The Internal Revenue Service, under attack in Washington for alleged political favoritism during the past couple of years, has assessed the Miccosukee Indians of Florida with a $170 million tax bill for failing to report and withhold taxes from its distribution of gambling profits to tribal members.
The Miccosukee Indians operate a successful casino in the west Miami-Dade County of Florida. They use casino profits to distribute funds to tribal members.
The IRS has ruled those funds are really income to recipients and the tribal leadership should be taking out federal withholding taxes on that money. The tribe disagrees and that forms the basis for the dispute.
“The Miccosukee people will continue to pay all applicable lawful taxes, as they always have, and we will continue our efforts to find a fair and workable solution to this dispute,” Miccosukee Chairman Colley Billie wrote in a statement to the Miami Herald newspaper.
Under federal law, the Miccosukee Tribe is considered a sovereign nation, meaning the entity itself is not subject to taxes. But what about the tribal members?
In the opinion of some members of the legal community, tribal members, just like all other American citizens, are responsible for reporting income and paying taxes. Therefore, the tribe, in making these distributions, must withhold taxes on the income and turn the deductions over to the IRS.
In 2011, when this issue arose, Bernardo Roman III wrote the IRS saying that the distributions at issue are not subject to federal income taxation and therefore not subject to federal reporting and withholding under applicable Supreme Court precedent.
But the problem is expected to escalate.
So far, the IRS says the tax liabilities cover the years 2000 to 2005. Auditors are now auditing the distributions that cover the years 2006 to 2010.
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