On November 22, 2000 the United States Justice Department issued a memo declaring that the taxation and withholding of state income taxes from active duty military pay of Native Americans domiciled on their reservation was impermissible. Arizona withheld state income taxes from all active duty military pay from September 1, 1993 through December 31, 2005. Beginning January 1, 2006 Arizona no longer taxed active duty military pay and therefore discontinued state income tax withholding of this type of income.
The Native American Veterans Income Tax Settlement Fund was established on July 1, 2016 to refund Arizona income tax erroneously withheld from Native Americans who served in the military while claiming tribal land as their domicile.
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