Tribal organization may receive deductible charitable contributions

Plain-English summary

Federally recognized Indian tribes in one region formed and funded an organization to carry out a shared project. The project promoted economic development, preserved cultural and subsistence resources, and expanded educational opportunities for tribal youth. Each tribe appointed a governing-body member to the organization's board, and the member tribes exclusively controlled its actions. Applying the governmental-instrumentality factors in Rev. Rul. 57-128, the IRS found no private interests and concluded that the organization was wholly owned and controlled by the tribal governments. It ruled that the organization could receive tax-deductible charitable contributions under IRC § 170(c)(1).

Ruling snapshot

• Question: Was the organization an instrumentality of its member tribal governments eligible to receive deductible charitable contributions?
• Outcome: Approved
• Key authorities: IRC §§ 170(c)(1), 7701(a)(40), 7871(a)(1)(A); Rev. Rul. 57-128

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201551003 [Third Party Communication:
Release Date: 12/18/2015 Date of Communication: Month DD, YYYY]
Index Number: 170.00-00, 7871.01-00
Person To Contact:
-------------------------- -------------------, ID No. -----------------
------------------------- Telephone Number:
------------------------------------ ---------------------
-------------------- Refer Reply To:
------------------------------------ CC:TEGE:EOEG:EO2
PLR-109371-15
Organization = ----------------- Date:
----------------- September 11, 2015
--------------
State = ---------
Project = -----------------
-----------------
-----------------
-----------------
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Dear ---------------:

This letter responds to a letter from your authorized representatives dated February 3,
2015 submitted on behalf of the Organization, requesting a ruling that the Organization
is an instrumentality of its member Indian tribal governments within the meaning of Rev.
Rul. 57-128, 1957-1 C.B. 31, and is eligible to receive tax deductible charitable
contributions under Internal Revenue Code (IRC) section 170(c)(1).

FACTS

The Organization’s members are recognized as Indian tribal governments within the
meaning of IRC section 7701(a)(40). Membership in the Organization is limited to
federally recognized Indian tribes located in a particular region of the State. Each
member Indian tribe appoints a member of the tribe’s governing body to serve on the
Organization’s board of directors. The Organization’s actions are controlled exclusively
by its member tribes through their appointed representatives. The Organization’s board
of directors’ meeting locations rotate between members’ lands to permit each member
tribe to more easily participate in the Organization’s board of directors meetings.
PLR-109371-15 2

The Organization was formed by resolutions from each of its member tribes for the
purpose of implementing the Project. The Project is focused on improving economic
development opportunities, preserving cultural and subsistence resources, and
increasing educational opportunities for tribal youth. In addition to the resolution, each
member tribe allocated funds from its treasury to support the Organization’s operations.

LAW

Revenue Ruling 57-128 sets forth the following factors to be taken into account in
determining whether an entity is an instrumentality of one or more governmental units:
(1) whether the organization is used for a governmental purpose and performs a
governmental function; (2) whether performance of its function is on behalf of one or
more states or political subdivisions; (3) whether there are any private interests
involved, or whether the states or political subdivisions have the power and interests of
an owner; (4) whether control and supervision of the organization is vested in a public
authority or authorities; (5) whether express or implied statutory or other authority is
necessary for the creation and/or use of the organization, and whether this authority
exists; and (6) the degree of financial autonomy of the entity and the source of its
operating expenses.

IRC section 7701(a)(40) provides that the term “Indian tribal government” means the
governing body of any tribe, band, community, or group of Indians or (if applicable)
Alaska Natives.

IRC section 7871(a)(1)(A) provides that an Indian tribal government shall be treated as
a state for purposes of determining whether and in what amount any contribution or
transfer to or for the use of an Indian tribal government (or a political subdivision
thereof) is deductible under IRC section 170.

IRC section 170(a)(1) allows, subject to certain limitations, a deduction for charitable
contributions as defined in IRC section 170(c), payment of which is made within the
taxable year. IRC section 170(c)(1) includes in the definition of “charitable contribution”
a contribution or gift made for exclusively public purposes to or for the use of a state, a
possession of the United States, a political subdivision of either a state or possession of
the United States, the United States, or the District of Columbia. Entities eligible to
receive tax deductible contributions include not only governmental units described in
IRC section 170(c)(1), but also wholly owned instrumentalities of states and political
subdivisions.

ANALYSIS

The member Indian tribes are all recognized as Indian tribal governments that are
treated similarly to states for specified purposes under the IRC section 7871.
PLR-109371-15 3

The Organization‘s purpose is to implement the Project, which is focused on improving
economic development opportunities, preserving cultural and subsistence resources,
and increasing educational opportunities for tribal youth. These activities are of a kind
that is typically undertaken by tribal governments.

There are no private interests involved in the Organization and the Indian tribal
governments have the power and interests of an owner. Control and supervision are
vested in the member tribes. Membership and ownership are limited to federally
recognized Indian tribal governments located in a particular region of the State.

The Organization’s actions, including all contracts and agreements, are controlled
exclusively by its member tribes through their appointed representatives. Further, the
Organization receives funding from funds allocated from its member tribes.

Accordingly, the Organization is a wholly owned instrumentality of its member Indian
tribal governments and is eligible to receive charitable contributions under IRC section
170(c)(1).

The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the request for rulings, it is subject to verification on examination.

This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representatives.

A copy of this letter must be attached to any income tax return to which it is relevant.
Alternatively, taxpayers filing their returns may satisfy this requirement.

                                   Sincerely,

                                   /S/

                                   Casey Lothamer
                                   Branch Chief
                                   Exempt Organizations Branch 2
                                   (TEGE Associate Chief Counsel)