Sunday, December 24, 2017

Is ITARA (HR 812) an Opportunity to Create TSWFs?

TSW Community:

For those of you looking to launch an Tribal Sovereign Wealth Fund (TSWF), but do not have the benefit of geography to spur significant natural resource or gaming development as your catalyst, this could be an opportunity.

I'm surprised I haven't heard more about this in the investment community, but I wanted to make you all aware of a law passed last year known as ITARA, or the Indian Trust Asset Reform Act. The two primary nuggets in this Act were:

  1. TITLE II. The "Indian Trust Asset Management Demonstration Project" under the Office of the Special Trustee (OST) and
  2. TITLE III. The organized termination of the OST itself (don't be alarmed, the OST was created as a temporary solution).

If you're not familiar with the OST, it basically (oversimplifying here) manages about $5B in financial assets on behalf of individuals and tribes, in addition to overseeing surface/subsurface rights across the country (encompassing about 10% of the US Oil & Gas reserves, by some accounts). The Special Trustee position is currently vacant since Vince Logan stepped down in January 2017 (Jerold Gildner is current serving as Acting Special Trustee).

What is this demonstration project? Well, it authorizes and encourages tribes that have assets under management by the OST to, in essence, start managing their own assets. Essentially, it creates a pathway for OST tribes to establish their own Tribal Sovereign Wealth Funds using these assets. This is a huge opportunity, as the OST assets are governed by an external investment policy that is extremely conservative, and therefore provide little opportunity in asset growth over time.

Oh yeah, and Tribal Consultation on ITARA section 304 (transition plan for the termination of the OST) is happening now. You have until January 18, 2018 to get your comments in.

One last thing - if you're a tribe with OST assets, I'd like to hear from you on how you're thinking through this opportunity. Please reach out directly or leave a comment!

In Perpetuity,
-Jay

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H.R. 812 — 114th Congress (2015-2016)

Public Law No: 114-178 (06/22/2016)

(This measure has not been amended since it was reported to the House on February 24, 2016. The summary of that version is repeated here.)
Indian Trust Asset Reform Act
TITLE I--RECOGNITION OF TRUST RESPONSIBILITY
(Sec. 102) This bill reaffirms the federal government's duty to promote tribal self-determination.
TITLE II--INDIAN TRUST ASSET MANAGEMENT DEMONSTRATION PROJECT
Indian Trust Asset Management Demonstration Project Act of 2016
(Sec. 203) The Department of the Interior must establish an Indian trust asset management demonstration project that allows tribes to propose Indian trust asset management plans. To be approved by Interior, these plans must establish objectives and priorities for trust assets and allocate sufficient funding for asset management to meet the objectives and priorities.
(Sec. 205) Interior may approve a trust asset management plan that allows the Indian tribe to enter into, approve, and carry out a surface leasing transaction or forest land management activity without Interior's approval, under certain conditions.
The United States is not liable for losses that result from: (1) a forest land management activity or lease under a trust asset management plan, or (2) management standards under a trust asset management plan that are less-stringent than Interior otherwise requires.
TITLE III--IMPROVING EFFICIENCY AND STREAMLINING PROCESSES
(Sec. 303) Interior may establish an Under Secretary for Indian Affairs who is to report directly to the Secretary of the Interior and coordinate with the Office of the Special Trustee for American Indians (OST) to ensure an orderly transition of the functions of the OST to an agency or bureau within Interior. 
(Sec. 304) Interior must prepare a transition plan and timetable for the termination of the OST.
(Sec. 305) Appraisals and valuations of Indian trust property must be administered by a single administrative entity within Interior.
Interior must establish minimum qualifications for individuals to prepare appraisals and valuations of Indian trust property. An appraisal or valuation by a qualified person is considered final without being reviewed or approved by Interior.
(Sec. 306) Representatives of entities that advise Interior on Indian program budget or funding issues may make recommendations regarding the use of savings realized from the transfer of the functions of the OST.

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