Taxability on income derived within Indian Country explained

Observer Staff

1/15/2004 12:00:00 AM

Any individual who is a Michigan resident and has income from state resources is required to file a Michigan income tax return in accordance with MCL 206.315 (1).

This provision requires every person who is required to file a return under the Internal Revenue Code to file a return under the Michigan Income Tax Act if his or her adjusted gross income is in excess of the personal exemptions allowed under the act.

Income can be deducted on the Michigan return if the:

1). Individual is a member of a federally-recognized Indian Tribe or Band; and

2). Individual resides within his/her own Tribe's reservation; and

3). Individual's income is earned on that reservation, i.e. is derived from employment or other sources on the reservation.

The above information can be found in the Michigan Revenue Administrative Bulletin (RAB) 88-47.

The income is deducted on MI-1040 Schedule 1, line 18, miscellaneous subtractions. For Michigan income tax purposed, gambling winnings is included in other sources and therefore nontaxable for state purposes.

If you have any further questions, consult with your tax advisor.