Final General Welfare Exclusion Regulations Mark a Historic Win for Tribal Nations

The U.S. Department of the Treasury and IRS on Dec. 15, 2025, issued long-awaited final regulations (Regulations) on the Tribal General Welfare Exclusion (GWE) Act of 2014 (the Act). The Regulations mark a major turning point for Tribal governments and their citizens, expanding what's possible for general welfare programs and strengthening Tribal sovereignty. They also demonstrate the value of meaningful Tribal consultation and engagement during the public comment period, as well as highlight the importance of the hard work and dedication of Tribal leaders and Treasury Department leadership over the years. Among many others whose efforts made these Regulations possible, key contributors include Treasury Tribal Advisory Committee (TTAC) Chair Ron Allen, U.S. Treasurer Brandon Beach, Treasury Department Tax Legislative Counsel Krishna Vallabhaneni, current and former Tribal leaders of TTAC's GWE Subcommittee, former U.S. Treasurer Lynn Malerba and Fatima Abbas, the first director of the Treasury Department's Office of Tribal and Native Affairs. GWE guidance has been a key issue for the TTAC, and the final Regulations reflect the collaborative efforts of all involved.

Overall, the Regulations demonstrate Treasury Department and IRS' understanding of the importance of the GWE to Tribes and their willingness to largely defer to Tribes in their development and implementation of GWE programs. The issuance of the Proposed Regulations in September 2024 was viewed as a win for Indian Country, but as discussed in a previous Holland & Knight alert, there was more work to be done to ensure the final rule would answer outstanding questions and provide Tribal governments with the desired level of flexibility to effectively develop and implement programs under the Act. The Regulations reflect feedback that the Treasury Department and IRS received during Tribal consultation and the public comment period, as well as through continued meetings with the TTAC and its GWE Subcommittee.

The Regulations apply to GWE programs beginning on or after Jan. 1, 2027; however, Tribes may rely on the guidance now and apply the guidance to their prior or existing GWE programs and implementation of such programs.

What Is the GWE?

Although taxpayers must generally include all items of income when computing gross income, the IRS has long recognized an exception for Tribal members who receive Tribal government program benefits for the promotion of general welfare and not as compensation for services. However, questions as to where the line was between taxable distributions and nontaxable general welfare benefits led to disputes between Tribal governments and the IRS. In order to minimize controversies, the IRS agreed to consult with Tribal governments and issue more tailored guidance, which culminated with Revenue Procedure 2014-35, also known as the IRS Safe Harbor, in June 2014.

The Revenue Procedure offers a series of safe harbors applicable to specific types of Tribal programs under which the IRS will presume that the program is "for the promotion of the general welfare." In addition, the Revenue Procedure describes specific types of qualifying benefits, including elder and disabled programs, education programs, housing programs, burial and funeral assistance, and certain other qualifying assistance programs. (For detailed information on Revenue Procedure 2014-35, see Holland & Knight's previous alert, "In Final Guidance, IRS Broadens General Welfare Safe Harbor for Tribal Programs," June 6, 2014.)

The Act created Internal Revenue Code Section 139E (Section 139E), which includes similar requirements to those found in the Revenue Procedure, although the Act was intended to be broader than the IRS Safe Harbor and apply to any Tribal benefit for the promotion of general welfare.

Under both the IRS Safe Harbor and the Act, benefits are excluded from income – and Tribes do not issue Form 1099s – if a program meets certain requirements, including:

• the benefits provided are available to all Tribal members who meet the eligibility requirements in the program's guidelines
• distribution of benefits does not discriminate in favor of the Tribe's governing body
• the benefits are not compensation for services
• the benefits are not lavish or extravagant

The Act imposed a moratorium on IRS audits of GWE issues. Prior to resuming audits, the Treasury Department must issue GWE guidance, as well as provide training and education on the guidance to IRS field agents and Tribal finance officers. The Act requires this training and education to be done in consultation with the TTAC.

What Has Happened Since the Act Was Passed?

Over the past decade, several steps have been taken toward the issuance of these Regulations, including soliciting and receiving feedback from Tribes and Tribal leaders:

• Treasury Tribal Advisory Committee. Establishment of the TTAC was mandated by the Tribal GWE Act of 2014. The purpose of the TTAC is to advise the Treasury Department secretary and IRS on matters relating to the taxation of Indians, training of IRS field agents and provision of training and technical assistance to Tribal financial officers. The TTAC held its first public meeting on June 20, 2019, during the first Trump Administration.
• IRS Notice 2015-34. On April 16, 2015, the IRS issued Notice 2015-34, which states that Section 139E codifies, but does not supplant, the GWE and taxpayers may continue to rely on the safe harbors in the Revenue Procedure. The IRS also noted that the Revenue Procedure is broader than Section 139E in some respects and, for benefits described in the safe harbors, provides certainty that the "need requirement" of the GWE is satisfied. (For detailed information on Notice 2015-34, see Holland & Knight's previous alert, "IRS Issues Guidance on Tribal General Welfare Exclusion and Safe Harbors," April 21, 2015.)
• TTAC's Tribal GWE Subcommittee. In 2019, the TTAC established the GWE Subcommittee, which is charged with providing the TTAC recommendations on 1) implementation of the substantive provisions of the Act and 2) implementation of the training provisions set forth in the Act.
• Subcommittee Report. The GWE Subcommittee solicited feedback from Tribes on an initial set of core principles for the GWE and surveyed Tribes on their general welfare programs. The GWE Subcommittee then prepared a GWE Subcommittee Report and its version of proposed regulations (TTAC Proposed Regulations). These documents contain recommended guidance to the Treasury Department and IRS on various aspects of the interpretation and implementation of the GWE. On June 16, 2021, the GWE Subcommittee submitted the GWE Subcommittee Report and TTAC Proposed Regulations to the Treasury Department. The TTAC referred these documents to the Treasury Department on Oct. 26, 2022, for Tribal consultation and comment.
• Dear Tribal Leader Letter. On Oct. 27, 2022, the Treasury Department issued a Dear Tribal Leader Letter announcing consultations and the solicitation of comments on the Act, GWE Subcommittee Report and TTAC Proposed Regulations. The Dear Tribal Leader Letter also requested responses to certain questions related to the interpretation of particular provisions of Section 139E. In response to the Dear Tribal Leader Letter, the Treasury Department received 65 written comments from Tribes and two Tribal organizations (Tribal Comments).
• Consultation Process. On Dec. 14-16, 2022, the Treasury Department hosted Tribal consultations on the Act, the GWE Subcommittee Report and TTAC Proposed Regulations. The Treasury Department and IRS also consulted with the TTAC and GWE Subcommittee throughout 2023 and 2024.
• Proposed Regulations. On Sept. 17, 2024, the Treasury Department and IRS issued Proposed Regulations on the Act. In the Proposed Regulations and Preamble, the Treasury Department and IRS expressed a willingness to largely defer to Tribes in their formation and implementation of GWE programs. The Treasury Department and IRS also incorporated several of the recommendations they received from the TTAC, as well as feedback from Tribes on how the Act should be implemented through regulations. However, there were certain areas where the Treasury Department and IRS had not agreed with recommendations they had received from the TTAC and Tribes; ambiguities also remained in the Proposed Regulations. Notably, the Proposed Regulations did not address grants to Indian-owned enterprises or trust arrangements (such as minors' trusts) with deferred benefits.
• Comment Period and Tribal Consultation. To obtain feedback on the Proposed Regulations, the Treasury Department issued a Dear Tribal Leader Letter inviting Tribes to participate in Tribal consultation and consultation meetings to be held on Nov. 18-20, 2024 (the Consultations). In response to the 2024 Dear Tribal Leader Letter and after the Consultations, the Treasury Department received 103 written comments from Tribes and Tribal organizations. In addition, a public hearing on the Proposed Regulations was held on Jan. 13, 2025, at which five speakers provided testimony, and the Treasury Department and the IRS also received 41 public comments in response to the notice of proposed rulemaking. Prior to publishing the Regulations, the Treasury Department and IRS also met with the TTAC and GWE Subcommittee on several occasions.

What Are Key Features of the Regulations?

• Benefits Must Be for the Promotion of the General Welfare. The Regulations provide that a Tribal government has sole discretion to determine whether a benefit is for the promotion of general welfare and the IRS will defer to the Tribal government's determination that a benefit meets this requirement.
• No Limitation on Source of Funds. The Regulations confirm that the Treasury Department and IRS agree with the GWE Subcommittee Report and Tribal comments that Section 139E does not prohibit a Tribal government from funding a general welfare program with net gaming revenues or revenues from any other particular source. Regulation Section 1.139E-1(c)(5)(i)-(iii) provides that benefits under the Tribal government program may be funded by any source of revenue or funds, including net gaming revenues. However, gaming Tribes with a Revenue Allocation Plan (RAP) should ensure that their GWE programs are consistent with the terms of their RAP. Under the Indian Gaming Regulatory Act (IGRA), per capita distributions of gaming revenue are subject to tax. The Regulations do not change this rule.
• General Welfare Benefits May Be Provided Through Minors' Trusts. The Regulations confirm that the Treasury Department and IRS agree with the GWE Subcommittee Report and feedback from Tribal consultation and the public comment period with respect to the distribution of GWE benefits from minors' trusts. The Regulations confirm that minors' trusts can contain (and distribute) assets as GWE benefits. Accordingly, with proper structuring, a Tribe may reallocate gaming revenue contributions and trust assets in minors' trusts for the purpose of providing general welfare distributions in addition to (or in lieu of) taxable payments to members.
• Economic Development Grants Qualify as GWE Benefits. Tribes also noted in Tribal consultation and through the public comment period that the Proposed Regulations lacked guidance regarding whether Tribes may provide economic development grants to support Tribally owned businesses under the Act; this is an issue that had been previously raised by TTAC and in the GWE Subcommittee Report. The Regulations reflect that the Treasury Department and IRS listened to this feedback, and the Regulations confirm that under the Act, a Tribal government may provide a GWE benefit to a Tribal Program Participant to support, develop, operate, expand or start a trade or business; such a benefit must be paid to or on behalf of the Tribal Program Participant as an individual and may not be provided directly to such person's corporation or partnership.
• No Retroactive Audits. The Regulations will not be applicable to any taxable years that begin before Jan. 1, 2027. The Preamble to the Regulations also confirms that the Treasury Department and IRS generally agree with the TTAC, Tribal leaders and commenters that audits should only be prospective in nature – but carved out a limited exception for extraordinary circumstances such as fraud.
• No Substantiation Requirement. The Preamble to the Regulations confirms that the Treasury Department and IRS agree with the GWE Subcommittee Report and Tribal Comments that individuals are not required to maintain personal receipts to substantiate that a benefit provided under a GWE program was used by that individual recipient for the purpose for which it was provided. However, this does not change other obligations under the Internal Revenue Code and Treasury Regulations for a taxpayer to maintain records to establish the amount of gross income reported on the taxpayer's tax return.
• Definition of "Tribal Program Participant." The Regulations expand the definition of eligible individuals to receive Tribal general welfare benefits, reflecting feedback from the GWE Subcommittee report and Tribal comments that an expansive definition is appropriate. A "Tribal Program Participant" who may receive general welfare benefits is defined in Treas. Reg. Section 1.139E-1(b)(8) to encompass the categories of "qualified nonmember" that are covered by Revenue Procedure 2014-35, with the clarification that a "spouse" may be a spouse under applicable Tribal law and the extension of the definition to include an individual for whom a Tribal member is a caregiver under Tribal or state law.
• Obsoletion of the Safe Harbor. The Preamble to the Regulations confirms that the Safe Harbor and Revenue Procedure will be obsoleted and superseded, effective Jan. 1, 2027. The Proposed Regulations had been silent on this point, and the inclusion of obsoleting and superseding the Revenue Procedure in the Regulations reflects Treasury Department and IRS' consideration of Tribes' public comments on the matter – the majority of which were in favor of obsoleting and superseding the Safe Harbor and Revenue Procedure to avoid potential confusion with the Regulations.
• GWE Program Must Be Established Under Specified Guidelines. The Regulations provide that a GWE program must include, at a minimum, 1) a description of the program to provide Tribal general welfare benefits, 2) the eligibility requirements for the program, 3) a description of the type of benefits authorized by the program and 4) the process for receiving benefits under the program. The Treasury Department and IRS agreed with the GWE Subcommittee Report and Tribal Comments that Section 139E does not require the specified guidelines of the program to be memorialized in a written document. However, several features in the Regulations incentivize Tribal governments to put their GWE programs in writing.
• Benefits Cannot Be Lavish or Extravagant. The Regulations offer deference to Tribes and incorporate a presumption that a written GWE program is not lavish or extravagant. Treas. Reg. Section 1.139E-1(d)(4), similar to the Proposed Regulations, explains that whether a benefit is lavish or extravagant would be based on the facts and circumstances at the time the benefit is provided. Relevant facts and circumstances would include a Tribe's culture and cultural practices, history, geographic area, traditions, resources, and economic conditions or factors. However, the Regulations further provide that for purposes of this rule, the IRS will "defer to an Indian Tribal government's attestations of the fact and circumstances but may also consider other facts and circumstances that are not attested to by the Indian Tribal government at the time that the benefit is provided to the Tribal Program Participant."
• Participation in Cultural or Ceremonial Activities Including Powwows. In the Proposed Regulations and now the Regulations, the Treasury Department and IRS generally agreed with Tribal Comments regarding ceremonial activities under Section 139E(c)(5). Regulation Section 1.139E-1(e) provides deference to Tribal governments on whether an activity is a cultural or ceremonial activity for the transmission of Tribal culture. The Regulations also confirm that powwow prizes – as well as awards at other cultural or ceremonial events – can be provided on a tax-exempt basis, provided proper structures are in place.

Next Steps

The Regulations offer several opportunities for Tribes:

• Revisit Existing GWE Programs. The GWE offers a unique opportunity for Tribes to provide important benefits to members without creating a tax liability. Many Tribal GWE programs are structured to comply with the Safe Harbor and Revenue Procedure. Tribes may continue to administer these programs, but with the issuance of the Regulations, these programs could now be falling short of new opportunities offered by the Regulations. Tribes should develop new GWE programs or revise existing programs to incorporate the increased flexibility and other favorable features of the Regulations.
• Explore RAP Opportunities. If carefully crafted, a RAP can now set forth provisions related to making distributions to members under a GWE program. Tribes should work with legal counsel to determine the appropriate amendments to existing RAPs and how to best restructure RAPs to maximize opportunities to provide GWE benefits to members. When amending a RAP for GWE purposes, it is often advisable to make additional changes to modernize the RAP and maximize flexibility.
• Consider Amendments to Minors' Trusts. The Regulations offer a significant opportunity for Tribal governments to restructure minors' trusts (and potentially other deferral arrangements) to provide GWE benefits to beneficiaries. Tribal governments should ensure their minors' trust agreements, as well as RAPs and GWE programs, are structured properly to maximize investment returns and income tax benefits while promoting the financial stability of beneficiaries.
• Stay Engaged. The Treasury Department and IRS will need to train agents on how to review GWE programs and properly conduct an audit of such programs, consistent with the Regulations. In response to requests from Tribal governments, the Treasury Department and IRS confirmed they will work closely with TTAC and consult with the GWE Subcommittee on this important task. TTAC also plans to reach out to Tribal governments for their input.

Holland & Knight Insights

• In the absence of GWE guidance, over the last 11 years, many Tribes have charted their own path by creating and administering GWE programs through various approaches. These approaches have included application-based programs such as housing, equal cash GWE distributions and hybrid programs that combine elements of both. The Regulations largely validate these approaches.
• It is evident in the Regulations that the Treasury Department and IRS took significant time to listen and incorporate feedback from Tribal leaders, commenters and the TTAC. Overall, the Regulations reflect positive collaboration and government-to-government discussion over the years leading up to the Proposed Regulations and in the refinement of those Proposed Regulations and development of the Regulations.
• In obsoleting and superseding the Revenue Procedure and Safe Harbor, the Treasury Department and IRS have substantially improved on elements of the old guidance, providing complete deference to Tribes for the determination of whether a program "promotes the general welfare."
• The Regulations confirmed the ability for Tribes to provide GWE benefits through minors' trusts. This could have significant positive implications for Tribal youth. Previously, IRS guidance on this issue was unclear, so many trust beneficiaries had been taxed – and even subject to the Kiddie Tax – on trust distributions for their health, education and welfare. This change in guidance was a key priority of the GWE Subcommittee and will benefit generations of Tribal members to come.
• The Regulations do not address the treatment of GWE benefits for Supplemental Security Income (SSI), Medicaid, Supplemental Nutrition Assistance Program (SNAP) and other public benefits such as those administered by the U.S. Department of Housing and Urban Development (HUD) and U.S. Department of Veterans Affairs (VA). These programs often determine eligibility using income tests that do not exclude GWE. Although workaround solutions may be available, they are imperfect and impermanent. At the public meeting on Dec. 15, 2025, TTAC requested a meeting with the Social Security Administration on this issue. However, a legislative solution may be required.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.