Rep. Estes and Rep. Moore Introduce the Tax Fairness for Tribal Youth Act of 2019
WASHINGTON―Congressman Ron Estes (R-Kansas) and Congresswoman Gwen Moore (D-Wisconsin) introduced the Tax Fairness for Tribal Youth Act of 2019 today. This bill would stop treating cash disbursements of funds that tribes sometimes make to tribal members as payments made to evade tax.
“The Tax Fairness for Tribal Youth Act is a common sense bill to support tribal youth and encourage students to pursue higher education by not taxing payments made to young tribal members,” said Rep. Estes. “While the Tax Cuts and Jobs Act lowered tax rates and simplified our tax code, this bill will repair an application error that mischaracterized payments to tribal youth. I’m proud to co-sponsor this bipartisan legislation and look forward to working with my colleagues on the Ways and Means Committee to advance it in Congress.”
“Due to a drafting error in the Tax Cut and Jobs Act (TCJA), payments to tribal youth are now subject to the tax rates imposed on trusts and estates, up to 37 percent! It is unfair to subject these common tribal transfers to the same rules that apply to abusive transactions,” said Rep. Moore. “This change in the TCJA was especially harsh because the current tax rules act as a disincentive for native youth from attending college. This occurs because the kiddie tax applies to youths between 18 to 24 if they are full-time students. Congress should encourage higher-education; we certainly should not be placing more barriers to get in the way of low-income youths. I strongly support ending abusive tax avoidance, but this provision simply was not meant to apply in these instances. I am really pleased that this simple, clean fix has bipartisan support. We don’t have to agree on everything in the TCJA to agree that we should end the pernicious impacts of this provision on tribal members.”
Congress first enacted special tax rules on unearned income of children and young adults in 1986 to prevent wealthy parents from reducing their own tax liability by transferring income to their children. The Tax Cut and Jobs Act simplified the application of these rules by applying the tax rates applicable to estates and taxes (thereby removing the need to determine a parental allocable share). However, the application to these rules on tribal disbursements were particularly harsh. The Tax Fairness for Tribal Youth Act of 2019 would amend these provisions so that the disbursements to native youth would be taxed at the rate of the recipient.
Ron Estes is a 5th generation Kansan and represents Kansas’ 4th Congressional District in the U.S. House of Representatives. He serves on the House Committee on Ways and Means.