In Colorado, there are special rules for Tribal members who live on two reservations in Southwest Colorado: Southern Ute Tribe and Ute Mountain Ute Tribe. It’s important to note that no special tax rules apply to Tribal members who live outside of the two reservations.
Members who live on either the Southern Ute Tribe or Ute Mountain Ute Tribe reservations qualify for the following special tax rules.
Qualified reservation income is exempt from Colorado Income Tax.
- The Colorado Individual Income Tax Guide (in Part 4) briefly discusses the subtractions allowed for qualified reservation income. "A subtraction is allowed for the qualified reservation income of an enrolled Tribal member who lives on a reservation. The income must be derived wholly from reservation sources and must be included in the Tribal member’s federal taxable income to qualify for subtraction."
- The subtraction does not apply to:
- Any individual who is not an enrolled Tribal member;
- Any enrolled Tribal member who lives outside of the reservation; or
- Any income derived from sources outside the reservation.
Sales tax exemptions exist for Tribal members.
- Under certain circumstances, sales of tangible personal property and services to Tribes and Tribal members are exempt from sales and use taxes. Additionally, sales made to legal entities may also be exempt if a Tribe or Tribal member holds an interest in the entity. More information can be found in the Sales & Use Tax Topics: Tribal Exemption publication.
A taxation compact between the Southern Ute tribe, La Plata county and the State of Colorado was approved by the Colorado General Assembly with House Bill 96-1367. The compact is primarily concerned with severance taxes on oil and gas production and property taxes.
A variety of income tax credits are available to Colorado taxpayers, including Tribal members, regardless of whether they are members of the Southern Ute Tribe, the Ute Mountain Ute Tribe, or another Tribe and regardless of whether the Tribal member lives on a reservation. These credits include, but are not limited to, the state sales tax refund (TABOR) credit, child care credits, child tax credits and the earned income tax credit (EITC). Information about each of these credits and other income tax credits can be found on the Income Tax Credits webpage.
Information on federal tax guidance for Indian Tribal Governments can be found on the Indian Tribal Governments IRS webpage. The IRS publishes monthly newsletters for Indian Tribal Governments on the Indian Tribal Government News webpage.