Reservation Source Income

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.