An enrolled member of a Native American tribe in Utah who lives and works on the reservation on which he/she is an enrolled member may be exempt from Utah income tax. To qualify as “reservation” land, the location must be within the currently recognized reservation boundaries, as set forth by the federal government. It includes land removed from the Uintah and Ouray Reservation under Hagen v. Utah (510 U.S. 399 (1994)). Qualifying income should be included in Federal Adjusted Gross Income, then deducted on TC-40S, Part 2, using code 77. Also, enter the enrollment/census number and a nation/tribe code (in the TC-40 instructions) in the space(s) indicated.
The qualification of income earned by tribal and non-tribal members is explained in the following categories:
Native Americans who are living and working on the reservation in which they are enrolled members may claim a Native American deduction for income earned on the reservation. Native Americans who are enrolled members of one tribe but live and work on another tribe’s reservation may not claim the Native American deduction on the income earned on the other reservation.
Native Americans who are living off the reservation and working on the reservation in which they are enrolled members may not claim a Native American deduction on the reservation income.
Native Americans who are living on the reservation and working off the reservation in which they are enrolled members may not claim a Native American deduction on the income earned off the reservation. Passive income such as interest and dividends is considered earned where the individual resides and would therefore qualify for the Native American deduction. If employment requires a Native American to work both on and off the reservation for the employer, please contact the Utah State Tax Commission, Taxpayer Services Division at (801) 297-7705 or 1-800-662-4335, ext. 7705 if outside the Salt Lake City area, to determine if the income qualifies for this deduction.
The Soldiers and Sailors Relief Act specifically states that persons in the military do not lose domicile in their state, territory, possession or political subdivision thereof by virtue of complying with military orders. Utah may not tax military wages earned off the reservation, by Native Americans, who retain reservation domicile. Therefore such persons may claim a Native American deduction on their military income. This only concerns Native Americans who enter military service from a domicile on the reservation and does not apply to other taxing situations.
Income earned off-reservation by a Native American not living on the reservation does not qualify for this deduction.
Non-tribal members residing on the reservation do not qualify for the Native American deduction.
Non-Native Americans earning income on reservation lands do not qualify for the Native American deduction.
The passive income of a Native American with an on-reservation residence is considered nontaxable, as the income could be deemed earned on-reservation in the same manner as wages. However, the passive income of a Native American residing off-reservation is taxable.
