Episode 29: Powwows, Prizes, and 1099s: Lessons from a 2026 IRS Ruling
In this episode of Information Return Intelligence, Jason breaks down a recent IRS private letter ruling that answers a deceptively simple question:
Do tax-exempt organizations still have 1099 reporting obligations?
The ruling involved a Native American tribe that awarded prize money at a powwow and questioned whether those payments required Form 1099 reporting. The tribe made three key arguments:
They are not subject to income tax
They are not a “person” under the tax code
The activity was not a trade or business
The IRS rejected all three.
While private letter rulings only apply to the taxpayer who requested them, they provide valuable insight into how the IRS interprets the law. In this case, the takeaway is clear:
Information reporting under IRC §6041 applies broadly—even to tax-exempt entities and activities that are not conducted for profit.
Jason walks through:
Why being tax-exempt does not eliminate 1099 obligations
How the IRS defines a “person” under IRC §7701
Why “not-for-profit” activities can still trigger reporting requirements
What nonprofits, government entities, and similar organizations should take away from this ruling
He also raises an interesting open question:
Could the IRS’s reasoning extend beyond tax-exempt entities to other non-profit-motivated activities, such as hobbies?
If you work in accounts payable, finance, or compliance, this episode is a reminder that 1099 reporting rules are broader than many organizations assume—and exemptions are narrower than they appear.
📌 Key Takeaway:
Even if your organization doesn’t pay income tax—or isn’t operating for profit—you may still be required to issue Forms 1099.
This episode is sponsored by IOFM, the Institute of Finance and Management. Learn more at IOFM.com.
Welcome to this week's episode of Information Return Intelligence. I'm Jason Dinason. This podcast is sponsored as always by IOFM. Let's jump right into this week's episode. And I wanted to catch up on some other 1099 news so far in 2026. This happened back in January. The IRS released an interesting private letter ruling where they got into the subject of whether or not a Native American tribe needed to issue a 1099 to a winner at a powwow. So the IRS letter ruling didn't specify which tribe requested the ruling. They just reference a tribe in this letter. But I think that the letter here provides some good reminders. I mean, private letter rulings are specific to whoever requested them. In this case, it was a Native American tribe. But I think nonprofits in general and government entities can get some interesting insights out of this. So the question was: does the tribe need to issue a 1099 miscellaneous box three other income for prizes given at a powwow that were $600 or more? Remember that that was the reporting threshold through 2025. And the tribe made three arguments to the IRS for why the tribe felt that it didn't need to issue 1099s. One, they said we're not subject to income tax. Two, they said we as a tribe are not a person under tax law. And related to that second argument, the third argument was the tribe said the powwow is not a trade or business. The IRS rejected all three of those arguments. So let's look at argument one. The tribe is not subject to income tax. That is true, and the IRS agreed with that in the private letter ruling that tribes are not subject to income tax that's been established over the course of many, many, many decades. What the IRS disagreed with, though, is the tribe's conclusion that thus we are not subject to issuing information forms. And the IRS said prior rulings and court cases have determined that tribes are exempt from income tax but still have to comply with other parts of tax law. For example, tribes that pay wages deal with FICA and issuing W-2s. And the IRS says this means tribes must also comply with the rules of section 6041, the requirement to issue 1099s. The second argument, the tribe said we're not a person under tax law. So there's two things to look at in the code on this. Section 6041, which governs issuing 1099s, says, quote, all persons engaged in a trade or business and making payment in the course of such trade or business to another person must issue 1099s. Now that doesn't tell us what a person is. We have to go deeper into the recesses of the code in section 7701. Says the term person shall be construed to mean an individual, a trust, estate, partnership, association, company, or corporation. And the tribe said, Aha, we're not an individual. We're not a trust, we're not an estate, we're not a partnership, or an association, or a company, or a corporation. We're a tribe. Therefore, we're not a person under Section 7701. Well, the IRS didn't buy that either. They pointed to a Supreme Court case in the year 2000 that determined that tribes are a part of the definition of a person under 7701A, and also a revenue ruling from the mid-80s, in which the IRS determined that tribes are subject to Section 6041. So we've had strike one and strike two, and here comes strike three, but not quite yet. Let's pause just briefly to tell you about our sponsor, IOFM, the Institute of Finance and Management. If you're listening to or watching this podcast, it means that you must have an interest in this subject, and you know where you can find your people. People like me and other like-minded souls. IOFM. Join IOFM and you will become a part of some 10,000 other people who find this stuff interesting and who work in accounts payable or finance. Check them out at IOFM.com. Your membership gets you access to monthly webinars, some of which I lead. You also get access to the ask the expert feature, where for information reporting, I'm the expert. It's more than just information reporting at IOFM, cash management and anything that falls under the realm of finance and accounts payable, accounts receivable, cash management, that sort of thing. Check them out at IOFM.com. And now back to the show. So before the break, we said strike one, strike two, and now here comes strike three. The tribe had argued that the powwow is a cultural event that does not make money. In fact, it loses money. And so their argument was we're not engaged in a trader business. And the tribe referenced a famous Supreme Court tax case from back in the 80s called the Gretzinger case. And in that case, the court ruled that a trader business required that, quote, the taxpayer must be involved in the activity with continuity and regularity, and that the taxpayer's primary purpose for engaging in the activity must be for profit. While the IRS rejected that argument too, the IRS says the Gretzinger case only involves a specific part of the code, section 162, which deals with the ability of those engaged in a trade or business to reduce their taxable income by taking deductions for certain expenses. And the IRS says that case doesn't apply here, and Section 6041 is much broader. And I'm going to read the quote from the private letter ruling. The quote is Section 6041 and its regulations apply to organizations, the activities of which are not for the purpose of gain or profit. Thus, even if the taxpayers' activities are not for the purpose of gain or profit, taxpayers' payments to the POW dance contest winners are subject to the information reporting requirements under Section 6041 and the related regulations. So this letter ruling doesn't break any new ground, but I think it gives us a few reminders. For all organizations of any type, whether you're a nonprofit or a government entity or you're an LLC or a corporation, you are a person in the eyes of tax law. Specific to nonprofits and other tax-exempt entities and government entities, you might not be in business. You might even be operating at a loss, but you still have a 1099 reporting requirement. And without getting too deep into the weeds here with tax law things, I also myself have found something to dive deeper into. At the end of that letter ruling in strike three against the tribe, the IRS writes about how organizations, the activities of which are not for the purpose of gain or profit, are still required to issue 1099s. And I wonder, are they limiting their view to tribes and nonprofits, charities, tax-exempt entities? Or what about hobbies? Now, my instinct says it probably doesn't mean that someone with a hobby needs to issue 1099s. But it's something to ponder. I've got it on my list to dig deeper into. And then just a final note about private letter rulings in general. They only, technically, they only apply to the requester. So in this case, it was a tribe that had written to the IRS. So the response only applies to that tribe, and you can't use private letter rulings as precedent. However, I like private letter rulings because they give you a window into the IRS's perspective on things. So that'll do it for this week's episode of Information Return Intelligence. I'm Jason Dinason. Thanks for joining us. We will catch you again next week. Dynason Media Ventures.