In 1971, Congress passed the Alaska Native Claims Settlement Act ( ANCSA ) to provide compensation for extinguishing Native land claims in Alaska. ANCSA created a system of village corporations that received money and land as compensation, and are to distribute the compensation to shareholders. The Internal Revenue Service ( IRS ), despite legislative history to the contrary, is now asserting that corporate tax principles apply to the distributions because of ambiguous language contained in ANCSA. This assertion makes distributions to shareholders taxable as dividends to the extent of the corporations\u27 accumulated and current earnings and profits. The IRS stance will result in excessive taxation of the shareholders due to the unique manner in which ANCSA is set up, and due to poorer economic values of the Natives\u27 land bases. The authors argue that Congress should amend ANCSA to relieve the corporations and shareholders of the unintended taxation. They examine ANCSA and its legislative history, and contrast the IRS\u27s letter rulings to show how the IRS interpretation is contrary to the legislative intent. Finally, the authors propose two alternative amendments that would clarify the otherwise coherent ANCSA policy against imposing an income tax on compensation for extinguishing aboriginal land claims, and assure that individual Natives receive the full measure of compensation that Congress intended to convey