Taxation of Indians and Indian Country PROFESSOR BETHANY

Taxation of Indians and Indian Country PROFESSOR BETHANY BERGER UNIVERSITY OF CONNECTICUT SCHOOL OF LAW NATIONAL CONFERENCE OF STATE TAX JUDGES OCTOBER 2, 2015

Narragansett Tribe Smoke Shop, July 2003 https: //www. youtube. com/watch? v=x 0 ZLExs 2_sk

1997: Senecas block New York State thruway on reservation over cigarette taxes

“ Reservation road systems are “among the most rudimentary” in United States, the majority are unpaved, many miles “are impassable immediately after rainstorms, and some “resemble roads in developing nations. ” US Bureau of Indian Affairs 2003 TOHAJILEE RESERVATION, 40 MILES FROMALBUQUERQUE, NM ”

Pine Ridge Reservation, South Dakota

Osage Reservation, Oklahoma

Lodge Grass, Crow Reservation, Montana

Poarch Creek Band of Creek Indians v. Alabama, 2015 WL 4469479 (S. D. Ala. 2015)

Quil Ceda Village, Tulalip Reservation 40 miles from Seattle

Quil Ceda Village, Tulalip Reservation

Key Concepts 1. Indian Country 2. Federal power to tax Indians and Indian country 3. State power to tax Indians and Indian country 1. Tribes and tribal members outside Indian country 2. Tribes and tribal members in Indian country 3. Non-members inside Indian country 4. Remedies for failure to collect taxes 5. State-tribal tax agreements

Indian Country = key to jurisdiction 1. 2. Tribal Ownership of land is not enough Must fall into one of the categories in 18 U. S. C. § 1151: a. Reservations, including all fee land rights of way within the reservation. a. b. Dependent Indian Communities— a. c. 3. Trust v. Fee land Communities that are not reservations, but which the U. S. has set aside for Indians and over which the U. S. exercises supervision. Alaska v. Native Village of Venetie, 522 U. S. 520 (1998) Off-reservation allotments to which Indian title has not been extinguished. Expanding Indian country? : 25 U. S. C. 465 and the Carcieri decision

Allotment: Checkerboards and Blurred Lines

Cheyenne River Sioux Reservation in South Dakota

Tulalip Reservation, near Seattle, WA

Distinctive East Coast Issues

25 USC 465: Land into trust Land taken into trust is free of state and local taxation, and is almost certainly Indian country Big wrinkle: Carcieri v. Salazar, 555 U. S. 379 (2009)—only can take land into trust for Indians as defined by 25 USC 479: recogized tribes «under federal jurisdiction» in 1934, descendants of members of «such tribe» living on an reservation, or group of individuals of more than half Indian blood Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians v. Patchak, 132 S. Ct. 2199 (2012)—can challenge decisions to take land into trust under the APA long after they were made. US is still taking land into trust for recently recognized tribes. Approved in Confederated Tribes of Grand Ronde Community v. Jewell, 75 F. Supp. 3 d 387 (D. D. C. 2014)

City of Sherrill v. Oneida Indian Nation, 544 U. S. 197 (2005)

II. Federal Taxes The federal government may tax Indians and tribes to the same extent as non-Indians. Individuals Indians pay all federal taxes, with limited exceptions for income directly derived from trust property Tribes are generally immune from federal taxes. 26 U. S. C. § 7871; Rev. Rul. 67 -284 1967 -2 C. B. 55. But see Chickasaw Nation v. U. S. , 534 U. S. 84 (2001) (tribes must pay gambling related excise and occupational taxes although states exempt) Tribal bonds generally only tax exempt if for core governmental functions State-chartered tribally-owned corporations not tax exempt unless integral to tribe Federal statutes provide incentives, such as accelerated depreciation, employment tax credits, and empowerment zone credits and incentives for non-members to do business with tribes.

III. State taxation Who and where tax falls are crucial Is the taxed activity inside or outside Indian country? Is the payer a tribe or tribal member or a non-member? Decided by legal incidence of tax, not economic incidence—formalistic test Cigarette taxes. Moe v. Confederated Salish and Kootenai Tribes of the Flathead Reservation, 425 U. S. 463 (1976) Fuel taxes. Oklahoma Tax Comm’n v. Chickasaw Nation, 515 U. S. 450 (1995) Fuel taxes II: Kansas drafts statute to provide that “the incidence of [the motor fuel] tax is imposed on the distributor of the first receipt of the motor fuel. ” Kan. Stat. Ann. § 79– 3408(c), e. g. , on the receipt of the fuel by a distributor who would later sell it on reservation to an Indian tribe, the taxed transaction was offreservation. Wagnon v. Prairie Band Potawatomi Nation, 546 U. S. 95 (2005).

A. Taxation of Tribes and Members outside Indian country Full power to tax unless specifically exempted. Limitations: Some states exempt certain tribal activities from state taxes, and tribes have sovereign immunity even outside Indian country.

B. Taxation of Tribes and Tribal Members for property/activity in Indian Country Can’t tax unless federal authorization is “unmistakably clear. ” Montana v. Blackfeet Tribe, 471 U. S. 759 (1985). E. g. : PL 280 providing several states with civil and criminal jurisdiction over Indians in Indian country does not give power to tax. Bryan v. Itasca County, 426 U. S. 373 (1973) General allotment act allows states to tax allotted lands in fee, but not to tax sales of such lands. County of Yakima v. Confederated Tribes or Band of Yakima Nation, 502 U. S. 251 (1992); cf. Keweenaw Bay Indian Cmty. v. Naftaly, 452 F. 3 d 514, 526 -527 (6 th Cir. 2006) (land allotted under 1854 treaty not taxable).

C. State taxation of non-members in Indian country 1. 2. State can tax non-members unless federal government has pre-empted tax. Preemption analysis is much broader than that in non-Indian context 1. 2. No need for express preempting language Read statutes against background of tribal independence from state law

Factors Preemption Analysis Extent of federal regulation 2. Federal goals with respect to activity. 3. Tribal involvement in activity, particularly extent of value added on reservation. 4. State interest in activity, particularly on-reservation contribution to activity, or off-reservation impact of activity. 1.

State Taxes Pre-empted Taxes on sales of goods or services to tribes or members for tribal/member use, are pre-empted by federal trader statutes. Cent. Mach. Co. v. Arizona State Tax Comm'n, 448 U. S. 160, 164 -166 (1980); Warren Trading Post Co. v. Arizona Tax Comm'n, 380 U. S. 685 (1965). Taxes on non-Indians working for tribal timber businesses, building tribal schools, pre-empted. Ramah Navajo Sch. Bd. , Inc. v. Bureau of Revenue of New Mexico, 458 U. S. 832 (1982); White Mountain Apache Tribe v. Bracker, 448 U. S. 136 (1980)

State Taxes Not Preempted Taxes on cigarettes purchased off reservation and sold on reservation. Moe v. Confederated Salish & Kootenai Tribes, 425 U. S. 463 (1976); Washington v. Confederated Tribes of the Colville Reservation, 447 U. S. 134 (1980); Dep’t Taxation & Fin. Of New York v. Milhelm Attea & Bros. , Inc. , 512 U. S. 61 (1994) Taxes on oil and gas extracted by non-Indian lessees of tribe. Cotton Petroleum Corp. v. New Mexico, 490 U. S. 163 (1989) Taxes on fuel received off-reservation then distributed to tribal gas station. Wagnon v. Prairie Band Potawatomi Nation, 546 U. S. 95 (2005).

Recent cases: Seminole Tribe of Florida v. Stranburg, --- F. 3 d ---- (11 th Cir. 2015) Strikes down rental taxes on non-Indian lessees of permanent improvements of tribal trust land Upholds taxes on utility services delivered to tribe Involves new regulation, 25 CFR § 162. 017, providing that permanent improvements, leaseholds, and activities on leased tribal land are not subject to taxation.

Mashantucket Pequot Tribe v. Town of Ledyard, 722 F. 3 d 457 (2013) Upholds local property taxes on slot machines leased to tribe for use in its casino. Warped analysis: Finds sufficient state and local interest in revenue raising, dismisses tribal interest in business it manages because small economic impact, and reads IGRA narrowly not to preempt this specific tax.

D. Remedies Even where state has power to impose tax, sovereign immunity bars state from suing tribe to collect tax. Oklahoma Tax Comm'n v. Citizen Band of Potawatomi Indian Tribe of Okla. , 498 U. S. 505 (1991); Michigan v. Bay Mills Indian Community, 134 S. Ct. 2024 (2014) State may, however, prevent traders from obtaining more tax free cigarettes than necessary for tribal members and may require on-reservation businesses to check and record membership status of those purchasing goods. Dep't of Taxation & Fin. of New York v. Milhelm Attea & Bros. , Inc. , 512 U. S. 61 (1994)

State-tribal tax agreements

Helpful Resources Felix S. Cohen’s Handbook of Federal Indian Law (2012) (available on Lexis) American Indian Law Deskbook (available on Westlaw) William C. Canby, American Indian Law in a Nutshell Feel free to contact me: Bethany Berger, UCONN Law, Bethany. berger@uconn. edu

Thank you