September 23, 2009

Committee Acts to Exclude Health Benefits Provided by Tribes from Taxation

The U.S. Senate is moving to block the Internal Revenue Service (IRS) from taxing health care benefits some tribal governments provide to their members, benefits that are needed only because the federal government failed to meet statutory and treaty obligations to provide adequate health care to Native Americans.
As the Senate Finance Committee began consideration of its health reform bill Tuesday, it acted to include language that would prohibit taxing the benefits. The issue was the subject of a hearing by the Senate Committee on Indian Affairs on September 18. Finance Committee member Senator Kent Conrad (D-ND), who also is a member of the Senate Committee on Indian Affairs offered the language blocking the IRS plan.
Senator Byron Dorgan (D-ND), who called the September 18 hearing, said the action by the Finance Committee Tuesday “was a good way to start things off” as the committee began its formal consideration of national health care reform.
“The federal government has both a moral and legal obligation to provide health care coverage to Native Americans,” Dorgan said. “It has clearly failed to do so adequately. We should be relieved that some Tribes are able to fill the void where the federal government has failed. At the very least, tribal governments should not be punished for meeting the obligation that we have failed to meet.”
At last week’s Indian Affairs Committee hearing, the IRS said it would review its plans, but insisted its reading of current law requires it to treat those benefits as taxable income.
“Testimony received at the hearing suggests they are mistaken,” Dorgan said, “but it any event, I’m glad to see the Finance Committee take such prompt action to make the law as clear as it can be on that point. I thank Senator Conrad for using his position on the committee to do so, and Finance Committee Chair Max Baucus for agreeing to include this in his own draft legislation.”
The amendment, included in the legislation now before the Finance Committee simply states that the value of any health insurance purchased by the Indian Health Service, or any other medical care or insurance coverage provided by an Indian tribe to supplement, replace or substitute for federal Indian health care coverage would excluded from gross income of Indians who receive the benefit.