A Word from the President

CIRI President and CEO Sophie Minich

If you’ve been following the news in the Raven’s Circle for the past few months, you’re aware the 2017 Tax Cuts and Jobs Act (Tax Act) contains provisions that could provide maximum benefit to shareholders of Alaska Native corporations (ANCs).

New tax savings available under the Tax Act offer distinct advantages to Settlement Trusts, which include tax advantages for both shareholders and ANCs. In a nutshell, the Tax Act made small reductions to income tax rates for most individual tax brackets and also significantly reduced the income tax rate for corporations.

Specific to ANCs, Section 13821 of the Tax Act allows ANCs to claim a tax deduction for transfers of assets to a Settlement Trust, thereby allowing such transfers to occur on a pre-tax basis, rather than the after-tax basis that was the rule prior to the new legislation. Essentially, ANCs may now place assets in a Settlement Trust on an effectively pre-tax basis to help finance trust benefits, which can include shareholder distributions – including Elders’ distributions – and other initiatives.

The Tax Act also allows for tax-free distributions to be paid to the shareholder-beneficiaries of the Trust.

Settlement Trusts are not new: In 1988, Congress enacted the 1987 Alaska Native Claims Settlement Act (ANCSA) Amendments, which authorized ANCs to establish Settlement Trusts “to promote the health, education and welfare of its beneficiaries and preserve the heritage and culture of Natives.”

But the Amendments did not address the myriad tax issues inherent in the creation, funding and operation of Settlement Trusts. The 2017 Tax Act changed this.

Prior to the Tax Act, CIRI shareholders voted in 2003 to approve the establishment of the irrevocable CIRI Elders’ Settlement Trust. In accordance with the vote, CIRI initially funded the Trust with a $16 million contribution. At the time, it was anticipated that Elders would receive quarterly distributions of $450 until 2023. This projection was based on assumptions regarding the performance of Trust investments over time and the number of beneficiaries.

However, due to the 2008 global economic downturn on investments and the fact that shareholders are (thankfully) living longer than anticipated, it is anticipated that the Trust portfolio will only be able to fund Elders’ payments for the first three quarters of 2019. The Trustees have been working with CIRI to explore options to ensure Elders continue to receive quarterly payments. In the interim, the CIRI Board has approved funding to cover any shortfall, thereby ensuring that all eligible Elders will receive full payments in 2019.

Due to the Tax Act, a long-term solution may be on the horizon in the form of a new Settlement Trust. CIRI has been evaluating the best options to take advantage of the new rules to benefit its shareholders and plans to present a resolution to shareholders at the 2019 Annual Meeting, allowing shareholders to decide whether a new Settlement Trust should be established.

Shareholders of Alaska Native regional corporations Calista Corp. and Bering Straits Native Corp. recently voted overwhelmingly in favor of establishing Settlement Trusts. For a CIRI Settlement Trust resolution to pass, a majority (more than 50 percent) of voting shares present or represented by proxy at the 2019 CIRI Annual Meeting must vote “yes.”

This year’s Annual Meeting will be held June 1 in Puyallup, Wash. In the coming months, more details regarding the establishment of a new Settlement Trust will be made available in the Raven’s Circle and through other means.

Warm regards,

Sophie Minich