The Internal Revenue Service warned taxpayers Friday that promoters are selling fake “Tribal Tax Credits” that do not exist under federal law and may expose people who claim them to tax assessments, penalties and possible criminal consequences.
In its September 18 warning on Tribal Tax Credit scams, the IRS said promoters are marketing the supposed benefits under names including “Tribal Tax Credits,” “Native American Tax Credits” and “Sovereign Tribal Tax Credits.” They falsely claim the credits can reduce federal tax bills or generate refunds.
The warning is directed at taxpayers, tribal communities, businesses, financial advisers and tax professionals. The IRS said some promoters encourage customers to purchase purported credits from entities described as connected with tribal communities, often while promising large returns or pressuring taxpayers to act quickly.
The agency specifically rejected several arguments promoters use to make the schemes appear legitimate. It said no Treasury, Interior Department or tribal-government agreement creates such credits. Federal rules allowing certain clean-energy tax credits to be transferred do not create a Tribal Tax Credit, and the New Markets Tax Credit under Internal Revenue Code Section 45D is unrelated to the promoted schemes.
The IRS also warned that acceptance of a previously filed tax return does not mean the agency approved a claimed credit. A return containing a nonexistent Tribal Tax Credit remains a false claim even if a refund was initially issued.
Taxpayers approached with these offers should not assume tribal affiliation makes the proposed federal credit legitimate. The IRS said suspected abusive promotions can be reported using Form 14242, Report Suspected Abusive Tax Promotions or Preparers.
