The US IRS has warned taxpayers about fraudulent “Tribal Tax Credits” promoted as a way to reduce tax liabilities or generate refunds, stressing that no such federal tax credit exists and that participants may face penalties and criminal charges.
The US Internal Revenue Service (IRS), in a release on 18 September 2026, has alerted the public about a growing scam involving nonexistent “Tribal Tax Credits.” Promoters are selling these fake credits to taxpayers, promising to reduce tax bills or generate refunds. The credits do not exist under federal law.
The IRS noted that participants face civil and criminal penalties. Frank J. Bisignano, IRS Chief Executive Officer, stated that confronting abusive tax schemes remains essential to maintaining confidence in the tax system.
How the scam works
Promoters advertise these credits under various names, including “Tribal Tax Credits,” “Native American Tax Credits,” and “Sovereign Tribal Tax Credits.” They typically market the credits as products available through entities claiming tribal association.
The pitch includes promises of significant returns by reducing existing tax liability or generating refunds. Promoters often create urgency, pressuring taxpayers to act quickly. Some charge fees for arranging credit purchases or producing supporting documentation. Purported legal opinions are sometimes provided, allegedly from established law firms or attorneys.
Fraudsters also encourage taxpayers who already claimed these credits to challenge IRS audits, claiming the credits are legitimate.
Common deceptions
Promoters distort legitimate tax provisions to make fraudulent schemes appear credible. The IRS identified several common tactics:
Promoters claim a Treasury Department and Department of Interior agreement exists that converts tribal trust fund payments into federal tax credits. No such agreement has been established.
They cite Internal Revenue Code Section 45D and the New Markets Tax Credit program as supporting their claims. That program has no connection to tribal tax credits.
Promoters reference presidential executive orders as legal authority for the credit, though no such executive order creates this credit.
They argue that companies owned by tribal members can claim credits based on sovereign status. Federal law contains no statute creating such a credit.
Promoters point to previously accepted IRS returns as proof the credits are valid, falsely suggesting acceptance indicates IRS approval.
Red flags to recognise
Taxpayers and financial professionals should watch for warning indicators of these schemes. Credits offered at substantially reduced prices signal fraud. Claims of limited availability or pressure to decide quickly are common tactics.
References to government agreements not publicly available should raise suspicion. Legal opinions that cannot be verified directly with the listed attorney or firm are another warning sign.
Requests to sign nondisclosure agreements before receiving basic information about the credit indicate a likely scam.
Penalties and reporting
Claiming a nonexistent credit on a federal return constitutes a false claim, regardless of whether the IRS initially processed a refund based on the fake credit. The correct tax liability will be assessed, along with penalties, interest, and potentially criminal charges.
Form 14242 allows taxpayers and communities to report suspected abusive tax promotions and preparers. The IRS also accepts reports through IRS.gov/submitatip for information on tax fraud or other illegal tax activity.
