Tribal Welfare and Exclusion Act

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Background

            The Social Service Program is overseen by the Hannahville Indian Community – Health Center (HIC-HC), this is a tribal government run organization that provides health care and human services to tribal members and other Indian people from federally recognized tribes. The program follows a template, designed by the Bureau of Indian Affairs (BIA, n. d. ), to administer federal funds to qualifying Indian People enrolled in federally recognized tribes. The Hannahville Indian Community tribal government has adopted the recommended plan and developed a social service welfare program following federal law and program guidelines established for low-income recipients. The IRS code, the Tribal Welfare and Exclusion Act of 2014, allows for tribal governments to implement a welfare program to reduce the federal tax liability for resident tribal members but the present BIA guidelines are based on income eligibility requirements. A welfare program based on economic value for each tribal member in obtaining self-sufficiency will be developed with resident tribal members included in the information sharing and development process of a tribal law that can be used to exclude certain types of income as taxable for federal government purposes. This process requires a well planned and executed communication campaign to reach potential adopters, who are resident tribal members with income.

The diffusion of information to tribal members is important based on many factors.  One factor is to disseminate information about how the Tribal Welfare and Exclusion Act of 2014 can benefit tribal members living and working on the HIC Indian Reservation. Another factor, taxable income is rising due to “per cap”, which is considered miscellaneous income to tribal members and taxed as income to the individual tribal member.  Robin Anderson (2013) in the Contemporary Economic Policy indicates, “the Government Accountability Office (2002) finds that 12 out of 87 gaming tribes distributed payments exceeding $5,000” (p 293). Anderson continues this statistic by also indicating “American Indian income on reservations with gaming was still low and poverty still was high relative to the rest of the US population in 2000.  Per Capital Income (PCI) was $7,875, the family poverty rate was 35.3%, and the child poverty rate was 45.6%. In the United States overall, PCI was $21,500, the family poverty rate was 9.0%, and the child poverty rate was 17%” (p 296). Individual tribal members are required by federal law to pay taxes on income classified as “per cap”. This “per cap” distribution is also counted as income for BIA social service programs and other state funded programs which can disqualify tribal member applicants. This income is also counted when applying for any other welfare benefits available in State and other programs

 Can the tribal government (HIC-HC) continue per cap and establish welfare programs to reduce the tax liability of tribal members? Tribal members are in a unique position as tribal governments have authority to create legislature for them to allow social programs that reduce tax liability. A recent IRS law passed by Congress in 2014, known as the Tribal Welfare and Exclusion Act, is a continued federal “Indian policy” that makes certain benefits given to tribal members untaxable when considering income. “Gross income does not include the value of any Indian general welfare benefit” according to the Act passed by congress (Congress U. , 2014).  Considering that an implementation of such a law requires tribal members and its tribal government to recognize economic value, one of the main problems is due to a lack of training and knowledge sharing. Tribal members rely on the tribal government to provide information regarding new law and policy that affect family life.   According to the recent changes in HIC civil law regarding per cap payments, “Per Capita means equal payments distributed to all members of the Tribe directly from gaming activities. This definition does not apply to funds set aside for social welfare programs, medical programs, education, housing or other similarly identified needs”. (Legal Dept., 2019). The tribal legislation also includes the policy statement that IGRA (Indian Gaming Regulatory Act of 1988), a federal law regarding Indian Gaming done by tribal governments, requires tribal members to pay income taxes on per cap payments and these are the responsibility of the tribal member to pay. This tribal “per cap” legislation also provides that 50 percent of the gaming proceeds can be used for tribal welfare programs. As a government-to-government relationship with the US government, tribal government welfare program benefits to tribal members are not taxable income to tribal members. Federal law defines “INDIAN GENERAL WELFARE BENEFIT.—For purposes of this section, the term ‘Indian general welfare benefit’ includes any payment made or services provided to or on behalf of a member of an Indian tribe (or any spouse or dependent of such a member) pursuant to an Indian tribal government program, but only if— ‘‘(1) the program is administered under specified guidelines and does not discriminate in favor of members of the governing body of the tribe, and ‘‘(2) the benefits provided under such program— ‘‘(A) are available to any tribal member who meets such guidelines, ‘‘(B) are for the promotion of general welfare, ‘‘(C) are not lavish or extravagant, and ‘‘(D) are not compensation for services.” (Congress U. , 2014) Thus, the diffusion of information on the importance of training others about economic value and demonstrate the importance of understanding value will can be consistently is important in reducing tax liabilities paid by tribal members in these critical areas.

 This paper will study the development of the diffusion of innovation – the need for tribal welfare and exclusion laws – to reduce the tax liability of tribal members living on the Hannahville Indian reservation, as allowed by US federal law. This study supports the creation of a process to develop an effective way to reach opinion leaders and potential innovators and include tribal members input in the development of welfare programs leading to the creation of tribal leadership and management training programs. This study includes projections as to the success of Tribal Welfare and Exclusion programs.

Introduction

HIC-Health Center is a branch of the tribal government and is an organization dedicated to social, economic and cultural existence of tribal members and Indian people. The HIC recently established a committee to evaluate the tribal management advancement programs within the community, the committee is referred to as TMAC or Tribal Management Advancement Committee, who is the representative organization of the tribal council or tribal government. Rogers (2003), defines the organization as “A stable system of individuals who work together to achieve common goals through a hierarchy of ranks and a division of labor” (p. 404). An organization, according to Rogers (2003) has as structure that includes: “Predetermined goals, prescribed roles, authority structure, rules and regulations, and informal patterns (p. 404). These ideals are met through establishment of both the Health Center and TMAC. Both tribal entities have been given authority to develop criteria that will guide in setting the objectives to meet Tribal constitutional goals:

Promote the welfare of the people

Be a representative organization for the tribal member

Preserve the land

Provide homes for all the Indian people who need them in the community

                                                                                                (Ickes, 1934)

These goals have no clear benchmarks, but all areas affect tribal member welfare and are necessary to guide delegated entities in producing objectives for programmatic needs.  Addressing issues that affect tax liability for tribal members can also be introduced in establishing training and development needs being address by the TMAC.  Reaching specific objectives in areas such as housing, education or ceremony and culture. The program will need to be developed to reach tribal members with income and preferably working. These potential adopters need to be convinced that involvement in a training, education or culture and ceremonial programs will increase their awareness and promote community involvement. Tribal members, as the ultimate adopters, will be included in establishing guidelines for welfare-based programs that will not affect gross income of resident tribal members.  Adoption of new benefits require using the “innovation process in organizations (p 421). According to Rogers (2003) two steps involve initiation and implementation decisions. Rogers (2003) explains the five-step process: “agenda setting, matching, redefining/restructuring, clarifying, and routinizing” (p. 421).  Regarding agenda setting TMAC has already established that there is a need for an innovation in providing training and development for tribal members. The TMAC employs a manager who sends employed tribal members surveys and questionnaires about future plans and goals.  The department managers and directors coordinate with the TMAC manager to provide completed forms for data interpretation. While this evaluation has been useful for a few tribal members, it is not heavily promoted.  This creates the need to return to the five step process and develop a more effective approach to reaching employed tribal members to participate in training provided by a tribal welfare program that could potentially reduce tax liabilities and create welfare benefits based on economic value and other defined needs identified by tribal members.

Diffusion in a tribal organization

Initiation begins the innovation process for the tribal organization. Rogers (2003) refers to this step as “all of the information gathering, conceptualizing, and planning for the adoption of an innovation, leading up to the decision to adopt (p. 420).  TMAC can review current information for summarization. This data could be used as identified objectives for training and development needs. By analyzing present information data, the basis can be formulated to structure a training program with relief from tribal government welfare legislation.

According to Rogers agenda setting occurs “when a general organizational problem is defined that creates a perceived need for an innovation” (p. 422).   The agenda setting will take place once the TMAC program develops into a instructional program to provide all potential tribal member employees living on the reservation, the benefits of a Tribal Welfare and Exclusion program. The organization can advance to the next step in the agenda setting process. Rogers (2003) reveals this step as “searching the organizations environment to locate innovations of potential usefulness to meet these organizational goals (p. 422). “While having quite different approaches to the idea of community, communitarian scholars discuss the need of members of a society to be involved with their government so that the government can adequately meet their common needs and work toward the common good (Clay, 2009)”. Now that the tax benefits have been identified the innovation and reinvention can begin. This is a reinvention of the existing federal IRS code to model a tribal law that can satisfy legal requirements of the US Congressional Act of 2014. Once the benefits have been identified, TMAC will proceed to the matching step.

In the matching step TMAC will fit a designated welfare category, in this example training, to the tax relief innovation. Delivery of information can be achieved in group setting, pamphlets and website updates. Defining the advantages to tribal members will improve the chances of the tribal government or tribal council to adopt welfare programming that can result in tax benefits and relief for resident tribal members who have gross income issues related to current per cap tribal laws. This leads to the redefining/restructuring stage.

According to Rogers (2003), “the innovation may have to be “re-invented so as to accommodate the organization’s needs and structure more closely” (p. 242). Identifying the advantages of the re-invention will require development of guidelines to the tax innovation and will have to be implemented for tribal members to receive benefits. According to Rogers (2003), “When an organization’s members change an innovation as they adopt it, they begin to regard it as their own (429).  Consequently, changes made to the innovation are crucial to the acceptance of the innovation within the organization and community. 

During the clarifying stage Rogers (2003) says, “the meaning of the new idea gradually becomes clearer to the organizations members” (427). Uncertainty is part of this stage and questions must be addressed to make sure the benefits become reality for tribal members. How can tribal members qualify for tribal welfare programs?  What guidelines will be utilized to make sure all members receive equal economic benefits for tax exclusion programs? Should current BIA social service be adjusted? Who will oversee presenting data to tribal members not employed but have taxable income? Will the current websites of the HIC diffuse the information? How will this innovation be funded?  How much will it cost, and will the tribal member need to forfeit per cap payments? Many uncertainties lie in the implementation of a tribal law and should be thoroughly explored to maximize benefits to resident tribal members.

The final occurrence is routinizing.  Rogers (2003) defines routinizing as “when an innovation has become incorporated into the regular activities of the organization and has lost its separate identity” (p. 428).  Most issues affecting other social and welfare programs will have been identified and a normalization process can occur.  Involving as many resident tribal members with income is key in the process of developing effective programs. Rogers (2003) says, “Collective innovation-decisions usually have greater sustainability than do authority innovation-decisions, due to the wider participation in them (p. 429).  Involvement of all tribal members with income will be vital to the adoption rate in community government and business.

To promote participation in developing program needs and guidelines with tribal member participation, requires a creative communication campaign. In past promotion of community participation events, the tribal government issues incentives to participating tribal members. These incentives will assist in creating awareness about the possible welfare programs that can be developed.  This type of campaign will reach potential early adopters to influence the acceptance or rejection of the innovation. 

TMAC will need to employ change agents to introduce the idea of a tribal welfare and exclusion law. Rogers (2003) expresses this idea as, “A change agent is an individual who influences clients’ innovation-decisions in a direction deemed desirable by a change agency” (p 27). Change agents can be used through opinion leaders in the community. These can include tribal council and other tribal government officers who support the innovation. Tax experts could be employed to increase the success of an innovation. These opinion leaders should not be professionals outside of the reservation as people who are homophililous, or similar, tend to make similar decisions. Rogers (2003) explains “When two individuals share common meanings, beliefs, and mutual understanding, communications between them is more likely to be effective” (p 306). TMAC will need to use opinion leaders in order to create support for additional government spending in the form of welfare programs.

Potential Adopters

The number of tribal members that could potentially participate in the diffusion process can be identified with current data provided by the TMAC manager. The potential adopters of a new tribal law are primarily voting, resident tribal members, who are employed in tribal government businesses. Tribal members are not considered stockholder in the traditional sense and can not gain shares in the tribal corporation. The federal government chartered an entity known as the Financing and Building Authority (FBA), to manage the one single share of the tribal gaming business. Ownership of the corporation belongs to the Hannahville Indian Community-Tribal Council who represents itself as one (1) class and only member of the FBA is the Hannahville Indian Community tribal council (shareholder) with the sole reason for existing is for benefit of tribal members. (Deer, 1997) Tribal members have nt shareholder rights but influence legislative decision makers with tribal government elections every 3 years.

Consideration and Expectation

Tribal member participation will be key in success or acceptance of this innovation. The program will be successful if the Tribal Council creates legislation and accept guidelines to establish the outlet to claim exclusion benefits. The process involves meeting with opinion leaders that influence sitting council members. These opinion leaders can comprise of tribal members elders or outside experts or paid contractors. This creates a principal-agent problem for tribal members as the tribal government has consistently invested casino revenue in economic expansion of its entertainment and resort style gaming facility. This expansion has created more low-level jobs as social and economic conditions have not improved for most tribal members. “Improved socio-economic conditions stemming from spent casino revenue could improve the quality of life for Native American families and communities and positively impact these systems in which problem behaviors occur.” (Patterson D., 2015). The final decision to accept welfare-based programs will need to be influenced from the tribal members who vote for legislators to create laws needed to establish the framework for successful benefit programs for tribal members and Indian People.

Corporate Social Responsibility (CSR) programs are popular public relations campaigns that fulfill a need of stakeholders involved in corporate business relationships. Tribal members are more akin to stakeholders as they are considered beneficiaries of tribal government business. In a study done in the Journal of Economic Perspective, the authors claimed “Indian gaming revenues have allowed tribes to invest in new programs to address poverty and provide public goods” (Akee R.K. Q., 2015) From a general perspective this is largely true but employment wages must pay federal taxes along with any per cap payments. If the tribal government were to create a philosophy of CSR type program the results of the programs could be used as promotional pieces to support tribal business operations. Customers who visit Indian Casino often believe that any money they lose will “benefit a tribal member”. This also lends additional credibility that tribal governments are indeed creating unique opportunities to lift tribal member out of poverty level existence. Customers may be intrigued to find out that program funds help young Indian people travel to “pow-wows” and other cultural events hosted by other Native American tribes in the US. Many customers prefer Indian Casinos over Commercial Casinos as they portray a much more philanthropic approach to spending gaming proceeds.

Political opposition and bureaucratic red tape can slow the diffusion process of this type of innovation. Claims that a process involving input from tribal members is cumbersome and authority has been given to tribal governments to set guidelines and rules. A case study was performed with 12 tribal members in 2000 on the Saginaw-Chippewa Indian Reservation located in Mount Pleasant, Michigan just north of Lansing the State Capital, demonstrates that social interaction with tribal members can produce a wealth of information. An interesting point the study makes that, “Individuals from the Saginaw-Chippewa tribe were interviewed as knowledgeable informants for the study.” (Myers, 2000) This is a rare and in-depth report on tribal members who were living in poverty level wages while experiencing social change and political unrest in the community. A difficult time to perform an economic study but it was accomplished with positive comments from tribal members about the success of other tribal members in the gaming operations. Myers (2000) also wrote that one respondent tribal member said, “There are policy decisions made by the community. They do surveys that help the Tribal Council shape policy,” one respondent said. He continued by pointing with pride to the fact that there was no outside management company running the casino, and that “90 percent of management in table games are tribal members (p 158)”. Considering this type of statement, the Saginaw-Chippewa tribe can introduce many new innovations with support from tribal legislation.

Consequences and Final Analysis

When the US Congress passed the Indian Gaming Regulatory Act of 1988, this was a diffusion of an innovation that required congress to classify different types of legal gaming into three distinct categories. They were simply referred to as Class I, II and III gaming, with class II and III being the most heavily regulated. The consequence of tribal governments to accept Indian Gaming required the tribes to negotiate compact agreements with their respective states and agree to five specific uses of gaming proceeds or net profits. Tribal governments with approved gaming ordinances must use net revenues from any tribal gaming proceeds to “(1) to fund tribal government operations or programs;(2) to provide for the general welfare of the Indian tribe and its members;(3) to promote tribal economic development; (4) to donate to charitable organizations; or(5) to help fund operations of local government agencies (Congress U. , 1988). In consideration of first two uses, tribal governments have the authority to establish general welfare programs for tribal members that can reduce tax liability and gross income. These programs can be established to benefit tribal members with untaxable benefits otherwise considered income and routinely subjected to local, state and federal taxing authorities. Tribal governments possess a government-to-government relationship with the Federal government to allow them to create these types of untaxable benefit programs to benefit tribal members and Indian people.

Social structure often determines how an innovation is introduced into a system. Usually those innovators and early adopters of the innovation prosper more from an adoption of an innovation than later adopters. “Generalization 11-6: A systems social structure partly determines the equality versus the inequality of an innovation’s consequences (Rogers, 2003)”. Understanding this consequence justifies that role tribal members will play in establishing guidelines and program parameters to avoid the pitfalls of creating more benefits for members of the governing body.

Governing bodies are organizations within the community are required to display ethical standards in governance. Corporate governance establishes a framework for entities when “Rules governing the allocation of authority are needed to establish common expectations as to who has authority to transfer rights relating to corporate assets prior to entering into a contract for their transfer (Armour J., 2009) The TMAC committee is a branch of the tribal government and ethical legal standards require, “All those acting on behalf of the Hannahville Indian Community are expected to act in the highest ethical manner and to carry out their duties with the best interest of the Tribe and its members in mind at all times.  Those individuals elected or appointed shall not place their personal interests above that of the Tribe (Legal, 2019)”. Creating open channels for tribal members to be included in guidelines will ensure principal-agent problems are reduced to a minimum when increasing benefits for lower wage earners. “The public policy effect of the federal policy of self-determination for federally recognized American Indian tribes has not only been greater control for tribal citizens and their governments over the management of tribal affairs, but greater control over the institutions of governance” (Kalt, 2010). Change requires a proper framework to meet the organizational goal of lifting tribal members and Indian People form poverty level to a quality of life that includes education, housing and cultural needs.

References

Akee R.K. Q., S. K. (2015). The Indian Gaming Regulatory Act and Its Effects on American Indian Economic Development. Journal of Economic Perspective, 185-208.

Anderson, R. J. (2013). Tribal Casino Impacts on American Indians Well-Being: Evidence from Rerservation-Level Census Data. Contemorary Economic Policy, 291-300.

Armour J., H. H. (2009). The Essentials of Corparate Law What is Corporate Law? Discussion Paper No. 643.

BIA, D. o. (n. d. ). How-to Effectively Implement General Assistance into a P.L. 102-477 Plan. Washington D.C.: U.S. Federal Government.

Clay, J. (2009). Measuring the Impact of Reservation Gaming Revenues on Native American Education Achievement. Journal of Public Budgeting Accounting & Financial Management, 58-82.

Congress, U. (1988). Indian Gaming Regulatory Act . Washington, D.C.: GAO.

Congress, U. (2014, September 26). Tribal General Welfare and Exclusion Act of 2014. Public Law 113-168: 113th Congress. Congressional Record.

Deer, A. (1997, October 28). Federal Charter of Incorporation. Hannahville Indian Community Financing and Building Authority A Federally Chartered Corporation. Washington D.C., Michigan, Indian Reservation: Secretary of Interior.

Ickes, H. (1934, July 13). Hannahville Indain Community. Constitution and Bylaws. Hannahville, Michigan, Indian Reservation: HIC-Tribal Council.

Kalt, S. C. (2010). American Indian Self-Determination: The Political Economy of a Successful Policy. JOPNA Working Papers, 175-186.

Legal. (2019). Code of Ethics:Title VI, Chapter 6. Hannahville Indian Reservation: Hannahville Indian Community.

Legal Dept., H. I. (2019, January 08). Title VII, Chapter 2: Per Cap Ordinance. Hannahville Indian Community. Hannahville, MI/US Indian Reservation: Tribal Council.

Myers, E. M. (2000). The Perceived Economic, Social, and Cultural Impacts of Gaming on a Michigan Indian Tribe. . Western MIchigan Univesity.

Patterson D., W. J. (2015). Sociocultural Influences on Gambling and Alcohol Use Among Native Americans in the United States. HHS Public Access.

Rogers, E. M. (2003). Diffusion of Innovations. New York: Free Press.

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