the required training is completed in consultation with the Treasury Tribal Advisory Committee, reflecting Congress’s intent to ensure informed and culturally competent enforcement. Commenters emphasized that the suspension must remain in place until meaningful consultation and training occur, but the IRS did not address that issue or provide a timeline for when it will address ANCs.  .

The Final Rule also removes any lingering ambiguity around funding sources. Tribal General Welfare Programs may be funded through any source, including taxes and fees, settlements, tribally owned business revenues, federal or state funds, grants, loans, and net gaming revenues under the Indian Gaming Regulatory Act (IGRA). This clears up a previous concern that using IGRA revenues to fund tribal welfare programs disqualified any benefits that flow from those programs. This concern arose because payments made equally to all members of the tribe (otherwise known as “per capita payments”) are specifically taxable as income under IGRA, and using casino revenue “to provide for the general welfare of the Tribe” is specifically included in the act.

The Final Rule draws a clear distinction: IGRA per capita payments remain taxable, but benefits provided through a separate, qualifying Tribal General Welfare Program funded with gaming revenues may still be excluded from gross income. In other words, if a tribe is already distributing per-capita payments to its members under IGRA, those payments cannot qualify as tribal general welfare benefits, but benefits supplied by other welfare programs funded by casino revenues can.

The IRS declined, however, to address how the exclusion of Tribal General Welfare Benefits from gross income may affect eligibility determinations under other federal programs. As a result, uncertainty remains as to whether these benefits could still be treated as income by other agencies for purposes such as benefit eligibility or means testing. The IRS did clarify that tribes are not required to show financial or other need in order to provide General Welfare Benefits, while reaffirming that tribes retain broad discretion to impose need-based eligibility requirements if they choose to do so.

v. How ANCs can use Tribal General Welfare Benefits Taxable Exclusions in the Interim

The potential use of the Final Rule by ANCs during this interim period is uncertain and carries inherent risks. ANCs may determine that many of their programs and activities designed to benefit shareholders, tribal members, and other affiliates qualify as general welfare benefits. However, as mentioned above, the specific application and interpretation of the Final Rule for ANCs remain unclear, even though the Treasury Department and IRS intend to eventually tailor a similar rule for ANCs.

Currently, the Treasury Department and IRS advise that ANCs relying on Section 1.139E-1 should adhere to the regulation in full. Doing so would mean complying with all program-level requirements applicable to Indian Tribal Government Programs, including establishment and administration under specified guidelines, nondiscrimination rules, benefit limitations, and others discussed above.

Without further guidance for approaching this interim period regarding how to effectually replace the term “Tribe” with “ANCs” in the Final Rule, there is substantial risk and uncertainty interpreting which taxable events could potentially apply the Final Rule to.

Two situations unique to ANCs, and their status as corporations with obligations under ANCSA, are implicated by the Final Rule:

1. Uniform or Pro-Rata Shareholder Distributions to At-Large & Village Corporation Shareholders

ANCs can argue that uniform or pro-rata shareholder distributions under ANCSA should be excluded from the shareholders’ gross income by aligning them with Tribal General Welfare principles in the Final Rule. Despite not being defined as tribes, ANCs provide community benefits similar to tribal governments. By showing that these distributions promote general welfare—an explicit purpose of ANCSA—and are not compensation for services, ANCs can support their claim for tax exclusion under section § 1.139E-1 for their shareholders.

For most ANCSA Regional Corporations, shareholders are divided into Village Corporation shareholders (Class A) and at-large shareholders (Class B). Section 7(i) mandates that Regional Corporations share 70% of certain resource development revenue with other Regional Corporations. Section 7(j) requires each Regional Corporation to distribute 50% of the 7(i) funds it receives to Village Corporations and at-large shareholders.

For Class A shareholders, 7(j) funds are typically retained within the Village Corporation and are not taxable until distributed to the shareholder, whereas Class B shareholder distributions do not transfer to the village corporations and are immediately taxable when paid by the Regional Corporation to the at-large shareholders.  There is the potential for 7(j) payments to at-large shareholders to be classified as a Tribal General Welfare benefit, and thus non-taxable to the at-large shareholders.

1. 2. Direct Funding through ANC Programs Subject to ANC Deference as Serving Shareholders’ General Welfare

The limited guidance provided by the Treasury Department and IRS provides a list of appropriate recipients of the welfare benefit tax exclusion—extending to shareholders, shareholders’ spouses and dependents, as well as other individuals who qualify as Tribal Program Participants (defined above). While the Tribal Government controls the determination of a Tribal Program Participants, ANCs are arguably afforded, under Treasury Regulation § 1.139E-2, similar deference—described in Section Three—in identifying ANC programs or activities that were established to provide general welfare benefits to their shareholders.

Based on the Final Rule, applicable ANC programs and activities could possibly include the exclusion of taxable gross income to recipients—provided they qualify as appropriate recipients under the Final Rule—of benefits conferred through: education assistance programs, healthcare and wellness programs, housing assistance programs, elder and disability support programs, cultural and traditional programs, disaster relief and emergency assistance, economic development and job training programs, youth and family support programs, legal aid and advocacy programs, transportation assistance programs, and more.

The Final Rule applies to taxable years that begin on or after January 1, 2027, while also allowing Indian Tribal Governments (including ANCs) and Tribal Program Participants to apply the tax exclusions to taxable years beginning before January 1, 2027. ANCs interested in providing tax-excluded general welfare benefits to shareholders and other appropriate recipients may want to use the interim time to structure such benefits into programs with clearly identifiable general welfare purposes.

While this may be a workable framework for ANCs to provide tax-excluded general welfare benefits to Alaska Native shareholders and other permitted recipients in the interim, both current and future application remain uncertain because ANCs are intentionally excluded from the definition of Indian Tribal Government in the current regulation, combined with the Final Rule’s lack of interim guidance for interpretation and application.

We also acknowledge the contributions of Sophia Tidler, Law Clerk, in the development of this update.

This article summarizes aspects of the law and opinions that are solely those of the authors. This article does not constitute legal advice. For legal advice regarding your situation, you should contact an attorney.