The Internal Revenue Service warned taxpayers, tribal communities, and tax professionals about a fraud scheme promoting nonexistent "Tribal Tax Credits" and similar products that have no basis in federal tax law.
Promoters market the fake credits as reducing tax liability or generating refunds, often pressuring taxpayers to act quickly. Some charge fees to arrange purchases or create supporting documentation. Taxpayers who claim the credits face civil and criminal penalties, according to the IRS.
Promoters typically misrepresent legitimate government programs and tax provisions to make schemes appear credible. They may cite purported agreements between the Treasury Department, Department of the Interior, and tribal governments allowing conversion of trust fund payments into tax credits. No such agreement exists. They may also reference provisions allowing transfer of certain tax credits, though federal law permits transfers only for specific clean energy credits.
Red flags include offers to purchase credits at substantially below-stated value, claims that only a limited number of credits are available, references to government agreements not publicly available, legal opinions that cannot be verified, and requests to sign nondisclosure agreements before receiving information about the credit.
Taxpayers with information about suspected abusive tax schemes can report them using IRS Form 14242 or at IRS.gov/submitatip. Financial advisors and tax professionals should be cautious if approached by promoters and avoid enabling such schemes.