[Congressional Record Volume 141, Number 156 (Tuesday, October 10, 1995)]
[Senate]
[Pages S14900-S14906]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCAIN (for himself, Mr. Baucus, Mr. Domenici, and Mr. 
        Inouye):
  S. 1307. A bill to amend the Internal Revenue Code of 1986 to exempt 
from income taxation income derived by a member of an Indian tribe 
directly or through a qualified Indian entity derived from natural 
resource activities; to the Committee on Finance.


            indian tribal reservation tax relief legislation

 Mr. McCAIN. Mr. President, I introduce a series of tax relief 
bills designed to encourage investment and economic development and 
growth on Indian Reservations and other native American communities 
throughout the United States.
  Let me put it in plain and simple terms, native Americans as a group 
have experienced a grinding poverty of epidemic proportions since the 
days when they were first uprooted from their homelands or overrun by 
settlers. The treaties that the United States made with tribes in 
exchange for their land and peace have been honored, for most part, 
only in the breach.
  The economic conditions on Indian reservations have not been improved 
by the occasional periods of economic growth that have swept much of 
the rest of our Nation. Instead, Indians have long suffered the 
indignity of promises broken, treaties discarded, and a hopelessness 
that reaches tragic, personal dimensions. Many Indian reservations are, 
relatively speaking, islands of poverty in the ocean of wealth that is 
the rest of America.
  On repeated occasions in the last several sessions of the Congress, I 
have offered amendments to the Federal Tax Code that would create 
incentives for private sector investment on Indian reservations and 
that would remove inequities in the Federal Tax Code so that tribal 
governments can enjoy the same tax benefits accorded other non-taxable 
government entities. I have offered these provisions, not to authorize 
any particular advantage to Indians, but merely to give them the same 
kind of tax incentives and benefits the Congress has given other 
economically depressed areas and other units of government. Given the 
extremely under-developed nature of the economies in native American 
communities, I believe the tax relief we have promised the American 
people must include reasonable measures to stimulate economic growth 
and productivity for Indians.
  Today I am introducing a series of measures that are designed to 
amend the Tax Code to give Indian tribes some tools with which to join 
with the private sector in improving their economies.


                   reservation investment tax credit

  I rise today on behalf of myself, Senator Baucus, Senator Bingaman, 
Senator Campbell, Senator Inouye, Senator Kyl, Senator Stevens, and 
Senator Thomas, to introduce the Indian Reservation Jobs and Investment 
Act of 1995. This bill is identical to provisions that passed the 
Congress in 1992 and were sent to the White House where they were 
vetoed because they were part of a larger bill containing other 
provisions opposed by the Bush administration. The measure I am 
reintroducing today would provide tax credits to otherwise taxable 
business enterprises if they locate certain kinds of income-producing 
property on Indian reservations. Credits would be extended to 
businesses placing new personal property, new construction property, 
and infrastructure investment property on Indian reservations.
  The bill does not provide any tax credit for reservation property 
used in connection with gaming activities. The credits are available 
for expenditures related to personal property used in a business or 
trade on an Indian reservation, related to new construction of property 
to be used in a business or trade on an Indian reservation, or related 
to investment in reservation infrastructure that is available for use 
by the general public and is placed in serve in connection with a 
reservation business or trade.
  The bill limits these credits to those reservations where there is 
economic need. The full credit is available to those reservations whose 
Indian unemployment rate exceeds the Nation's average unemployment by 
300 percent. One-half of the credit is available on reservations where 
the unemployment rate is 150 to 300 percent of the national average. No 
investment tax credit is provided taxpayers on reservations where the 
Indian unemployment rate is less than 150 percent of the national 
average.
  Mr. President, I am very concerned by how little private enterprise 
is present on Indian reservations. Typically the only economic activity 
is the generated by Federal or tribal government employment. I 
understand why this is the case, but I don't like the fact that it is 
the main way jobs and wealth are created in Indian country. By their 
very nature, governments, including tribal governments, simply are not 
good at running businesses. I know this is acknowledged by many tribes, 
who, consistent with their cultural traditions, have created tribal 
corporations or cooperative ventures that mix private sector business 
with tribal principles. But we must begin to see private investment 
being attracted to Indian reservations if we are to see any significant 
improvement in the economies of Indian tribes. The reservation tax 
credit provisions I am introducing today are designed to act as an 
incentive to encourage the private business sector to plow through many 
of the known obstacles to reservation economic development.


                     section 403(b) pension relief

  On a second measure, I rise today on behalf of myself, Senator 
Baucus, Senator Bingaman, Senator Domenici, Senator Feingold, Senator 
Inouye, Senator Kohl, Senator Kyl, Senator Stevens, and Senator Thomas, 
to introduce the Indian Tribal Government Pension Tax Relief Amendments 
of 1995. This bill would help address some very serious ambiguities 
currently found in the Tax Code relating to the 

[[Page S 14901]]
availability of pension plans for Indian tribal governments and their 
employees. Under current law, there are no salary deferred pension 
plans expressly made available to Indian tribal governments and their 
employees.
  Employees of Indian tribal governments are perhaps the only group of 
workers in America for whom current Federal tax law does not provide 
express authority for a tax-deferred pension plan. Commercial for-
profit corporations and partnerships can offer section 401(k) 
retirement benefits to their employees. Public school systems and tax-
exempt charitable and educational organizations can offer section 
403(b) pension plans to their employees. State government employees 
have access to similar pension benefits under section 457. But people 
who work for tribal governments are not expressly authorized to have 
favorable Federal income tax treatment on their pension plans.
  The bill also addresses an additional problem that has arisen from 
the fact that several tribes have participated in plans provided for 
under Section 403(b) of the Code and promoted by insurance 
underwriters, only later to find that such plans were not expressly 
intended for their use as governmental employees involved in activities 
other than education. Those retirement funds, affecting several tribes 
and the retirement savings of thousands of tribal employees, are now in 
jeopardy.

  The pension relief measure I am introducing would enable tribal 
governments to compete, on the same terms, with other private and 
public sectors employers in attracting qualified employees. Let me be 
clear--this measure would give tribal workers no more tax relief than 
is already offered every other group of workers in our country. Mr. 
President, as we all know, many individuals choose who they will work 
for based on what employment benefits are offered, including retirement 
and pension plans. Many tribes have been trying to raise their salary 
and health benefits to competitive levels. But the Federal Tax Code has 
been increasingly interpreted by the Internal Revenue Service to 
prohibit tribes from offering their employees any form of the typical 
salary reduction pension plans, one of the most sought after benefits 
offered to prospective employees. Other units of government and tax 
exempt organizations are permitted to offer such plans. The fact that 
tribal governments are precluded from doing so is simply unfair. This 
injustice would be corrected by enactment of the Indian Tribal 
Government Pension Tax Relief Amendments of 1995.
  The bill would expressly qualify, as tax-sheltered annuities under 
section 403(b) of the Internal Revenue Code, those annuity contracts 
purchased by employees of tribal governments. The Joint Committee on 
Tax has estimated that proposals largely identical to this one would 
have a negligible revenue effect on Federal fiscal year budget 
receipts. I am pleased to introduce this measure and urge my colleagues 
to support it and include it in the pending tax relief legislation 
under consideration.


               tribal unemployment tax equity and relief

  Mr. President, on a third measure, I rise today on behalf of myself, 
Senator Baucus, Senator Campbell, Senator Domenici, Senator Inouye, 
Senator Kyl, Senator Stevens, and Senator Thomas, to introduce the 
Indian Tribal Government Unemployment Compensation Act Tax Relief 
Amendments of 1995. This bill would correct a serious oversight in the 
way the Internal Revenue Code treats Indian tribal governments for 
unemployment tax purposes under the unique, State-Federal unemployment 
program authorized by the Federal Unemployment Tax Act [FUTA]. It would 
clarify existing tax statutes so that tribal governments are treated 
just as State and local units of governments are treated for 
unemployment tax purposes.
  It is well-settled that tribal governments are not taxable entities 
under the Federal Tax Code because of their governmental status. But in 
recent years, the Internal Revenue Service has begun to advance an 
interpretation of FUTA that is particularly burdensome to Indian tribal 
governments. While FUTA expressly exempts all tax-exempt charitable 
organizations and all State and local units of government from paying 
the Federal portion of the FUTA tax, it does not expressly mention 
tribal governments.
  FUTA involves a joint Federal-State taxation system that levies two 
taxes on most employers: An 0.8 percent unemployment tax and a State 
unemployment tax ranging up to more than 9 percent of a portion of an 
employer's payroll. Since its enactment in the 1930s, FUTA has treated 
foreign, Federal, State, and local government employers differently 
from private commercial business employers. It exempts all foreign, 
Federal, State, and local government employers from the 0.8 percent 
Federal FUTA tax. It exempts foreign and Federal Government employers 
from State unemployment programs and allows State and local government 
employers to pay lower State unemployment taxes. FUTA also treats 
income tax-exempt charitable organizations the same as State and local 
governments. All other private sector employers pay both the Federal 
and State FUTA tax rates. The FUTA statute does not expressly include 
tribal government employers within the definition of government 
employers.
  The IRS has chosen in recent years to pursue some tribal governments 
for unpaid FUTA taxes who has proceeded on the good faith assumption 
that they, as units of government, were immune from the Federal portion 
of the tax. Some tribal governments also chose not to participate in 
the State unemployment programs. In such cases, former employees of the 
tribal governments, who were otherwise eligible for unemployment 
benefits, were denied benefits by many State unemployment programs 
because they had worked for what the States deemed an exempt employer--
a tribal government. While this caused hardship on the former employees 
of tribal governments, it meant that the State unemployment funds were 
held harmless.

  The IRS interpretation has caused another problem in recent years, as 
tribal governments have been subject to differing interpretations over 
whether and how they are covered under FUTA. The interpretations of 
FUTA made by State governments, the U.S. Internal Revenue Service, and 
the U.S. Department of Labor have varied from region to region and 
State to State, resulting in differing treatment of Indian tribal 
governments in different periods of time. This has led to considerable 
confusion among tribal governments about the amount they are supposed 
to pay. Some tribes have paid the Federal FUTA tax and then 
successfully obtained tax refunds because they were deemed exempt. Some 
tribes have not paid, assuming they were exempt, and then have been 
investigated by the IRS for nonpayment of hundreds of thousands of 
dollars in unemployment taxes, plus penalties and interest. Some tribes 
have paid taxes; other tribes have not had to pay. In each case, the 
tribes are identically situated but are treated differently simply 
because they are located within differing IRS regions or have been 
scrutinized by different IRS agents. This inconsistency of 
interpretation has also resulted in many former tribal government 
employees being denied eligibility to receive unemployment benefits.
  Now the IRS has begun to pursue these tribes to collect unpaid 
assessments in the form of a penal tax under FUTA's unique enforcement 
mechanisms. Under FUTA, none of the funds assessed and collected would 
be paid as unemployment benefits to former employees of a tribal 
government that had not participated under FUTA. Nor would these 
dollars return to the State funds in which the tribes did not 
participate. Instead, the Federal IRS would collect the highest 
possible State and Federal unemployment taxes and place all of these 
funds directly into the U.S. Treasury without credit or benefit to any 
workers, Indian or otherwise. No one can reasonably argue that it is 
fair to impose this kind of taxation without benefit on the meager 
funds of an Indian tribal government simply because it has followed an 
interpretation of FUTA that some regional offices of the IRS and the 
States previously followed but now have abandoned.
  The bill would also expressly authorize tribal governments, like 
State and local units of government, and like charitable organizations, 
to contribute to a State fund on a reimbursable basis for unemployment 
benefits actually paid out. Private sector employers 

[[Page S 14902]]
typically must pay an unemployment tax in advance. The rationale for 
reimburser status is that governmental employers, like tribes and 
States, have a far more stable employment environment than that of the 
private sector, and that governmental revenue should not be committed 
to such purposes in advance of when the obligation to pay arises. Let 
me be clear, this bill would ensure that tribes participate in the 
unemployment compensation system. Many now do not do so. Their 
participation would be on the same terms that other governments 
participate.
  The bill I am introducing today would permanently resolve this matter 
across the Nation for every Indian tribal government. For unemployment 
tax purposes, it would require that federally recognized Indian tribal 
government employers be treated the same way Federal, State, local 
government, and other tax-exempt organizations are treated. It would 
also remove an unemployment tax liability of tribal governments who did 
not pay unemployment compensation taxes in the past in the belief that 
they were exempt, provided that no benefits were paid to their former 
employer. I have requested a revenue estimate from the Joint Committee 
on Taxation. I believe, however, that the bill would have only a 
negligible effect on revenues.
  Unless this problem is resolved, many former tribal government 
employees will continue to be denied benefits by State unemployment 
funds. I believe Indian and non-Indian workers who are separated from 
tribal governmental employment should be included within our Nation's 
comprehensive unemployment benefit system, and this bill will go a long 
way toward ensuring mandatory participation by tribal governments on a 
fair and equitable basis in the Federal-State unemployment fund system. 
I can think of nothing more fair than the approach clarified in this 
bill. I urge my colleagues to support it and include it in the pending 
tax relief legislation under consideration.


                    Tribal Tax-Exempt Bond Authority

  Mr. President, on a fourth measure, I rise today on behalf of myself, 
Senator Baucus, Senator Campbell, Senator Domenici, Senator Inouye, and 
Senator Kyl, to introduce the Tribal Government Tax-Exempt Bond 
Authority Amendments Act of 1995. This bill would bring new investment 
dollars to Indian reservations where capital formation is so 
desperately needed. The bill would replace the current restrictions on 
the issuance of tax-exempt bonds by tribes and tribal subdivisions with 
a provision that such bonds are to be issued under slightly more 
restrictive conditions than those that now apply to States and their 
political subdivisions. In 1982, the Congress adopted the Indian Tribal 
Governmental Tax Status Act of 1982--Public Law 97-473--which, among 
other things, authorized tribes and tribal subdivisions to issue tax-
exempt bonds for certain purposes. In 1987, the Congress amended that 
act in Public Law 100-203, limiting the purposes for which tribes and 
tribal subdivisions could issue tax-exempt bonds to two: First, 
essential governmental functions, defined as functions customarily 
performed by State and local governments with general taxing powers, 
and second, certain tribally owned manufacturing facilities. The 1987 
amendments were adopted to address perceived abuses in the issuance of 
tax-exempt bonds by tribes for purposes not related to their 
reservations and for the earning of arbitrage by issuing tax-exempt 
bonds at low rates for the purpose of investing the proceeds in higher-
yielding, taxable obligations. The fact of the matter is that these 
abuses were effectively curtailed by the amendment to section 103 of 
the Internal Revenue Code enacted in 1986 and subsequently implemented 
and enforced. Tribes have informed the Committee on Indian Affairs that 
the 1987 restrictions on tribal government bonds are unfairly 
restrictive, in that the interpretation of what is an ``essential 
governmental function'' has been unduly limiting, given the type of 
activities that are customarily carried out by tribal governments for 
the benefit of their members and their reservations. Mr. President, 
there are serious deficiencies in the basic infrastructure on Indian 
reservations, primarily because increasingly tight fiscal restraints 
have limited the ability of the United States, through direct annual 
appropriations, to fund construction and other activities. Reservations 
lag far behind the rest of the United States in terms of sanitation, 
housing, roads, basic utilities, and public service facilities 
necessary to support a civilized society and a competitive economy. I 
believe that providing additional tax-exempt bond authority to tribal 
governments will go a long way toward attracting new sources of capital 
to Indian reservations. I urge my colleagues to support this bill and 
to include it in the pending tax relief legislation under 
consideration.


                   tribal natural resource tax relief

  Mr. President, on a fifth measure, I rise today on behalf of myself, 
Senator Baucus, Senator Domenici, and Senator Inouye to introduce the 
Treatment of Indian Tribal Natural Resource Income Act of 1995. This 
bill would extend an exemption to income derived by individual Indians 
from the harvest of natural resources from tribal trust land that is 
now extended to income derived by individual Indians from treaty-
protected Indian fishing activity. In 1988 Congress amended the 
Internal Revenue Code to provide the treaty fishing exemption under 
section 7873, which serves as a model for this bill.
  With most Indian reservations, tribes signing treaties with the 
United States assumed that the natural resources of the reservation, 
including timber and minerals, would be available for the use of the 
tribe and its members without taxation or other burden imposed by the 
United States. Accordingly, due to their status as nontaxable sovereign 
nations, tribal governments are not subject to Federal income tax under 
current law and practice on revenues generated when the tribal 
government carries out natural resource activities on the tribal trust 
land. However, in those cases where a tribe issues a subsistence permit 
or license to individual tribal members to harvest or process natural 
resources held in trust for the tribe by the United States, the 
Internal Revenue Service has been imposing a tax on that individual 
Indian's income. Such a tax is unfair and arbitrary, since in a 1956 
case, Squire versus Capoeman, the U.S. Supreme Court ruled that natural 
resource income earned by individual Indians from their own individual 
allotments held in trust for them by the United States is exempt. That 
case did not deal with individual income derived from lands held in 
trust for an entire tribe. Recently the IRS has begun to take 
enforcement action to collect income taxes from Indian individuals 
harvesting the fruits of tribal trust lands. The effect of this IRS 
interpretation has been to impose a tax on income from Indian tribal 
trust lands which were never broken up and allotted, but not from 
allotted trust lands held for an individual Indian.
  The bill I am introducing today would apply only to tribal members 
and only with regard to natural resources, underlying title to which is 
owned by the United States in trust for a tribe. It would remove the 
existing anomaly which allows a tribe as a whole to harvest or process 
such resources free of tax, but imposes an income tax on an individual 
tribal member of that tribe carrying out activity permitted by the 
tribe. I urge my colleagues to support this bill and to include it in 
the pending tax relief legislation under consideration.
  Mr. President, I ask unanimous consent that a copy of each of the 
five bills I am introducing today, as well as a section-by-section 
description of each bill's provisions, be inserted in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1303

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Indian Reservation Jobs and 
     Investment Act of 1995''.

     SEC. 2. INVESTMENT TAX CREDIT FOR PROPERTY ON INDIAN 
                   RESERVATIONS.

       (a) Allowance of Indian Reservation Credit.--Section 46 of 
     the Internal Revenue Code of 1986 (relating to investment 
     credits) is amended by striking ``and'' at the end of 
     paragraph (2), by striking the period at the end of paragraph 
     (3) and inserting ``, and'', and by adding after paragraph 
     (3) the following new paragraph:
       ``(4) the Indian reservation credit.''.
       (b) Amount of Indian Reservation Credit.--

[[Page S 14903]]

       (1) In general.--Section 48 of such Code (relating to the 
     energy credit and the reforestation credit) is amended by 
     adding after subsection (b) the following new subsection:
       ``(c) Indian Reservation Credit.--
       ``(1) In general.--For purposes of section 46, the Indian 
     reservation credit for any taxable year is the Indian 
     reservation percentage of the qualified investment in 
     qualified Indian reservation property placed in service 
     during such taxable year, determined in accordance with the 
     following table:

The Indian reservation percentage is--rvation property which is--
  Reservation personal property..................................10....

  New reservation construction property..........................15....

  Reservation infrastructure investment..........................15....

       ``(2) Qualified investment in qualified Indian reservation 
     property defined.--For purposes of this subpart--
       ``(A) In general.--The term `qualified Indian reservation 
     property' means property--
       ``(i) which is--

       ``(I) reservation personal property;
       ``(II) new reservation construction property; or
       ``(III) reservation infrastructure investment; and

       ``(ii) not acquired (directly or indirectly) by the 
     taxpayer from a person who is related to the taxpayer (within 
     the meaning of section 465(b)(3)(C)).

     The term `qualified Indian reservation property' does not 
     include any property (or any portion thereof) placed in 
     service for purposes of conducting or housing class I, II, or 
     III gaming (as defined in section 4 of the Indian Gaming 
     Regulatory Act (25 U.S.C. 2703)).
       ``(B) Qualified investment.--The term `qualified 
     investment' means--
       ``(i) in the case of reservation infrastructure investment, 
     the amount expended by the taxpayer for the acquisition or 
     construction of the reservation infrastructure investment; 
     and
       ``(ii) in the case of all other qualified Indian 
     reservation property, the taxpayer's basis for such property.
       ``(C) Reservation personal property.--The term `reservation 
     personal property' means qualified personal property which is 
     used by the taxpayer predominantly in the active conduct of a 
     trade or business within an Indian reservation.

     Property shall not be treated as `reservation personal 
     property' if it is used or located outside the Indian 
     reservation on a regular basis.
       ``(D) Qualified personal property.--The term `qualified 
     personal property' means property--
       ``(i) for which depreciation is allowable under section 
     168;
       ``(ii) which is not--

       ``(I) nonresidential real property;
       ``(II) residential rental property; or
       ``(III) real property which is not described in (I) or (II) 
     and which has a class life of more than 12.5 years.

     For purposes of this subparagraph, the terms `nonresidential 
     real property', `residential rental property', and `class 
     life' have the respective meanings given such terms by 
     section 168.
       ``(E) New reservation construction property.--The term `new 
     reservation construction property' means qualified real 
     property--
       ``(i) which is located in an Indian reservation;
       ``(ii) which is used by the taxpayer predominantly in the 
     active conduct of a trade or business within an Indian 
     reservation; and
       ``(iii) which is originally placed in service by the 
     taxpayer.
       ``(F) Qualified real property.--The term `qualified real 
     property' means property for which depreciation is allowable 
     under section 168 and which is described in clause (I), (II), 
     or (III) of subparagraph (D)(ii).
       ``(G) Reservation infrastructure investment.--
       ``(i) In general.--The term `reservation infrastructure 
     investment' means qualified personal property or qualified 
     real property which--

       ``(I) benefits the tribal infrastructure;
       ``(II) is available to the general public; and
       ``(III) is placed in service in connection with the 
     taxpayer's active conduct of a trade or business within an 
     Indian reservation.

       ``(ii) Property may be located outside the reservation.--
     Qualified personal property and qualified real property used 
     or located outside an Indian reservation shall be reservation 
     infrastructure investment only if its purpose is to connect 
     to existing tribal infrastructure in the reservation, and 
     shall include, but not be limited to, roads, power lines, 
     water systems, railroad spurs, and communications facilities.
       ``(H) Coordination with other credits.--The term `qualified 
     Indian reservation property' shall not include any property 
     with respect to which the energy credit or the rehabilitation 
     credit is allowed.
       ``(3) Real estate rentals.--For purposes of this section, 
     the rental to others of real property located within an 
     Indian reservation shall be treated as the active conduct of 
     a trade or business in an Indian reservation.
       ``(4) Indian reservation defined.--For purposes of this 
     subpart, the term `Indian reservation' means a reservation, 
     as defined in--
       ``(A) section 3(d) of the Indian Financing Act of 1974 (25 
     U.S.C. 1452(d)); or
       ``(B) section 4(10) of the Indian Child Welfare Act of 1978 
     (25 U.S.C. 1903(10)).
       ``(5) Limitation based on unemployment.--
       ``(A) General rule.--The Indian reservation credit allowed 
     under section 46 for any taxable year shall equal--
       ``(i) if the Indian unemployment rate on the applicable 
     Indian reservation for which the credit is sought exceeds 300 
     percent of the national average unemployment rate at any time 
     during the calendar year in which the property is placed in 
     service or during the immediately preceding 2 calendar years, 
     100 percent of such credit;
       ``(ii) if such Indian unemployment rate exceeds 150 percent 
     but not 300 percent, 50 percent of such credit; and
       ``(iii) if such Indian unemployment rate does not exceed 
     150 percent, 0 percent of such credit.
       ``(B) Special rule for large projects.--In the case of a 
     qualified Indian reservation property which has (or is a 
     component of a project which has) a projected construction 
     period of more than 2 years or a cost of more than 
     $1,000,000, subparagraph (A) shall be applied by substituting 
     `during the earlier of the calendar year in which the 
     taxpayer enters into a binding agreement to make a qualified 
     investment or the first calendar year in which the taxpayer 
     has expended at least 10 percent of the taxpayer's qualified 
     investment, or the preceding calendar year' for `during the 
     calendar year in which the property is placed in service or 
     during the immediately preceding 2 calendar years'.
       ``(C) Determination of Indian unemployment.--For purposes 
     of this paragraph, with respect to any Indian reservation, 
     the Indian unemployment rate shall be based upon Indians 
     unemployed and able to work, and shall be certified by the 
     Secretary of the Interior.
       ``(6) Coordination with nonrevenue laws.--Any reference in 
     this subsection to a provision not contained in this title 
     shall be treated for purposes of this subsection as a 
     reference to such provision as in effect on the date of the 
     enactment of this paragraph.''.
       (2) Lodging to qualify.--Paragraph (2) of section 50(b) of 
     such Code (relating to property used for lodging) is 
     amended--
       (A) by striking `and' at the end of subparagraph (C);
       (B) by striking the period at the end of subparagraph (D) 
     and inserting ``; and'' and
       (C) by adding at the end the following subparagraph:
       ``(E) new reservation construction property.''.
       (c) Recapture.--Subsection (a) of section 50 of such Code 
     (relating to recapture in case of dispositions, etc.), is 
     amended by adding at the end the following new paragraph:
       ``(6) Special rules for Indian reservation property.--
       ``(A) In general.--If, during any taxable year, property 
     with respect to which the taxpayer claimed an Indian 
     reservation credit--
       ``(i) is disposed of; or
       ``(ii) in the case of reservation personal property--

       ``(I) otherwise ceases to be investment credit property 
     with respect to the taxpayer; or
       ``(II) is removed from the Indian reservation, converted, 
     or otherwise ceases to be Indian reservation property, the 
     tax under this chapter for such taxable year shall be 
     increased by the amount described in subparagraph (B).

       ``(B) Amount of increase.--The increase in tax under 
     subparagraph (A) shall equal the aggregate decrease in the 
     credits allowed under section 38 by reason of section 48(c) 
     for all prior taxable years which would have resulted had the 
     qualified investment taken into account with respect to the 
     property been limited to an amount which bears the same ratio 
     to the qualified investment with respect to such property as 
     the period such property was held by the taxpayer bears to 
     the applicable recovery period under section 168(g).
       ``(C) Coordination with other recapture provisions.--In the 
     case of property to which this paragraph applies, paragraph 
     (1) shall not apply and the rules of paragraphs (3), (4), and 
     (5) shall apply.''.
       (d) Basis Adjustment To Reflect Investment Credit.--
     Paragraph (3) of section 50(c) of such Code (relating to 
     basis adjustment to investment credit property) is amended by 
     striking `energy credit or reforestation credit' and 
     inserting `energy credit, reforestation credit, or Indian 
     reservation credit other than with respect to any expenditure 
     for new reservation construction property''.
       (e) Certain Governmental Use Property To Qualify.--
     Paragraph (4) of section 50(b) of such Code (relating to 
     property used by governmental units or foreign persons or 
     entities) is amended by redesignating subparagraphs (D) and 
     (E) as subparagraphs (E) and (F), respectively, and inserting 
     after subparagraph (C) the following new subparagraph:
       ``(D) Exception for reservation infrastructure 
     investment.--This paragraph shall not apply for purposes of 
     determining the Indian reservation credit with respect to 
     reservation infrastructure investment.''.
       (f) Application of At-Risk Rules.--Subparagraph (C) of 
     section 49(a)(1) of such Code is amended by striking `and' at 
     the end of clause (ii), by striking the period at the end of 
     clause (iii) and inserting ``, and'', and by adding at the 
     end the following new clause:
       ``(iv) the qualified investment in qualified Indian 
     reservation property.''.
       (g) Clerical Amendments.--

[[Page S 14904]]

       (1) Section 48 of such Code is amended by striking the 
     heading and inserting the following:

     ``SEC. 48. ENERGY CREDIT; REFORESTATION CREDIT; INDIAN 
                   RESERVATION CREDIT.''.

       (2) The table of sections for subpart E of part IV of 
     subchapter A of chapter 1 is amended by striking the item 
     relating to section 48 and inserting the following:

``Sec. 48. Energy credit; reforestation credit; Indian reservation 
              credit.''.

       (h) Effective Date.--The amendments made by this section 
     shall apply to property placed in service after December 31, 
     1995.
                                                                    ____


Section-by-Section Analysis--Indian Reservation Jobs and Investment Act 
                                of 1995

       Section 1 sets forth the short title of the Act.
       Section 2(a) amends Section 46 of the Internal Revenue Code 
     of 1986 (relating to investment credits) by adding new 
     authority for an Indian reservation tax credit. This tax 
     credit is designed to attract private industry and capital, 
     expand existing industry, and make the private sector a 
     permanent source of economic development on Indian 
     reservations.
       Section 2(b) establishes a 10% tax credit for personal 
     property on reservations, and a 15% credit is provided for 
     new construction property and infrastructure investment on 
     reservations. The tax credit is not available for property 
     acquired by the taxpayer from a person who is related to the 
     taxpayer, nor for the development or operation of tribal 
     gaming establishments authorized under the Indian Gaming 
     Regulatory Act of 1988. The tax credit is allowed for 
     investments used to acquire or construct reservation 
     infrastructure, and for expenditures on personal property and 
     new construction real property used predominately in the 
     active conduct of a trade or business within an Indian 
     reservation. The credits would extend to all 32 States in 
     which the 555 federally-recognized tribes are located, using 
     the definition of Indian reservation codified in section 3 
     (d) of the Indian Financing Act of 1974 (25 U.S.C. 1452(d)) 
     and section 4 (10) of the Indian Child Welfare Act of 1978 
     (25 U.S.C. 1903 (10)). The full tax credit is available only 
     on an Indian reservation in which the Indian unemployment 
     rate exceeds 300 percent of the national average unemployment 
     rate at any time during the year in which the property is 
     placed in service or during the immediately preceding two 
     calendar years. A one-half tax credit (50%) is available to 
     those reservations where the Indian unemployment rate exceeds 
     150 percent but not 300 percent of the national rate during 
     the same period. No tax credit is extended under the bill to 
     any property on reservations where the Indian unemployment 
     rate does not exceed 150 percent of the national rate during 
     that period. The subsection provides a special timing rule 
     for large construction projects. All Indian unemployment 
     rates must be certified by the Secretary of the Interior.
       Section 2(c) amends section 50 of the Internal Revenue Code 
     (relating to recapture in case of dispositions) by providing 
     authority for the recapture of tax credits through increased 
     taxes if the property is disposed of, ceases to be investment 
     credit property of the taxpayer, or is removed from the 
     Indian reservation, converted, or otherwise ceases to be 
     Indian reservation property.
       Section 2(d) amends Section 50(c) of the Internal Revenue 
     Code (relating to basis adjustment to investment credit 
     property) to add Indian reservation credits to the types of 
     property subject to basis adjustment.
       Section 2(e) amends Section 50(b) of the Internal Revenue 
     Code (relating to property used by governmental units or 
     foreign persons or entities) to add a conforming exception 
     for Indian reservation infrastructure investment.
       Section 2(f) amends Section 49(a) (1) of the Internal 
     Revenue Code of the Internal Revenue Code (relating to the 
     application of at-risk rules) to make a conforming addition 
     for qualified investment in qualified Indian reservation 
     property.
       Section 2(g) amends Section 48 of the Internal Revenue Code 
     to make several conforming clerical changes.
       Section 2(h) provides an effective date of this measure, so 
     that it applies only to property placed in service after 
     December 31, 1995.
                                                                    ____


                                S. 1304

         Be it enacted by the Senate and House of Representatives 
     of the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Indian Tribal Government 
     Pension Tax Relief Amendments of 1995''.

     SEC. 2. TREATMENT OF INDIAN TRIBAL GOVERNMENTS UNDER SECTION 
                   403(b).

       In the case of any contract purchased in a plan year 
     beginning before January 1, 1996, section 403(b) of the 
     Internal Revenue Code of 1986 shall be applied as if any 
     reference to an employer described in section 501(c)(3) of 
     the Internal Revenue Code of 1986 which is exempt from tax 
     under section 501 of such Code included a reference to an 
     employer which is an Indian tribal government (as defined by 
     section 7701(a)(40) of such Code), a subdivision of an Indian 
     tribal government (determined in accordance with section 
     7871(d) of such Code), an agency or instrumentality of an 
     Indian tribal government or subdivision thereof, or a 
     corporation chartered under Federal, State, or tribal law 
     which is owned in whole or in part by any of the foregoing.
                                                                    ____


   Section-by-Section Analysis--Indian Tribal Government Pension Tax 
                       Relief Amendments of 1995

       Section 1 sets forth the short title of the Act.
       Section 2 would expressly qualify, as tax-sheltered 
     annuities under section 403(b) of the Internal Revenue Code, 
     those annuity contracts purchased by employees of a 
     federally-recognized Indian tribal government (as defined by 
     section 7701(a)(4) of such Code), a subdivision of such 
     tribal government (as defined by section 7871(d) of such 
     Code), an agency or instrumentality of such tribal government 
     or subdivision, or a corporation chartered under Federal, 
     State, or tribal law which is owned in whole or in part by 
     such tribal government or subdivision.
                                                                    ____


                                S. 1305

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Indian Tribal Government 
     Unemployment Compensation Act Tax Relief Amendments of 
     1995''.

     SEC. 2. TREATMENT OF INDIAN TRIBAL GOVERNMENTS UNDER FEDERAL 
                   UNEMPLOYMENT TAX ACT.

       (a) In General.--Section 3306(c)(7) of the Internal Revenue 
     Code of 1986 (defining employment) is amended--
       (1) by inserting ``or in the employ of an Indian tribe,'' 
     after ``service performed in the employ of a State, or any 
     political subdivision thereof,''; and
       (2) by inserting ``or Indian tribes'' after ``wholly owned 
     by one or more States or political subdivisions''.
       (b) Payments in Lieu of Contributions.--Section 3309 of the 
     Internal Revenue Code of 1986 (relating to State law coverage 
     of services performed for nonprofit organizations or 
     governmental entities) is amended--
       (1) in subsection (a)(2) by inserting ``, including an 
     Indian tribe,'' after `the State law shall provide that a 
     governmental entity';
       (2) in subsection (b)(3)(B) by inserting ``, or of an 
     Indian tribe' after ``of a State or political subdivision 
     thereof'';
       (3) in subsection (b)(3)(E) by inserting ``or the tribe's'' 
     after ``the State''; and
       (4) in subsection (b)(5) by inserting ``or of an Indian 
     tribe'' after ``an agency of a State or political subdivision 
     thereof''.
       (c) State Law Coverage.--Section 3309 of the Internal 
     Revenue Code of 1986 (relating to State law coverage of 
     services performed for nonprofit organizations or 
     governmental entities) is amended by adding at the end the 
     following new subsection:
       ``(d) Election by Indian Tribe.--The State law shall 
     provide that an Indian tribe may elect to make contributions 
     for employment as if the employment is within the meaning of 
     section 3306 of the Internal Revenue Code of 1986 or to make 
     payments in lieu of contributions under this section, and 
     shall provide that an Indian tribe may make separate 
     elections for itself and each subdivision, subsidiary, or 
     business enterprise chartered and wholly owned by such Indian 
     tribe. State law may require an electing tribe to post a 
     payment bond or take other reasonable measures to assure the 
     making of payments in lieu of contributions under this 
     section.''.
       (d) Definitions.--Section 3306 of the Internal Revenue Code 
     of 1986 (relating to definitions) is amended by adding at the 
     end the following new subsection:
       ``(t) Indian Tribe.--For purposes of this chapter, the term 
     ``Indian tribe'' has the meaning given to such term by 
     section 4(e) of the Indian Self-Determination and Education 
     Assistance Act (25 U.S.C. 450b(e)), and includes any 
     subdivision, subsidiary, or business enterprise chartered and 
     wholly owned by such an Indian tribe.''
       (e) Transition Rule.--For purposes of the Federal 
     Unemployment Tax Act, service performed in the employ of an 
     Indian tribe (as defined in section 3306(t) of the Internal 
     Revenue Code of 1986 (as added by this Act)) shall not be 
     treated as employment (within the meaning of section 3306 of 
     such Code) if--
       (1) it is service which is performed before the date of 
     enactment of this Act and with respect to which the tax 
     imposed under the Federal Unemployment Tax Act has not been 
     paid; and
       (2) such Indian tribe reimburses a State unemployment fund 
     for unemployment benefits paid for service attributable to 
     such tribe for such period.
                                                                    ____


  Section-by-Section Analysis--Indian Tribal Government Unemployment 
             Compensation Act Tax Relief Amendments of 1995

       Section 1 sets forth the short title of the Act.
       Section 2. Treatment of Indian Tribal Governments Under 
     Federal Unemployment Tax Act.
       Subsection 2(a) In General.--This subsection (a) amends 
     section 3306(c)(7) of the Internal Revenue Code. Section 
     3306(c)(7) provides an exemption from the 0.8% federal 
     unemployment tax for employment for a state, any of its 
     political subdivisions, or any of its wholly-owned 
     instrumentalities. This subsection of the bill would make 
     employment for a tribal government or any political 
     subdivision or wholly tribally owned subsidiary thereof 
     likewise exempt from the 0.8% federal unemployment tax.
       Subsection 2(b). Payments in Lieu of Contributions.--This 
     subsection amends several 

[[Page S 14905]]
     provisions of section 3309 of the Internal Revenue Code. Section 
     3309(a)(2) of the Internal Revenue Code now requires a state 
     unemployment fund to offer coverage and benefits to employees 
     of a state government, its political subdivisions and wholly-
     owned instrumentalities, and to employees of a religious, 
     charitable, educational or other income tax exempt 
     organization described in Section 501(c)(3) of the Internal 
     Revenue Code. These employers may then elect to either pay a 
     flat tax rate as do private, for-profit commercial 
     businesses, or to make contributions, on a reimbursable 
     basis, for all benefits paid out to their former employees.
       Subsection 2(b)(1) of the bill would provide the same 
     options to a tribal government or any political subdivision 
     or wholly tribally owned subsidiary thereof. Section 
     3309(b)(3)(B) of the Internal Revenue Code now exempts from 
     all unemployment taxes service performed by members of a 
     State or political subdivision legislative body or judiciary.
       Subsection 2(b)(2) of the bill would provide the same 
     exemption to a tribal government's legislative body or 
     judiciary. Section 3309(b)(3)(E) of the Internal Revenue Code 
     now exempts from all unemployment taxes service designated by 
     State law to be a major nontenured policymaking or advisory 
     position or a policymaking or advisory position that 
     ordinarily does not require more than 8 hours per week.
       Subsection 2(b)(3) of the bill would provide the same 
     exemption to the same service so designated by tribal law. 
     Section 3309(b)(5) of the Internal Revenue Code now exempts 
     from all unemployment taxes service that is part of an 
     unemployment work-relief or work-training program assisted or 
     financed in whole or in part by any Federal or state agency.
       Subsection 2(b)(4) of the bill would provide the same 
     exemption to the same service assisted or financed in whole 
     or in part by a tribal government.
       Subsection 2(c). State Law Coverage.--This subsection adds 
     a new subsection to section 3309 of the Internal Revenue 
     Code. Section 3309 contains provisions relating to State law 
     coverage of services performed for non-profit organizations 
     or governmental entities. Subsection (e) of the bill extends 
     to tribal governments and their subsidiaries certain 
     flexibilities now extended to other governments and to 
     charitable organizations. The new subsection provides that a 
     state must permit a tribe to choose to pay the comparable tax 
     rate paid by commercial businesses under the Act, or to 
     choose to reimburse, like other governments and charitable 
     organizations, the State fund in lieu of such contributions 
     with amounts equal to the compensation attributable under 
     State law to such service. The new subsection also provides 
     that a tribe may make separate elections for itself and one 
     or more of its enterprises, subsidiaries, or subdivisions.
       Subsection 2(d). Definitions.--This subsection amends 
     section 3306 of the Internal Revenue Code. Section 3306 
     contains definitions relating to the Federal Unemployment Tax 
     Act provisions. Subsection (c) of the bill would add a 
     definition of an ``Indian tribe'' to mean for these purposes 
     a federally recognized Indian tribal government, adopting the 
     same definition of a tribe as that used in 25 U.S.C. 450b(e), 
     the Indian Self-Determination Act. The bill clarifies that, 
     just as the subdivisions of a state government are included 
     within the definition of a state, and consistent with federal 
     Indian law provisions recognizing the unique nature of tribal 
     government, included within the bill's definition of a tribe 
     are its subdivisions, subsidiaries and enterprises wholly 
     owned by the tribal government.
       Subsection 2(e). Transition Rule.--This subsection of the 
     bill provides tax relief to those tribal governments who in 
     good faith did not pay federal or state unemployment taxes 
     deemed due by the U.S. Internal Revenue Service under the 
     Federal Unemployment Tax Act. It ceases all federal 
     assessment and collection actions aimed at extracting non-
     federal funds from tribal governments who have not paid 
     unemployment taxes provided they reimburse a state fund for 
     all benefits paid to otherwise eligible former tribal 
     employees during this period of non-payment. This relief is 
     available only for periods prior to the date of enactment of 
     this bill. The bill does not authorize refund actions for 
     taxes already paid nor relief from a tribe's obligation to 
     reimburse a state unemployment fund for benefits paid to 
     former tribal employees.

                                S. 1306

         Be it enacted by the Senate and House of Representatives 
     of the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Tribal Government Tax-Exempt 
     Bond Authority Amendments Act of 1995''.

     SEC. 2. MODIFICATIONS OF AUTHORITY OF INDIAN TRIBAL 
                   GOVERNMENTS TO ISSUE TAX-EXEMPT BONDS.

       (a) General Provision.--Subsection (c) of section 7871 of 
     the Internal Revenue Code of 1986 (relating to Indian tribal 
     governments treated as States for certain purposes) is 
     amended to read as follows:
       ``(c) Additional Requirements for Tax-Exempt Bonds.--
       ``(1) In general.--Subsection (a) of section 103 shall 
     apply to any obligation issued by an Indian tribal government 
     (or subdivision thereof) only if such obligation is part of 
     an issue 95 percent or more of the net proceeds of which are 
     to be used to finance facilities located on land within or in 
     close proximity to the exterior boundaries of an Indian 
     reservation.
       ``(2) Private activity bonds.--Any private activity bond 
     (as defined in section 141(a)) issued by an Indian tribal 
     government (or subdivision thereof) shall be treated as a 
     qualified bond for purposes of section 103(b)(1) to which 
     section 146 does not apply if--
       ``(A) General restrictions.--The requirements of section 
     144(a)(8)(B) and section 147 are met with respect to the 
     issue.
       ``(B) Specific restrictions.--
       ``(i) Ownership.--In the case of an issue the net proceeds 
     of which exceed $500,000, 50 percent or more of the profits  
     or capital interests in the facilities to be financed 
     thereby (or in the entity owning the facilities) are owned 
     either by an Indian tribe, a subdivision thereof, a 
     corporation chartered under section 17 of the Indian 
     Reorganization Act of 1934 (25 U.S.C. 477) or section 3 of 
     the Oklahoma Welfare Act (25 U.S.C. 503), individual 
     enrolled members of an Indian tribe, an entity wholly-
     owned by any of the foregoing, or any combination thereof.
       ``(ii) Employment test.--It is reasonably expected (at the 
     time of issuance of the obligations) that for each $100,000 
     of net proceeds of the issue at least 1 employee rendering 
     services at the financed facilities is an enrolled member of 
     an Indian tribe or the spouse of an enrolled member of an 
     Indian tribe.
       ``(3) Definitions.--For purposes of this subsection--
       ``(A) Indian tribe.--The term `Indian tribe' means any 
     Indian tribe, band, nation, pueblo, or other organized group 
     or community, including any Alaska Native village, or 
     regional or village corporation, as defined in, or 
     established pursuant to, the Alaska Native Claims Settlement 
     Act (43 U.S.C. 1601 et seq.) which is recognized as eligible 
     for the special programs and services provided by the United 
     States to Indians because of their status as Indians.
       ``(B) Indian reservation.--The term `Indian reservation' 
     means a reservation, as defined in--
       ``(i) section 3(d) of the Indian Financing Act of 1974 (25 
     U.S.C. 1452(d)); or
       ``(ii) section 4(10) of the Indian Child Welfare Act of 
     1978 (25 U.S.C. 1903(10)).
       ``(C) In close proximity to.--The term `in close proximity 
     to' means--
       ``(i) in the case of an Indian reservation, or portion 
     thereof, located within a metropolitan statistical area 
     (within the meaning of section 143(k)(2)(B)), within 1 mile 
     of the boundaries of such reservation, or portion thereof; 
     and
       ``(ii) in the case of an Indian reservation, or portion 
     thereof, located within a nonmetropolitan area (as defined in 
     section 42(d)(5)(C)(iv)(IV)), within 15 miles of the 
     boundaries of such reservation, or portion thereof.
       ``(D) Net proceeds.--The term `net proceeds' has the 
     meaning given such term by section 150(a)(3).''.
       (b) Conforming Amendment.--Paragraph (3) of section 149(b) 
     of the Internal Revenue Code of 1986 (relating to federally 
     guaranteed bond is not exempt) is amended by redesignating 
     subparagraph (D) as subparagraph (E) and by inserting after 
     subparagraph (C) the following new subparagraph:
       ``(D) Exception for bonds issued by indian tribal 
     governments.--Paragraph (1) shall not apply to any bond 
     issued by an Indian tribal government (or subdivision 
     thereof) unless it is federally guaranteed within the meaning 
     of paragraph (2)(B)(ii).''.

     SEC. 3. EXEMPTION FROM REGISTRATION REQUIREMENTS.

       The first sentence of section 3(a)(2) of the Securities Act 
     of 1933 (15 U.S.C. 77c(a)(2)) is amended by inserting ``or by 
     any Indian tribal government or subdivision thereof (within 
     the meaning of section 7871 of the Internal Revenue Code of 
     1986),'' after ``or territories,''.

     SEC. 4. EFFECTIVE DATE.

       The amendments made by this Act shall apply to obligations 
     issued after the date of the enactment of this Act.
                                                                    ____


    Section-by-Section Analysis--Tribal Government Tax-Exempt Bond 
                    Authority Amendments Act of 1995

       Section 1 sets forth the short title of the Act.
       Section 2 amends Section 7871 of the Internal Revenue Code 
     (relating to Indian tribal governments treated as States for 
     certain purposes) by applying existing tax-exempt bond 
     authority in Section 103(a) to those obligations issued by an 
     Indian tribal government, or its subdivision, that are part 
     of an issue 95 percent or more of the net proceeds of which 
     are to be used to finance facilities located on land within 
     or in close proximity to an Indian reservation. It would 
     replace the current restrictions on the issuance of tax-
     exempt bonds by tribes and tribal subdivisions with a 
     provision that such bonds are to be issued under slightly 
     more restrictive conditions than those that now apply to 
     States and their political subdivisions.
       Section 3 amends section 3(a)(2) of the Securities Act of 
     1993 to exempt from the general registration requirements, as 
     are other governmental bonds, those bonds issued under 
     authority of these amendments.
       Section 4 provides that these amendments shall apply to 
     obligations issued after the date of enactment of this bill.
                                                                    ____

                                  
[[Page S 14906]]


                                S. 1307

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Treatment of Indian Tribal 
     Natural Resource Income Act of 1995''.

     SEC. 2. FEDERAL TAX TREATMENT OF INCOME DERIVED BY INDIANS 
                   FROM NATURAL RESOURCES ACTIVITIES.

       (a) In General.--Subchapter C of chapter 80 of the Internal 
     Revenue Code of 1986 (relating to provisions affecting more 
     than one subtitle) is amended by adding at the end the 
     following new section:

     ``SEC. 7874. FEDERAL TAX TREATMENT OF INCOME DERIVED BY 
                   INDIANS FROM THE HARVEST OF TRIBALLY OWNED 
                   NATURAL RESOURCES.

       ``(a) In General.--
       ``(1) Income and self-employment taxes.--No tax shall be 
     imposed by subtitle A on income derived from a natural 
     resources-related activity conducted--
       ``(A) by a member of an Indian tribe directly or through a 
     qualified Indian entity; or
       ``(B) by a qualified Indian entity.
       ``(2) Employment taxes.--No tax shall be imposed by 
     subtitle C on remuneration paid for services performed in 
     natural resources-related activity by one member of a tribe 
     for another member of such tribe or for a qualified Indian 
     entity.
       ``(b) Definitions.--For purpose of this section.
       ``(1) Natural resources-related activity.--The term 
     `natural resources-related activity' means, with respect to 
     an Indian tribe, any activity directly related to 
     cultivating, harvesting, processing, extracting, or 
     transporting natural resources held in trust by the United 
     States for the benefit of such tribe or directly related 
     to selling such natural resources but only if 
     substantially all of the selling activity is performed by 
     members of such tribe.
       ``(2) Qualified indian entity.--
       ``(A) In general.--The term `qualified Indian entity' means 
     an entity--
       ``(i) engaged in a natural resources-related activity of 
     one or more Indian tribes;
       ``(ii) all of whose equity interests are owned by such 
     tribes or members of such tribes; and
       ``(iii) substantially all of the management functions of 
     the entity are performed by members of such tribes.
       ``(B) Entities engaged in processing or transportation.--
     Except as provided in regulations similar to regulations in 
     effect under section 7873(b)(3)(A)(iii) on the date of the 
     enactment of this section, if an entity is engaged to any 
     extent in any processing or transporting of natural 
     resources, the term `qualified Indian entity' shall also 
     include an entity whose annual gross receipts are 90 percent 
     or more derived from natural resources-related activities of 
     one or more Indian tribes each of which owns at least 10 
     percent of the equity interests in the entity. For purposes 
     of this subparagraph, equity interests owned by a member of 
     such a tribe shall be treated as owned by the tribe.
       ``(c) Special Rules.--
       ``(1) Distributions from qualified indian entity.--For 
     purposes of this section, any distribution with respect to an 
     equity interest in a qualified Indian entity of one or more 
     Indian tribes to a member of one of such tribes shall be 
     treated as derived by such member from a natural resources-
     related activity to the extent such distribution is 
     attributable to income derived by such entity from a natural 
     resources-related activity.
       ``(2) De minimis unrelated amounts may be excluded.--If, 
     but for this paragraph, all but a de minimis amount derived 
     by a qualified Indian tribal entity or by a tribal member 
     through such entity, or paid to an individual for services, 
     would be entitled to the benefits of subsection (a), then the 
     entire amount shall be so entitled.
       ``(d) No Inference Created.--Nothing in this title shall 
     create any inference as to the existence or non-existence or 
     scope of any exemption from tax for income derived from 
     tribal rights secured as of January 1, 1995, by any treaty, 
     law, or Executive Order.''.
       (b) Conforming Amendment.--The table of sections for 
     subchapter C of chapter 80 of such Code is amended by adding 
     at the end the following new item:

``Sec. 7874. Federal tax treatment of income derived by Indians from 
              the harvest of tribally owned natural resources.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to periods before, on, or after the date of the 
     enactment of this Act.
                                                                    ____


    Section-by-Section Analysis--Treatment of Indian Tribal Natural 
                      Resource Income Act of 1995

       Section 1 sets forth the short title of the Act.
       Section 2 amends subchapter C of chapter 80 of the Internal 
     Revenue Code to add a new section 7874 which would provide 
     individual members of Federally-recognized tribal governments 
     with an exemption from Federal income and employments taxes 
     on income derived from certain economic activities related to 
     natural resources held in trust for a tribe by the United 
     States. These activities include those directly related to 
     cultivating, harvesting, processing, extracting, or 
     transporting such trust resources, and the selling of such 
     resources if substantially all of the selling activity is 
     performed by tribal members. The exemption covers both self-
     employment income and income paid to an individual by a 
     qualified Indian entity, which by definition is limited to an 
     entity engaged in such activity that is owned and controlled 
     by a tribe or members of a tribe. Unless regulations in 
     effect upon the date of enactment provide otherwise, income 
     from entities engaged in processing or transportation is also 
     exempt if the entity's gross receipts are 90 percent or more 
     derived from the trust resources of one or more tribes each 
     of which owns at least 10 percent of the equity interests in 
     the entity. To the extent that it is derived from such a 
     natural resources activity, individual income from a 
     distribution made by a tribe to its members from an equity 
     interest in a qualified Indian entity is treated as exempt.
       Section 2(b) sets forth a conforming amendment to the table 
     of sections in the Internal Revenue Code.
       Section 2(c) provides that these amendments shall apply to 
     periods before, on, or after the date of enactment of the 
     Act.

                          ____________________