Tribes embrace Section 105(l) leasing to generate facility funding

More and more, tribes are pursuing lease agreements with the federal government that can provide funding for health care centers and other community infrastructure.

A new analysis from the Center for Indian Country Development (CICD) at the Federal Reserve Bank of Minneapolis shows that tribes are embracing a previously obscure provision of the Indian Self-Determination and Education Assistance Act (ISDEAA) to generate revenue for developing, managing, and maintaining tribal government facilities. Section 105(l) of the ISDEAA requires that tribes receive reasonable compensation for the use of tribal facilities in administering federal programs. Compensation terms are laid out in negotiated lease agreements between the tribes and the federal government. Prior to 2014, few tribes requested Section 105(l) leases because the compensation due under these leases was uncertain and not generally included in ISDEAA funding agreements. But the use of these 105(l) leases began to increase substantially following a pair of federal court decisions issued in 2014 and 2016 that clarified aspects of Section 105(l).

We analyzed Bureau of Indian Affairs (BIA), Bureau of Indian Education (BIE), and Indian Health Service (IHS) Section 105(l) lease data to better understand growth of this source of revenue for infrastructure development. We found that total annual lease revenue to tribes increased from $800,000 in 2016 to an estimated $612.7 million in 2024. Both amounts are inflation-adjusted to 2024 dollars. Over the same period, an estimated $1.81 billion in total lease compensation, also adjusted to 2024 dollars, was paid to tribes.

This analysis is consistent with CICD’s mission to advance the economic self-determination and prosperity of Native nations and Indigenous communities through actionable data and research that inform public policy discussions. Recent CICD research has explored the various ways tribes generate revenue, such as through their commercial operations, and how they leverage their resources to deliver public goods to their citizens and those in their regions. This latest analysis complements CICD’s Survey of Native Nations—a first-of-its-kind Indian Country data collaboration surveying the revenues and expenditures of tribal governments. Grounded in data-sovereignty principles, the Survey of Native Nations is documenting the key sources of revenue for tribal governments and the role federal government transfers, such as Section 105(l) revenues, play in shaping tribal treasuries.

Understanding Section 105(l) leases

Passed in 1975, the ISDEAA marks the beginning of the self-determination era in federal Indian policy. Before the ISDEAA, the federal government—pursuant to its trust obligation to tribal nations—directly administered most federal programs and services on reservations. In 1975, the ISDEAA set forth a new process for the federal government to meet its trust obligation. Under the ISDEAA, tribal governments run federal programs themselves, receiving funding for those programs directly from the federal agencies otherwise responsible for their administration.

The ISDEAA requires the BIA (which houses the BIE) and IHS to transfer, upon request, administration of any program, function, service, or activity (PFSA) benefiting a tribe to that tribe. PFSA transfers may take the form of a self-determination contract under Title I of the ISDEAA or a self-governance compact (a more comprehensive type of agreement than a contract) under Title IV for the BIA or Title V for the IHS.¹ These contracts or compacts, which are negotiated annually to adjust for tribal needs and priorities, govern the tribe’s assumption of PFSA responsibility and determine the related federal funding the tribe receives. According to the Congressional Research Service, as of 2024, 92 percent of tribes have contracted to administer specific federal programs and 51 percent of tribes have entered into compacts that enable them to assume control of an array of federal programs.

The ISDEAA provides that tribes are entitled to receive funding transfers equivalent to what the federal agency would have spent administering the PFSA. However, until federal court decisions in 2014² and 2016³ there remained substantial funding shortfalls with respect to the facilities used to deliver services. For example, in a 2016 needs assessment report to Congress, the IHS estimated that since 1992 it had accumulated a $10.3 billion backlog in the investments needed to construct new and replacement space for health care facilities. Similarly, the BIA noted in its 2016 budget justification that it had a deferred-maintenance backlog of over $377 million for the BIE’s school buildings. Until 2016, tribes continued to cover operational and maintenance costs at these facilities. In some cases, tribes were spending millions of dollars annually to ensure the delivery of services.⁴

The federal court decisions in 2014 and 2016, which both arose from a suit that Maniilaq Association (an Alaska Native health organization) brought against the IHS, clarified that federal agencies must compensate tribes, through Section 105(l) leases, for the use of tribal facilities in administering PFSAs and that these leases must cover reasonable operational, maintenance, and other specified costs.⁵ To qualify for a lease, a tribe must submit a proposal to the BIA, BIE, or IHS to initiate the lease-negotiation process.⁶ The regulations implementing Section 105(l) provide three options to determine lease compensation: fair market rental, specified cost elements, or a combination of fair market rental and specified cost elements.⁷ These regulations ensure tribes receive reasonable compensation for facility costs. How tribes use revenue from Section 105(l) leases is discretionary, which gives them flexibility in applying the revenue to facility development, management, and maintenance.

Section 105(l) leasing and lease revenue grow

According to the BIA, BIE, and IHS data we analyzed, Section 105(l) leasing has grown rapidly since 2016. The overall number of Section 105(l) leases grew from only two in fiscal year 2016 to 1,890 in fiscal year 2024. IHS leases, which are funded through the U.S. Department of Health and Human Services, usually cover health care facilities. In contrast, BIA and BIE leases, which are funded through the U.S. Department of the Interior, cover facilities used for a multitude of PFSA types, such as natural resource management, public safety, and education. To shed light on what kinds of facilities tribes have attained Section 105(l) leases for, we compared growth in IHS leases vs. growth in BIA-BIE leases.⁸ As shown in Figure 1, in every fiscal year except 2024, the number of Section 105(l) leases for facilities that run IHS programs has been higher than the number of Section 105(l) leases for facilities that run either BIA or BIE programs. Although IHS leases outnumbered total BIA and BIE leases in all but one year, all three agencies are seeing steep annual growth in leasing.

According to BIA officials and industry experts we interviewed in 2024 and 2025, annual renewals of Section 105(l) leases add to a quickly growing load of new lease proposals.⁹ Every fiscal year, existing Section 105(l) leases are renewed, including those that were approved in the last funding cycle. Thus, an increasing number of recurring renewals are submitted each year in addition to any new proposals. Further, new proposals are generally approved because the terms of Section 105(l) leases are negotiated between the submitting tribe and applicable agency.

Growing tribal revenue from Section 105(l) leasing reflects the growth in lease approvals since 2016. As shown in Figure 2, tribal government revenue from IHS, BIA, and BIE Section 105(l) leases grew from $800,000 in fiscal year 2016 to $109.6 million in fiscal year 2019, and then to an estimated $612.7 million in fiscal year 2024. Each amount is measured in 2024 dollars. From fiscal year 2016 through fiscal year 2024, roughly $1.81 billion in 2024 dollars was paid to tribal governments for Section 105(l) leases, with roughly 76 percent of it, or $1.37 billion in 2024 dollars, from the IHS.

The future of 105(l) leasing

The passage of the ISDEAA 50 years ago started the current self-determination era of federal Indian policy. The act gave space for tribes to assert self-governance, which may have aided in them becoming engines of regional economic growth. Section 105(l) leasing has made a growing contribution to tribal government finances in the decade since it was implemented. With Section 105(l) leasing in place at the IHS, BIA, and BIE, and with the growing funding need being met by each Congress, financial institutions have started to lend against future lease revenue, allowing tribes to access a new source of capital for building, improving, and maintaining physical infrastructure.

For example, last year the Oneida Nation announced a major expansion of its health care campus near Green Bay, Wisconsin—a development with a complex capital structure that leverages future Section 105(l) lease revenue as well as New Market Tax Credits and private financing to expand health care access to both Oneida Nation citizens and members of the surrounding community. Similar developments are popping up in other areas of Indian Country. The Leech Lake Band of Ojibwe recently announced a community health care facility development in northern Minnesota that secured a construction loan using future Section 105(l) lease revenue.

According to former CICD Leadership Council member Leonard “Lenny” Fineday, who serves as general counsel at the National Congress of American Indians and is the former secretary and treasurer of the Leech Lake Band of Ojibwe, development of the health care facility would have been out of reach without the Leech Lake Band’s financing partners considering future Section 105(l) lease revenue as part of the loan agreement. Contemplating the significance of Section 105(l) leasing, Fineday said, “Section 105(l) leasing improves tribal government financial stability and gives tribes an additional finance lever for community and economic development. It takes a lot of work to put a deal together, but these projects will improve both community and economic health in places where investment is rare.”

CICD thanks John Morseau, former CICD senior policy analyst, for his early contributions in shaping this analysis. CICD also thanks Caitlin Caldwell, Lenny Fineday, Jason Freihage, David Lockhart, Cody Seaton, Geoff Strommer, and Jameson Wilson for their contributions to this article.

Endnotes

1 Self-determination contracts are more commonly known as “638 contracts” in reference to the ISDEAA’s public law number of 93-638. These 638 contracts are different from self-governance compacts in that contracts are on a program-by-program basis, whereas compacts can encompass the entirety of PFSAs conducted by a federal agency. Due to the comprehensive nature of compacts, compacting tribes must adhere to higher audit and reporting standards.

2 See Maniilaq Ass’n v. Burwell, 77 F.Supp. 3d 277, 238 (D.D.C. 2014).

3 See Maniilaq Ass’n v. Burwell, 170 F.Supp. 3d 243 (D.D.C. 2016).

4 See Maniilaq Ass’n v. Burwell, 72 F.Supp. 3d 227 (D.D.C. 2014); and Maniilaq Ass’n v. Burwell, 170 F.Supp. 3d 243 (D.D.C. 2016).

5 Ibid.

6 The Section 105(l) proposal package must include proof that the tribe possesses title, leasehold interest, or trust interest in the facility; a certificate of occupancy; documentation substantiating the fair market rental value and/or proof of actual costs, whichever method the tribe is basing the requested facility compensation on; photos of the facility’s interior and exterior; floor plans identifying all spaces and types of use; financial certification; and tribal council resolution.

7 All tribes prior to 2016 and tribes currently without Section 105(l) leases recover facility-related costs from specific IHS- or BIA-BIE-related funds. The IHS Office of Environmental Health and Engineering administers the IHS Facilities Appropriation Maintenance and Improvement (M&I) Fund dedicated to maintaining, repairing, and improving existing IHS and tribal health care facilities. Similarly, the BIA’s Operation and Maintenance (O&M) Program is dedicated to maintaining BIA-owned and tribal facilities used to fulfill ISDEAA contracts and compacts. Both the M&I Fund and O&M Program are formula-based, with eligible tribes receiving a portion of funding available under a fixed congressional appropriation. The appropriated amount for these programs is often inadequate to cover all of a tribe’s facility-related costs, so the tribes supplement the PFSAs to cover funding shortfalls.

8 According to Jason Freihage, founder and principal consultant for Freefield Strategies LLC and former deputy assistant secretary for management at the BIA, one consideration is that differences in facility types may have a significant effect on Section 105(l) proposal-processing times. That is, the similarities among IHS leases may expedite processing, while the variability among BIA and BIE leases may require more complex analysis. Differences in processing times are beyond the scope of our analysis.

9 Federal officials have noted publicly that the volume of lease proposals has created a backlog that has strained agencies’ capacity. For example, in testimony that Bryan Newland, assistant secretary for Indian Affairs at the U.S. Department of the Interior, presented to Congress in March 2024, he referred to a “significant backlog” in pending proposals and added, “It is challenging for staff to keep pace with the significant growth in this hugely successful program.”