Mark Cowan (Boise State, Dep’t of Accountancy) has published Leaving Money on the Table(s): An Examination of Federal Income Tax Policy Towards Indian Tribes, 6 Fla. Tax Rev. 345 (2004). Here is the Conclusion:

A lot has changed in Indian country. Not much has changed in tax country. Despite the economic growth of many Indian tribes brought about by Indian gaming, there has been no major overhaul to the federal tax treatment of Indian tribes. The tax story remains the same — Indian tribes, with one minor exception, are not subject to the federal income tax. States have a similar status, although they escaped the grip of the IRC by a much more heavily documented, but extremely confusing path. This Article has attempted to expose and highlight the complexities underlying these statuses and to revisit them in light of the realities of the new millennium.

Despite the changes in Indian country, it appears that federal tax policy towards Indian tribes is best kept at the status quo. Tribes, while increasingly commercial in nature, are governments and should be treated as such under the tax system. Therefore, tribes should continue to be exempt from the federal income tax — just like states. While Congress has the power to tax the tribes, to do so would frustrate long-standing federal Indian policy favoring the economic independence and sovereignty of the tribes and end Congress’s recent movement towards treating Indian tribes as states for many purposes of the tax code. Unless and until there are major changes in tax policy towards states or federal policy towards Indian tribes, imposing the federal income tax on tribes would not be justifiable.

We have not heard the last of this issue. As Indian gaming expands and the government searches for new sources of tax revenue, there will no doubt be pressure to impose some sort of an income tax on the tribes. When this issue reemerges, any new proposals must be evaluated, as done here, in light of prevailing Indian policy and tax policy. In addition, empirical studies of the complex revenue impact on tribes, states, and the federal government would need to be done to properly measure the true amount of potential tax revenue at stake. Only then can we, like the weekend gambler, know how much money we are leaving on the table, and whether we are better off for having done so.