Or. Admin. Code § 150-316-0595

Current through Register Vol. 63, No. 11, November 1, 2024

Section 150-316-0595 - Exempt Income of Native Americans

(1) ORS 316.777 exempts from Oregon taxation certain income earned by an enrolled member of a federally recognized Indian tribe. To qualify under these provisions, at the time the income is earned the tribal member must reside in "Indian country" in Oregon, and the income must be derived from sources within Indian country in Oregon. A tribal member who resides outside of Indian country can not exclude income from Oregon tax under the provisions of ORS 316.777. The person is subject to the statutes and rules governing Oregon residents and nonresidents and is taxed accordingly.

(2) Definitions: For purposes of this rule:

(a) "Current reservation boundaries" means the boundaries in existence at the time of the transaction.

(b) "Indian country" means any federally recognized Indian reservation in Oregon or other land in Oregon that has been set aside for the residence of tribal Indians under federal protection, and includes:

(A) Any land within the current reservation boundaries of a federally recognized reservation regardless of ownership.

(B) Tribal- or member-owned land outside current reservation boundaries if held in trust for the benefit of the tribe or its members.

(C) Land that the federal government allotted to a tribal member that since the time of the allotment has been continuously either:

(i) Held in trust by the federal government for the benefit of an individual tribal member(s), i.e. a trust allotment; or

(ii) Owned by a tribal member(s) with continuing federal restrictions against sale of the land, i.e., a restricted allotment.

(3) Income derived from sources within Indian country includes:

(a) Wages earned for work performed in Indian country;

(b) Income from a business or real estate located in Indian country;

(c) Distributions, including earnings, from retirement plans, if the contributions to the plan were derived from or connected with services performed in Indian country;

(d) Unemployment compensation, if the benefits are received as a result of work performed in Indian country;

(e) Interest, dividends, capital gain from the sale of stock, and other income from intangibles regardless of the location of the bank accounts or other intangible assets.

(4) To be exempted from Oregon personal income tax withholding, a tribal member whose wages are exempt from Oregon tax must furnish the member's employer with an extract from the tribal rolls as proof of enrolled status. Any employer of a qualified exempt tribal member who has documentary proof under this rule must keep this proof as part of the employer's payroll records.

(5) The following examples illustrate the provisions of this rule:

Example 1: Margaret, an enrolled member of the Confederated Tribes of Warm Springs, lives and works on the reservation of the Confederated Tribes of the Umatilla Indian Reservation. Under ORS 316.777, her income is exempt from state income tax.

Example 2: Claire, an enrolled member of the Coquille Indian Tribe, resides on reservation land in Oregon and works as an accountant for the city of Coos Bay at City Hall. Claire's income is taxable by Oregon because she resides on, but does not work on, Indian country on Oregon.

Example 3: Charles, an enrolled member of the Confederated Tribes of the Umatilla Indian Reservation, resides on the reservation of the Confederated Tribes of the Umatilla Indians. For six months of each year, he works on a fishing trawler off the Alaska coast. During the remaining six months, he is employed as a forester by the Blue Mountain Timber Company. None of his work is performed in Indian country. Charles owns a Certificate of Deposit, (CD), at a bank in Portland, Oregon. Charles is taxed on the income he earns fishing in Alaska and on his wages from the timber company because none of that income is earned in Indian country. Charles is not taxed on the interest from the CD because that income is considered to be earned on the reservation on which he lives.

Example 4: Using the facts in Example 3, assume that Charles is retired and receives a pension from the lumber company. His pension income is subject to state tax because the contributions made to the plan were not related to services performed in Indian country.

Example 5: William, an enrolled member of the Navajo Nation, is a resident of the Navajo Nation reservation in Arizona. During the summer months, he temporarily lives and works on the reservation of the Burns Paiute Tribe in Oregon. Under ORS 316.777, Oregon will not tax any of William's wages earned on the reservation of the Burns Paiute Tribe because he lives and works in Indian country in Oregon and he is an enrolled member of a federally recognized Indian tribe.

Example 6: John, an enrolled member of the Confederated Tribes of the Grande Ronde, resides on land that he inherited from his father's estate. The land came into John's family through an allotment by the federal government to tribal members. The federal government holds the land in trust for the benefit of John. It is allotment land. As long as John lives on allotment land and works in Indian country, his income is exempt from Oregon tax.

Example 7: Ben, an enrolled member of the Confederated Tribes of the Grande Ronde, lives on land that a prior owner, who was also a tribal member, received from the federal government in an allotment. Ben owns the land, but the federal restrictions prohibit him from selling it. Those restrictions have been in place since the federal government allotted the land, but they will be lifted next month. The land is allotment land now, but it will not be after the restrictions are lifted. Once the federal restrictions are lifted, all of Ben's income is taxed by Oregon. The land is no longer Indian country and Ben may sell the land.

Or. Admin. Code § 150-316-0595

RD 11-1985, f. 12-26-85, cert. ef. 12-31-85; RD 5-1994, f. 12-15-94, cert. ef. 12-31-94; RD 6-1996, f. 12-23-96, cert. ef. 12-31-96; REV 6-2004, f. 7-30-04, cert. ef. 7-31-04; Renumbered from 150-316.777, REV 66-2016, f. 8-15-16, cert. ef. 9/1/2016

Stat. Auth.: ORS 305.100

Stats. Implemented: ORS 316.777