On February 21, 2018, the IRS released the long-awaited 2018 tax withholding tables Publication 15-A. The tables provide the federal income tax withholding on distributions of Indian gaming profit to tribal members and can be used for 2018 gaming distributions. Reductions to individual income tax rates as a result of tax reform are reflected in the tables.
President Trump also signed the Bipartisan Budget Act into law in February. The legislation includes specific extenders for certain Indian provisions that had expired on December 31, 2016.
Here’s what tribes can do to make the most of these changes.
2018 Tax Withholding Tables
If your tribe has been using the 2017 withholding tables for gaming distributions, it can true-up the withholding to adjust for the difference between the 2017 and 2018 required withholding.
The tribe isn’t required to true-up withholding because of the late release of the 2018 Publication 15-A. If the tribe chooses to align the withholding with the 2018 rates, it can rely on Regulation 31.3402(r)-1, which gives tribes the option to use an alternate method of withholding instead of the normal withholding tables—provided that the amount deducted and withheld using the alternate method is substantially the same as the result using the Publication 15-A tables.
After the withholding is equalized as if the tribe had been using the 2018 tables since January 1, 2018, the tribe would need to revert back to the 2018 Publication 15-A withholding tables for the remainder of the year.
Among the provisions enacted in the Bipartisan Budget Act of 2018, there are several extenders for certain Indian provisions. Previously, all of the following provisions expired on December 31, 2016, but are now extended through 2017. They provide crucial incentives such as attracting capital-intensive projects, helping develop resources, and bringing skilled employment opportunities to Indian country.
Indian Employment Tax Credit
Section 40301 extends the Indian employment tax credit, which provides a 20% credit to employers for qualified wages and qualified healthcare expenses associated with employing certain members of an Indian tribe. The credit can reach $4,000 for each employee paid at least $20,000 per year. Employees paid over $45,000 don’t qualify for the credit.
Accelerated Depreciation for Business Property on an Indian Reservation
Accelerated depreciation for qualified Indian reservation property placed in service during 2017 is modified and extended in Section 40306. The credit allows businesses operating on Indian reservations to accelerate depreciation on qualifying property and infrastructure investments.
Production Credit for Indian Coal Facilities
Section 40408 extends the two-dollar-per-ton production tax credit for coal produced on land that’s owned by an Indian tribe.
We’re Here to Help
For more information on how these changes may affect your tribe, contact your Moss Adams professional at firstname.lastname@example.org. You can also visit our dedicated tax reform page to learn more.