Tax incentives for doing business on Indian reservations

Two federal income tax incentives designed to stimulate economic development on Indian reservations were added in the Omnibus Budget Reconciliation Act of 1993. The provisions provide assistance to companies investing in and conducting business on reservation land between 1994 and 2003. These tax incentives are similar to those targeted at other areas of economic depression known as empowerment zones. The Indian Employment Credit allows businesses to use a portion of the wages paid and health insurance benefits provided to members of an Indian tribe (or spouses of Indian tribe members) to directly reduce their tax liability with the resulting increase in after-tax income. The Qualified Indian Reservation Property provision allows businesses to depreciate certain assets faster thus reducing the tax liability in early years with the resulting increase in the present value of after-tax income. The requirements for taking advantage of these 2 tax benefits are discussed and an overview of the requirements provided in Sections 45A and 168(j) is provided.