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. The United States Department of Defense began mandatory Arizona income tax withholding on all active duty military pay on September 1, 1993 and continued withholding Arizona income tax through December 31, 2005.
Beginning January 1, 2006, Arizona no longer taxed active duty military pay and therefore discontinued state income tax withholding on 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 from September 1, 1993 through December 31, 2005. During the 2017 Arizona legislative session, House Bill 2158 was introduced to amend the original legislation when it was discovered the Department of Defense may have withheld Arizona income tax prior to September 1, 1993.
Refunds may be claimed for years 1977 through 2005 on a first-come, first-served basis until the fund is exhausted.
Native American veterans who had Arizona income tax withheld from their active duty military pay while domiciled on their reservation can claim the refund. If the veteran is deceased the surviving spouse or personal representative may make a claim. If anyone other than the surviving spouse or personal representative (e.g., child of the veteran) makes a claim they must show the value of the decedent’s estate was less than $30,000.
The Department of Veterans’ Service may not accept claims after December 31, 2022. The Department of Revenue will not grant refunds after June 30, 2023.
Find more information in Pub 706.
Native American Veteran Income Tax Settlement Forms
||Native American Veterans Income Tax Settlement Fund Claim
||Claim For Refund on Behalf of Deceased Native American Veteran
||Native American Veterans Income Tax Settlement Fund Claim Residency Statement
Please Note: Claimants who do not have their DD-214 must include a completed Federal Form SF-180 with their Native American Settlement Fund application.