H.R. 7705 — Tribal Tax and Investment Reform Act of 2026

This section designates the Act as the "Tribal Tax and Investment Reform Act of 2026" and sets forth its table of contents.

This section sets forth seven congressional findings regarding the federal-tribal government-to-government relationship, including (1) the unique federal legal and political relationship between the United States and Indian Tribes; (2) Tribes' responsibility and authority to provide governmental programs and services, develop Tribal economies, and build community infrastructure; (3) federal recognition of Tribes as governments with inherent authority to tax, issue bonds, and receive general tax exemptions; (4) consistency of tax parity for Tribal governments with federal treaties; (5) Tribes' historic disadvantages in accessing capital for infrastructure, job creation, and strong governance; (6) exclusions of Tribes from key Internal Revenue Code provisions resulting in unfair tax treatment and unequal enforcement; and (7) Congress's authority under the Commerce Clause to further Tribal self-governance.

This section repeals the essential governmental function requirements in IRC §7871(b) and (e) that previously limited Indian tribal governments' ability to issue tax-exempt bonds and redesignates other subsections accordingly. (As background, IRC §7871 treats Indian tribal governments as states for specified federal tax purposes, including issuance of tax-exempt governmental bonds under §103, which are subject to annual volume caps under §146.) The section establishes special rules for such bonds issued by Indian Tribal Governments after 2026 by (1) imposing a national volume cap of $400 million annually (inflation-adjusted after 2027), to be allocated among tribes by the Treasury Secretary; (2) exempting bonds financing facilities on qualified Indian lands (i.e., certain tribal lands, fee simple lands held by tribes, Alaska Native regions, Hawaiian Home Lands, and related infrastructure) from the geographic restriction in §146(k)(1); and (3) prohibiting bond proceeds from financing class II or III gaming facilities under the Indian Gaming Regulatory Act. The section further treats Alaska Native Intertribal Consortium tax-exempt bonds as issued by an Indian Tribal Government, with a separate national volume cap of $45 million annually after 2026 allocated by the Treasury Secretary. (Thus, these changes expand tribes' access to tax-exempt bond financing beyond prior essential function limits, subject to the new national caps and restrictions.)

This section expands the tax treatment of pension and employee benefit plans maintained by Indian tribal governments (and their agencies, instrumentalities, subdivisions, or wholly owned entities) to align with governmental plans established by states or political subdivisions. Specifically, it (1) includes such tribal entities in the definition of qualified public safety employer for the section 72(t)(10) early withdrawal penalty exception; (2) revises the governmental plan definition under section 414(d) to explicitly encompass tribal plans; (3) includes tribal plans in the exempt governmental deferred compensation plan definition under section 3121(v)(3); (4) grandfathers certain preexisting tribal deferred compensation plans under section 457 to treat them as compliant eligible employer plans; and (5) exempts governmental plans (now including tribal plans) from long-term part-time worker cash balance accrual standards under section 401(k)(15)(C). The section further imposes a moratorium on federal enforcement actions against such tribal entities based solely on Pension Protection Act of 2006 amendments to the Internal Revenue Code or ERISA for periods before Treasury and Labor Department regulations are issued (requires issuance in consultation with the Tribal Advisory Committee and tribal governments). Finally, the section adds new section 7531 to establish uniform protections and fiduciary standards for tribal pension plans (i.e., qualified employer retirement plans), including personal liability for fiduciary breaches, prohibitions on discrimination against participants, and nondiscrimination requirements for contributions and benefits. (As background, governmental plans are exempt from many ERISA requirements; thus, these changes provide tribal plans with equivalent exemptions and tailored fiduciary rules.)

This section expands the definition of governmental unit under the Internal Revenue Code to include an Indian tribal government, an agency, instrumentality, or subdivision thereof, or an entity wholly owned or controlled by any of the foregoing. (1) Such entities qualify as public charities eligible for the full charitable contribution deduction; (2) such entities qualify as supported organizations for supporting organizations exempt from private foundation rules. The amendments apply to taxable years beginning after enactment.

This section establishes an additional annual new markets tax credit (NMTC) limitation of $175 million for qualified tribal area investments beginning in calendar year 2027 (in addition to the existing NMTC limitation under IRC §45D(f)(1)). Qualified tribal area investments include capital or equity investments or loans to qualified active tribal community businesses (defined similarly to qualified active low-income community businesses but substituting "tribal statistical area" for "low-income community," with tribal statistical areas encompassing low-income communities in Tribal Census Tracts, Oklahoma Tribal Statistical Areas, Tribal-Designated Statistical Areas, Alaska Native Village Statistical Areas, or Hawaiian Home Lands); financial counseling and services to businesses and residents in such areas; and investments in community development entities used for such purposes (with allocations restricted solely to these investments and carryover of unused limitation permitted for up to five years, after which excess transfers to the general NMTC limitation). (As background, the NMTC program provides tax credits to investors in qualified community development entities that make investments in low-income communities to promote economic development.) This section further requires the Secretary of the Treasury, not later than 180 days after enactment and after consultation with specified agencies including the Community Development Financial Institutions Fund, to establish a program providing educational and technical assistance related to NMTC investments in tribal statistical areas.

This section designates Indian areas (as defined in the Native American Housing Assistance and Self-Determination Act of 1996 [NAHASDA], 25 U.S.C. 4103(11)) as difficult development areas (DDAs) under the low-income housing tax credit (LIHTC), allowing qualified buildings placed in service after December 31, 2026, to increase eligible basis by 30% (thus generating additional tax credits to offset high development costs). (As background, LIHTC provides tax credits to developers of affordable rental housing for households at or below 60% of area median income; DDAs are areas with high construction, land, and utility costs relative to income.) Only buildings assisted or financed under NAHASDA or with a project sponsor that is an Indian tribe (as defined in IRC §45A(c)(6)), tribally designated housing entity (TDHE, 25 U.S.C. 4103(22)), or wholly owned or controlled by such tribe or TDHE qualify.

This section excludes from unearned income for Supplemental Security Income (SSI) purposes any Indian general welfare benefit (as defined in IRC §139E). It also excludes from countable resources for SSI purposes (1) any such Indian general welfare benefit for the nine-month period beginning after the month received and (2) any grantor trust established by an Indian tribe for the benefit of Indians where the tribe is the grantor (as defined in IRC §676-679). (SSI provides monthly cash benefits to low-income aged, blind, or disabled individuals, with eligibility and payment amounts determined by excluding specified income and resources.)

This section extends and modifies the Indian employment tax credit—equal to 20% of qualified wages and employee health insurance costs exceeding a baseline amount paid to qualified employees (i.e., enrolled members of an Indian tribe, their spouses, or certain others working on or near an Indian reservation)—for taxable years beginning after December 31, 2026. Specifically, the section (1) strikes the termination provision in subsection (f), (2) revises the baseline amount under subsection (a)(2) to the average (i.e., sum divided by 2) of such qualified wages and costs paid or incurred by the employer (or any predecessor) during the two most recent calendar years ending before the taxable year, and (3) increases the per-qualified-employee limitation under subsection (b)(3) to $30,000 (from $20,000).

This section expands the exclusion from gross income under IRC §108(f)(4) for certain student loan repayments to include payments under the Indian Health Service Loan Repayment Program (i.e., sec. 108 of the Indian Health Care Improvement Act), effective for payments made after the date of enactment. (The program repays loans for health professionals serving in Indian Health Service, tribal, or urban Indian health facilities.)

This section excludes from gross income amounts received under the Indian Health Professions Scholarships Program under section 104 of the Indian Health Care Improvement Act (i.e., scholarships for American Indians and Alaska Natives pursuing health professions degrees to serve in Indian health programs). The exclusion applies to amounts received in taxable years beginning after December 31, 2026.