Indian Wills – Planning for the Inevitable

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By Mike Godbe, CILS Bishop office Staff Attorney

It is often said, “nothing can be said to be certain, except death and taxes.” Because taxation in Indian Country is often uncertain (e.g., sales and use tax, property tax, etc.), this leaves death as the only certainty for Native Americans.

Death: the only certainty!

Well, now that I’ve got you feeling upbeat about how we’ll all be kicking the bucket someday, it’s a great time to remember that it’s never too early to start end-of-life planning!

For Native Americans who own an interest in an allotment or have money from their allotment in an Individual Indian Money (IIM) Accounts (referred to “trust assets”), there is a special set of probate rules for giving (“devising”) these assets by will.

Making a Valid Indian Will
While under state law a handwritten will with no witnesses, or a type-written will with two witnesses, may be valid, this state rule is not valid for leaving your trust assets to a relative or loved one. You must execute a will (“Indian Will”) that meets the requirements found in Title 25 of the Code of Federal Regulations, Subpart A (25 CFR §§15.1 – 15.12) to transfer trust assets.[1]  Some of these requirements are that, in addition to having 2 disinterested witnesses, the testator and witnesses must all sign Affidavits with specific language in the presence of “an officer authorized to administer oaths,” such as a notary, and contain specific language.

CILS Attorneys and Advocates have many years of experience assisting clients in drafting valid Indian Wills for their trust assets.

A Valid Indian Will can also Satisfy California Law  (Combined Will)
A valid Indian Will can meet the less-stringent requirements for a valid will under California law (i.e for transferring personal property and non-trust land).  (see Probate Code § 6110-6113). This means that you don’t need two wills– one for your trust and one for your non-trust assets—- as long as the more stringent requirements for Indian Wills are met.

Wills are also an appropriate place to record any specific wishes you may have following your passing. For example, whether you would like to be buried or cremated, where your ashes should be spread, whether you want a traditional burial ceremony, if your body should be left undisturbed for a certain period of time, and anything that requires the consent of your next of kin such as an autopsy. These can be hard conversations for families to have and CILS Attorneys and Advocates can help you navigate these challenging considerations.

What Happens to my Trust Assets if I Die Without Making a Valid Will?
If you die without a will, your trust assets will pass according to the rules set out in the American Indian Probate Reform Act of 2004 (AIPRA).[2] AIPRA creates specific rules for succession (transferring) of trust assets, which differ depending on whether the individual who died intestate (without a will) owns greater or less than 5% interest in the allotment being probated.

Before AIPRA was enacted, if there was no will, Indian trust assets would be distributed by following state law. As a result, throughout the country there was wide variation in how trust assets would be distributed among the heirs of deceased allottees. This of course is the legacy of the Allotment period (1877-1934) that resulted in severe fractionation of Indian trust lands. It is not unusual for Indian allotments to have hundreds of living interest holders sharing the land as tenants in common, with each only owning a fraction of one percent. A primary goal of AIPRA was to reduce – or at least lessen – this fractionation.

The AIPRA does not apply if a Tribe has its own Probate Code that has been approved by the Bureau of Indian Affairs.

CILS Is Here to Help
If you have more questions or are ready to move forward and make an Indian Will, don’t hesitate to contact your local CILS office.

For additional resources, check out the Trust Assets and Probate section of CILS’ Self-Help resources, where you can find AIPRA resources and helpful guides.

[1] This section of the Code of Federal Regulations does not apply to members of the Osage Nation and the “Five Civilized Tribes” of Oklahoma.

[2] If your tribe has its own probate code that has been approved by the Secretary of the Interior, then the tribe’s probate code, not AIPRA, applies.

California Stimulus Check

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By Ryan Buuck, LMU Loyola Law School, J.D./M.B.A. Dual Degree Candidate

Last week, Governor Gavin Newsom announced a new economic recovery package that will include $12 billion of direct payments to residents of the State of California. These payments will be like the three stimulus checks sent by the federal government during the CoVID-19 Pandemic. Under this new California plan, many residents who earn up to $75,000 per year will qualify for a one-time check. California expects two out of every three residents to receive economic relief from the state this year.

Do I qualify?
To qualify, you must be a resident of the State of California, you must have already filed your 2020 taxes, and you must earn between $30,000 and $75,000 per year. If you are married and file your taxes jointly with your spouse, you must make less than $75,000 combined to qualify. If you earn less than $30,000 per year, you will not be able to get this check because you qualified for the Golden State Stimulus check that was announced in February, and you can still claim that payment up until October 15, 2021. The $75,000 threshold is measured by “California Adjusted Gross Income,” which means you could make more than $75,000 per year, but if you make less than $75,000 after deductions, you will still qualify for the check.
Unlike the federal stimulus checks, undocumented immigrants and their families and non-resident and resident aliens who use an Individual Taxpayer Identification Number (ITIN) are eligible for the California stimulus check.

How much will I get?
Each Californian that qualifies for the stimulus check will get $600. If you are married and file jointly, you and your spouse will get $600 total. If you are eligible and you have dependents, you will receive an extra $500. This additional amount will be the same no matter how many dependents you have. For example, if you have one child, you will get an extra $500, and if you have five children, you will also get an additional $500. If you received the Golden State Stimulus earlier this year and you have dependents, you will not be getting the $600 check, but you will qualify for the extra $500 for your dependent.

When will I get it?
Although the e state has announced this payment plan, our legislature still needs to approve it, which may take some time. If the Golden State Stimulus earlier this year is a good indicator, you should expect the state to move quickly on processing these payments. Once a taxpayer is deemed eligible, it takes between two and six weeks to receive the check. Taxpayers who set up direct deposit for their taxes will get theirs faster than those waiting on a check to come in the mail. You can set up a direct deposit at ftb.ca.gov.

How can the state afford this?
In 1979 Californians voted to create a limit on the amount of money the state is legally allowed to spend every year. We pay high taxes in California, and this cap, called the Gann Limit, ensures that our state government is responsible for our tax money. When the state reaches the Gann Limit, the rest of the funds must be returned – half goes to our public schools, and half goes straight back to the taxpayers. The only time this has happened before was 1989, and we got a 15% cut on our taxes. This year, there was a ton of money left over, and it is coming back to many of our bank accounts.

Tax Time: New Enrolled Tribal Member Certification Form

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Enrolled Tribal Member Certification Form (FTB Form 3504)

On January 2, 2017, the California Franchise Tax Board (FTB), the agency tasked with collecting state income taxes from residents, introduced Form FTB 3504, Enrolled Tribal Member Certification Form, on its website. FTB Form 3504, which was designed with input from tribal leaders and attorneys, allows tribal members to declare their tribal enrollment status and reservation residency in order to show an exemption from state income taxation. Without the form, the FTB does not always know who does or does not qualify for the tax exemption, which sometimes results in improper and unnecessary state income tax assessments.

Frequently Asked Questions

Q. How do I know if I qualify for the state income tax exemption?

A. To be eligible for the exemption from California state income taxation you must satisfy three criteria:
(1) Enrolled member of a federal recognized California Indian tribe;
(2) Live in your tribe’s “Indian country”; and
(3) Your earned or received income while living in your tribe’s “Indian country.”

Q. Is my tribe federally recognized?

A. The federal government recognizes tribes with which it has a government to government relationship. Each year a list of federally recognized tribes is published in the Federal Register. As of 2016, the United States government recognizes 567 tribes. https://www.tribalselfgov.org/about/sgcetc/

Q. What is meant by the phrase my tribe’s “Indian country”?

A. The term “Indian country” is defined by federal law can be found at http://codes.lp.findlaw.com/uscode/18/I/53/1151 and includes:
(1) An Indian reservations—this is all lands held in trust for the tribe by the federal government;
(2) A “dependent Indian communities”—these are federal lands set aside for tribe where serves are provided by the federal and tribal government. They are different than a reservation because the land is not held in trust for the tribe; and
(3) Indian allotments—individual trust lands

“Indian Country” does not include lands owned by your tribe but not in trust (fee lands) or your tribe’s aboriginal lands that are not in trust.

Q. Where can I find FTB Form 3504 Enrolled Tribal Member Certification Form?

A. The form is available on our website here or the FTB website.

Q. Is FTB Form 3504 required to get the state income tax exemption?

A. No. FTB Form 3504 is entirely optional although filing it may prevent tax errors in the future.

Q. What do I do with FTB Form 3504 once I fill it out?

A. For people required to file a California income tax return, attach FTB Form 3504 to the tax return, and file use the address for that tax return. If you are not required to file a California income tax return, sign and mail the completed form to Franchise Tax Board, PO Box 1998, Rancho Cordova CA 95741-1998.

Q. Is there a deadline to submit FTB Form 3504?FTB Form 3504 should be filed for each tax year that you meet the exemption requirements listed above. The form can be filed with your state income tax return by the standard due date or extended

A. FTB Form 3504 should be filed for each tax year that you meet the exemption requirements listed above. The form can be filed with your state income tax return by the standard due date or extended due date. For example, FTB Form 3504 for 2016 should be filed between January 1, 2017 and October 15, 2017.

Q. If FTB Form 3504 is not required why should I bother filling it out and submitting it to the state?

A. While no one is required to complete and submit FTB Form 3504, doing so can help you avoid getting unwanted notices from the Franchise Tax Board, even if the notices mistakenly claim you owe state income taxes. Many times tribal members who qualify for the state income tax exemption get taxed anyway because the FTB doesn’t realize they are tribal members living and earning income on their tribe’s reservation. FTB Form 3504 puts the FTB on notice that an individual meets these requirements, thereby reducing the chance he or she is assessed state income taxes by mistake or subjected to an audit in the future.

Q. Do you have an example of what forms a Tribe would create or use?

A. Yes, the Rincon Band has graciously shared their two forms for use with the California Franchise Tax Board.
2017 CA Franchise Tax Board form to be notarized
2017 CA Franchise Tax Board letter

Q. Who can I turn to if I need help filling out FTB Form 3504 or other questions about the state income tax exemption?

A. California Indian Legal Services can help people fill out of the form and provide more information about the tax exemption. Visit our website at www.calindian.org or call one of our four offices using the numbers below:

Bishop:           (800) 736-3582

Escondido:      (800) 746-8941

Eureka:            (800) 347-2402

Sacramento:     (800) 829-0284

For more information about the California Franchise Tax Board, visit its website at https://www.ftb.ca.gov

Reservation Source Income

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TRIBAL ALERT

FTB: RESERVATION SOURCE INCOME —- NOT SUBJECT TO TAXATION

Tribal leaders please circulate to all members

The Franchise Tax Board (FTB) has determined that income earned by a tribal member who lives and works on his or her reservation are not subject to state income tax, regardless of the source of the income. The FTB had previously been taxing the income of tribal members whose on reservation income was not from a “tribal source.” The FTB’s practice, which was contrary to established federal law, was brought to the attention of Cynthia Gomez, Tribal Advisor in the Governor’s Office, by the Hoopa Valley Tribe and California Indian Legal Services (CILS.)

Through discussions between the Governor’s Office and FTB, the FTB determined that it would no longer require that tribal member income would need to be from a “tribal source” in order to be tax exempt. The FTB has posted a notice on its website outlining the process for submitting a claim for a refund of income tax that was improperly assessed. Attached is a copy of the FTB webpage. The FTB will be notifying individual tribal members that they are aware of who were improperly assessed. However, the FTB may not be able to notify everyone and so we encourage all tribal members who believe they were improperly taxed on income that they earned on their reservation to contact the FTB as soon as possible even if they do not receive a notice from the FTB. If you have further questions you may contact your local CILS office for assistance.

For a .pdf version of this Alert, click here.

FTB Rescinds ‘Tribal Source Practice’

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TRIBAL ALERT

April 4, 2013

FTB TO RESCIND ‘TRIBAL SOURCE’ PRACTICE – THOSE WHO FILED 2008 STATE INCOME TAXES HAVE UNTIL APRIL 15, 2013 TO FILE APPEAL & PRESERVE THEIR RIGHTS: Tribal leaders please circulate to all members

The California Franchise Tax Board (FTB) has initiated a practice of collecting state income tax from tribal members who are living and working on their reservation. The FTB’s rational for this practice is that tribal member income is not exempt from state income tax unless it is derived from a “tribal source.” The FTB has not defined “tribal source” or provided legal authority for its practice, which is contrary to federal case law.

The FTB practice was brought to the attention of the Governor’s office and through its efforts the FTB has reconsidered its practice and is prepared to discontinue it and rescind assessments that were issued over the last four years. We anticipate official notice confirming FTB’s position next week. However, because the FTB is only going back four tax years, tribal members who have been wrongful assessed income tax in 2008 will only have until April 15, 2013 to file an appeal with the FTB.

Attached are the necessary appeal forms that tribal members may submit to preserve their claims.
CILS is asking tribal leaders and others to please post and circulate this alert so that tribal members may protect their rights for a refund of improperly collected taxes on their income earned on their reservation. If tribal members need assistance please direct them to the CILS office within their area.

Thank you and CILS will continue to monitor this matter and inform the tribes of future developments.

Click here for a .pdf version of this Alert.