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Controlled Group Rules and Indian Tribal Gov'ts


Randy Watson
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This issue relates to Indian Tribes and the controlled group rules. Assume an Indian Tribe directly owns a number of entities (corporations, LLCs etc...). The parent-subsidiary controlled group rules apply to corporations, partnerships, sole proprietorships, trusts and estates. The Tribe is none of those, so it seems like an Indian Tribe cannot be the parent in a parent-subsidiary controlled group. Similarly, a Tribe is not an individual, trust or estate, so it cannot be the common owner in a brother-sister controlled group. The recent tax exempt entity controlled group regulations do not apply to government entities and IRS Notice 95-48 states that Tribes are treated as government entities.

It certainly seems reasonable to conclude that entities owned directly by an Indian Tribe would not be considered to be a controlled group as to the Tribe. Does anyone disagree with this logic?

Although this post deals with non-governmental plans and this might not be the best board for this topic, I figured those who deal with governmental plans might have a good deal of knowledge about tribal entities and how the controlled group rules apply.

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  • 2 weeks later...
Guest Sam Palisano

Your analysis sounds correct to me.

A few thoughts:

1. Apparently an Indian Nation itself may be incorporated under federal law or if located in Oklahoma under OKLA law.

2. Announcement 95-48 is obsolete under Rev. Rul. 2009-18. Notice 96-634 which states that governments may apply a reasonable good faith interpretation in determining controlled group issues under Sections 414(b) and © pending further guidance remains in effect.

3. As you note, Treasury Decision 9340 (7/26/07) specifically states that the 414© tax-exempt organization regs don't apply to state and local governmental entities.

4. Code section 7871 generally treats Indian Nations as States for various purposes (which include Sections 105(e) and 403(b)(1) but not 401 or 414©).

A tribally-owned entity conducting a trade or business could itself have a subsidiary conducting a separate trade or business. Those two entities (but not the Indian Nation or any other entity directly owned by the Nation) would presumably constitute a controlled group.

The analysis becomes more difficult if the Indian Nation itself directly conducts a trade or business rather than through a separate entity. I don't think that should cause the Indian Nation itself to be considered a trade or business. In its governmental capacity, the Indian Nation should still be treated as a "government" for 414© purposes so there should be no linking of these businesses with businesses conducted through separate entities by reason of the Nation's control. The trade or business should have the same status vis-a-vis 414© whether it's conducted through a separate entity or is operated as an unincorporated trade or business by the Indian Nation.

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