An enrolled member of a Native American tribe in Utah who lives and works on the reservation on which he/she is an enrolled member is exempt from Utah income tax. To qualify as reservation land, the location must be within the currently recognized reservation boundaries, as set forth by the federal government. It includes land removed from the Uintah and Ouray Reservation under Hagen v. Utah (510 U.S. 399 (1994)). Qualifying income should be included in Federal Adjusted Gross Income, then deducted in the Native American deduction (code 77).

The qualification of income earned by tribal and non-tribal members is explained in the following categories:

Native Americans who are living and working on the reservation in which they are enrolled members may claim a Native American deduction for income earned on the reservation. Native Americans who are enrolled members of one tribe but live and work on another tribes reservation may not claim the Native American deduction.

Native Americans who are living off the reservation and working on the reservation in which they are enrolled members may not claim a Native American deduction.

Native Americans who are living on the reservation and working off the reservation in which they are enrolled members may not claim a Native American deduction on the income earned off the reservation. Passive income such as interest and dividends is considered earned where the individual resides and would therefore qualify for the Native American deduction. If employment requires a Native American to work both on and off the reservation for the employer, please contact the Utah State Tax Commission, Taxpayer Services Division at (801) 297-6300 to determine if the income qualifies for this deduction.

The Soldiers and Sailors Relief Act specifically states that persons in the military do not lose domicile in their state, territory, possession or political subdivision thereof by virtue of complying with military orders. Utah may not tax military wages earned off the reservation, by Native Americans, who retain reservation domicile. Therefore such persons may claim a Native American deduction on their military income. This only concerns Native Americans who enter military service from a domicile on the reservation and does not apply to other taxing situations.

Income earned off-reservation by a Native American not living on the reservation does not qualify for this deduction.

Non-tribal members residing on the reservation do not qualify for the Native American deduction.

Non-Native Americans on reservation lands do not qualify for the Native American deduction.

The passive income of a Native American with residence on-reservation is considered not taxable, as the income could be deemed earned on-reservation in the same manner as wages. This issue has never been litigated in state courts. However, the passive income of a Native American residing off-reservation is taxable.

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