IRS Investigates Tribe Gambling Payouts

Tax lawyers and accountants for the Miccosukee Indian are fighting an investigation by the IRS regarding the tribes’ allegedly unreported payments to its tribal members from its gambling profits. The IRS is demanding that the tribe hand over internal records they claim will show millions in unreported payments.

The Miccosukee Indians’ gaming distributions during 2006-2010 are under scrutiny, as are the council’s records of their discussions of tax matters from as far back as 1985. The IRS is asking for a long list of documents, including Miccosukee disbursement statements, check register reports, and any record of tax advice from lawyers and accountants of the tribe.

The tribe’s tax lawyers are lashing out against this aggressive probe by the IRS into the tribe’s finances. They claim that this is a blatant harassment of the Miccosukee tribes by the United States, according to court documents.

This contentious exchange between the Miccosukee tribe tax lawyers and the IRS is nothing new. The raging legal battle has been going on for the last decade. The IRS has won a series of victories in its fight to gain access to the tribe’s financial accounts that are held both by banks and by third parties. The tribe has attempted to use its sovereign status, which is the inherent authority the indigenous tribes have within the United States to govern themselves, as a way in which to block the investigation of the IRS. Now it seems that this plan may not be successful, as the tribe is facing the possibility of assuming the responsibility for taxes owed by many of the 600 members of the tribe.

As a sovereign entity, the tribe is not responsible for paying taxes under federal law. According to the IRS, it is when the tribe distributes profits made from its casinos to its members that they become individually responsible for reporting and paying taxes on their annual income tax returns. Responsibility also lies within the tribe’s domain to report and withhold a portion of any personal income from the casinos.

It was only a few months ago that the tribe admitted that more than 100 of its members owed the federal government about $25.8 million in back taxes, penalties, and interest on income that was received from profits made from its gaming operation in the years 2000-2005.

It seems that the outlook is not promising for the tax lawyers of the Miccosukee tribe. A federal judge has repeatedly denied the tribe’s requests to block probes, siding with the IRS in each case.

It remains to be seen what the outcome of this latest battle will be.

 

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