Description & Examples

In passing the Indian Reorganization Act of 1934 (IRA), Congress intended to provide tribes with the ability to compete in the private business world. Section 17 of the IRA gives tribes the power to incorporate and enables them to waive sovereign immunity to facilitate business transactions, thereby fostering tribal economic development and independence.54 Congress realized that the perception, if not the reality, of tribal sovereign immunity could impede a tribe’s economic growth and participation in the business world. Therefore, to address this issue, Congress authorized tribes to organize two separate entities: (1) a political governing body to exercise powers of self-government pursuant to Section 16 of the IRA, and (2) a federally-chartered tribal corporation to engage in business transactions pursuant to Section 17.

Pursuant to the IRA, a Section 16 governmental unit and a Section 17 tribal corporation are distinct legal entities. By forming two legal entities (one with sovereign immunity, the other with the possibility of waiver of sovereign immunity), tribes could maximize the use of their property and assets. Under the two-part scheme, the property of the corporation may be placed at risk, but only to the extent necessary to satisfy the needs of lenders and developers; however, tribal assets held by the tribal political body organized pursuant to Section 16 of the IRA would remain fully protected by sovereign immunity.