IRS Tells Employees to Disallow ‘Non-Valid’ Tribal Credits (1)

The IRS is instructing workers to disallow so-called sovereign tribal tax credits, an arrangement now under federal investigation.

The agency published multiple procedural updates about disallowing the credits to its Internal Revenue Manual, which is employee guidance for tax return processing and other internal functions. The updates were published on the IRS website as part of its Freedom of Information Act library. The agency has warned employees of the tribal tax credits over the past several months.

“There is currently a potential scheme that has been identified with Tribal Credits being claimed,” an Aug. 8 update reads. “These credits are highly questionable and cannot be allowed, regardless of documentation provided.”

“These non-valid credits are being claimed as Other Credits and should be disallowed,” the update continues.

White River Energy Corp. and third-party promoters have been selling the credits as tax shelters for wealthy investors, Bloomberg Tax first reported in December 2024. The Treasury Department and IRS have said these credits don’t exist. Federal prosecutors have opened a criminal investigation into the sale of these credits, according to a Senate Finance Committee letter.

White River as recently as this month defended the credits’ legitimacy. White River didn’t respond to a request for comment on the internal IRS updates.

The IRS didn’t immediately respond to a request for comment.

Read Bloomberg Tax’s full investigation into tribal tax credits here.

IRS Employee Guidance

IRS guidance for employees on the credits is highly technical and explains where the credits would be found on a tax return and how employees should proceed.

It appears the IRS first updated its manual July 2 with the subject “Highly Questionable Tribal Credits.” The agency updated its manual after an alert was issued to employees about the scheme, according to the document. The alert was revised June 27.

More procedural updates on the credits came on July 8, July 23, Aug. 7, and Aug. 8 with the subject “Tribal Tax Credit Scheme.” Greenspoon Marder LLP flagged the updates in a Sept. 8 client alert.

The July 23 update notes the credits may be called tribal tax credit, sovereign tribal federal tax credit, Native American tribal tax credit, or Section 6418.

The IRS published the updates while Billy Long, President Donald Trump’s appointee, was IRS commissioner. Long began at the agency in late June but lasted only two months before being pushed out.

Long found potential buyers for the credits while in the private sector before he was confirmed as commissioner, and he received campaign donations from those associated with the arrangement. Long said during his confirmation hearing he didn’t realize there were any issues with tribal credits and would cooperate with any investigations into the credits.

White River is facing a lawsuit from a Florida couple who allege harm of more than $1.7 million from White River and other defendants. Multiple law firms specializing in investment fraud have received requests from buyers about representation.