U.S. Rep. Ron Estes (R-KS) on May 16 cosponsored a bipartisan bill that would treat certain payments made by Indian tribal governments as earned income for purposes of the kiddie tax, which is a tax on a child’s unearned investment income at the parents’ rate.
Rep. Estes introduced the Tax Fairness for Tribal Youth Act of 2019, H.R. 2810, with bill sponsor U.S. Rep. Gwen Moore (D-WI) to stop treating cash disbursements of funds that tribes sometimes make to tribal members as payments made to evade tax, the congressman said.
“The Tax Fairness for Tribal Youth Act is a common sense bill to support tribal youth and encourage students to pursue higher education by not taxing payments made to young tribal members,” Rep. Estes said.
According to a statement released by his office, a drafting error in the enacted Tax Cuts and Jobs Act resulted in payments to tribal youth being subject to the tax rates imposed on trusts and estates, which can be up to 37 percent. The law’s change subsequently created a disincentive for native youth to attend college because the kiddie tax applies to those aged 18 to 24 years who are full-time students.
H.R. 2810 would amend provisions in the Internal Revenue Code of 1986 so that the disbursements to native youth would be taxed at the rate of the recipient, Rep. Estes said.
“While the Tax Cuts and Jobs Act lowered tax rates and simplified our tax code, this bill will repair an application error that mischaracterized payments to tribal youth,” said the lawmaker, who is among 18 cosponsors of H.R. 2810, including U.S. Reps. Ken Calvert (R-CA), Tom Cole (R-OK) and Paul Cook (R-CA).
“I’m proud to cosponsor this bipartisan legislation and look forward to working with my colleagues on the Ways and Means Committee to advance it in Congress,” Rep. Estes added.
H.R. 2810 is under consideration by the U.S. House Ways and Means Committee.