Regulatory Comment v1.0

Commentary on Proposed Rulemaking (IRS REG-118788-06) Definition of Essential Governmental Function Under Section 7871 and Limitation to Activities Customarily Performed by States and Local Governments Dr. Gavin Clarkson Assistant Professor University of Michigan School of Information, School of Law, and Native American Studies November 6, 2006 My comments are in three parts. I am enclosing a forthcoming article that provides a detailed analysis of tribal tax-exempt bonding authority and the discriminatory impact that the current statutory and regulatory regime has on Indian Country. I am also enclosing a research summary of a joint data collection effort I conducted with the IRS. The following is a summary of the of the forthcoming article, the joint research effort, as well as specific comments on the proposed regulations: I. Introduction Upwards of $50 billion in capital needs go unmet each year in Indian Country in such vital sectors as infrastructure, community facilities, housing, and enterprise development, in part due to the restrictions imposed on tribal access to the capital markets, specifically the ability of tribal governments to issue tax-exempt debt. Section 7871 of the Internal Revenue Code requires tribal tax-free bond proceeds to only be used for “essential governmental functions,” a restriction not applicable to state and municipal bonds. Section 7871(e) further limits the scope of available tax-exempt bonding authority by ...