[Congressional Record Volume 145, Number 63 (Tuesday, May 4, 1999)]
[Senate]
[Page S4660]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 CLARIFYING TAX TREATMENT OF SETTLEMENT TRUSTS ESTABLISHED UNDER ANCSA

  Mr. STEVENS. Mr. President, today I join Senator Murkowski in rising 
in support of S. 933, which would clarify tax treatment of Settlement 
Trusts established under the Alaska Native Claims Settlement Act. Our 
legislation would amend the U.S. tax code by allowing these Settlement 
Trusts to organize as 501(c)(28) tax exempt organizations. This bill is 
similar to S. 2065 which I co-sponsored with Senator Murkowski last 
year.
  Consistent with last year's proposal, this bill allows for 
conveyances to a Settlement Trust without including those contributions 
in the beneficiaries' gross income. This is an important provision 
because under the current tax code, beneficiaries of a Settlement Trust 
can be taxed on contributions to the trust, even though they haven't 
received a payment or disbursement from the Settlement Trust.
  Our new provision also outlines the process and terms for revoking a 
trust's tax exempt status as a 501(c)(28) organization. Under this 
provision, if a Settlement Trust engages in forbidden activities as 
outlined in the Alaska Native Claims Settlement Act, its election as a 
501(c)(28) tax exempt organization would be revoked and the trust would 
pay a tax on the fair market value of the assets held. This ensures 
that U.S. taxpayers will not underwrite forbidden transactions within 
the trusts or between the trusts and the beneficiaries.
  This provision also requires a Settlement Trust to distribute at 
least 55 percent of its adjusted taxable income for each year. This 
would insure that Settlement Trusts fulfill a basic obligation to the 
beneficiaries.
  In addition, the new provision requires trusts electing to be 
recognized as 501(c)(28) tax exempt organizations to withhold income 
tax from payments made to beneficiaries. There is, however, an 
important exception to this withholding provision. That exception would 
apply to third party payments made on the behalf of beneficiaries for 
educational, funeral, or medical benefits.
  It is my hope that we will clarify the tax treatment of these 
Settlement Trusts so that beneficiaries are treated in a fair and just 
manner.

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