taxation

IRS Chief Counsel Issues Memorandum re: Tribal Tax-Exempt Bonds

Matthew L.M. Fletcher

AM2009-014

An excerpt:

This memorandum addresses the interaction between tribal economic development bonds under
§7871(f) of the Internal Revenue Code (“Tribal Economic Development Bonds”) and build America
bonds under § 54AA (“Build America Bonds”). This memorandum should not be used or cited as
precedent.

ISSUE
Can an Indian tribal government that has received an allocation of volume cap pursuant to §7871(f)
(1) of the Internal Revenue Code (the “Code”) to issue Tribal Economic Development Bonds elect
under § 54AA(d)(1)(C) to issue those bonds as Build America Bonds instead of issuing the bonds as
tax-exempt bonds under §103?

CONCLUSION
An Indian tribal government that has received an allocation of volume cap pursuant to §7871(f)(1) to
issue Tribal Economic Development Bonds can elect under §54AA(d)(1)(C) to issue such bonds as
Build America Bonds instead of issuing the bonds as tax-exempt bonds under §103.

Thanks to J.W. for this!

Student Article on Authority of Indian Tribes to Tax Athletes and Performers

Matthew L.M. Fletcher

Here is an interesting piece called “The Power of Indian Tribes to Tax the Income of Professional Athletes and Entertainers Who Perform in Indian Country,” a student note in the Connecticut Law Review.

Here is the abstract:

Athletes and entertainers represent some of the highest paid individuals in the United States today. Historically, these individuals perform in various states throughout the country and pay state income taxes to each state they earn income in. With the recent rise of athletic and entertainment venues in Indian Country, more athletes and entertainers are earning income in Indian Country. For example, the Mohegan Tribe owns and operates the Mohegan Sun Arena on its reservation in Connecticut and the Arena annually hosts hundreds of professional athletic and entertainment events. Because the Mohegan Sun Arena is located in Connecticut, athletes and entertainers who perform at the Arena and receive compensation are currently subject to Connecticut’s state income tax. However, as a federally-recognized Tribe, the Mohegan Tribe possesses the power to tax, including the power to tax non-member Indians doing business on the Mohegan Reservation. Although the Mohegan Tribe does not currently levy an income tax on the athletes and entertainers who perform at the Mohegan Sun Arena, the prospect of double taxation raises the question of which sovereign is really the proper taxing entity — the State or the Tribe? This Note proposes an equitable tax framework that resolves this double taxation quandary.

Supreme Court Denies Cert in Rocky Barrett Tax Case

Matthew L.M. Fletcher1 Comment

Here is the order list — the docket no. is 09-32, and the notice is on page 3.

Oklahoma Supreme Court Vacates Injunction against Oklahoma Tax Commission from Enforcing Tax Compact against Osage Smokeshops

Matthew L.M. Fletcher

Here is the opinion in Feather Smoke Shops v. Oklahoma Tax Commission.

An excerpt from the dissent:

¶2 I believe the “dispute” is not subject to arbitration because it is not one “arising in the interpretation or performance of th[e] Compact.” I reach this conclusion because the undisputed material facts show that the State, through the actions of the Oklahoma Tax Commission, is simply in breach of the unambiguous “favored nations” provision of the Compact. This provision grants the Osage Nation the “option” to “automatically… incorporate” more favorable terms of a tobacco tax compact with another Indian tribe into the Osage Nation Compact. The State, through the Oklahoma Tax Commission, admits that the Osage Nation exercised this “option” and chose to incorporate the favorable terms of the State’s compacts with the Cherokee Nation and Choctaw Nation, inter alia. The Oklahoma Tax Commission recognizes that this action constituted an amendment to the Compact, including the “exception rate” of $.58 per carton. Nothing in the Compact ties or burdens such amendment of the Compact to the continuation of any comparable terms that may have been previously incorporated from another compact, like the Pawnee Compact in question.

¶3 In my opinion, there is no uncertainty about the meaning of any term in the Compact, nor any doubt about the performance due under any term. There is simply unjustified refusal of the Oklahoma Tax Commission to perform its ministerial duties under the Compact and a suit in district court for injunctive relief is one of the appropriate remedies for such a breach of contract. Under the record presented, I do not believe the trial court either exceeded its jurisdiction or abused its discretion in issuing the injunction.

Barrett v. United States Cert Petition Materials

Matthew L.M. Fletcher

The petition stage briefing is complete in Barrett v. United States (09-32).

Barrett v. US Cert Petition

CPN Amicus Brief

SOLICITOR ANSWER BRIEF

Barrett Reply Brief

The conference for this petition is October 9, 2009.

Lower court materials are here.

Sales Taxes at Indian Casinos

Matthew L.M. Fletcher

The 1 percent sales tax at Foxwoods apparently has the attention of the Connecticut AG for some reason (Indianz report here). The concerns seem to be based in the accounting of the tax, and really just a way for this troubling AG (Blumenthal) to get in the papers.

But tribal sales taxes at Indian casinos imposed on the largely non-Indian customer base is an important and real expression of tribal sovereignty. But largely because of numerous Supreme Court decisions like Wagnon, Cotton Petroleum, and Moe, the states get most of the money from the on-reservation tribal tax base. Moe says tribes have to collect sales taxes from non-Indians purchasing tobacco products in Indian Country. Cotton Petroleum says that tribal taxes don’t preempt states taxes imposed on non-Indians doing business in Indian Country, allowing state taxes to economically trump tribal taxes. As does Wagnon.

The one percent tax added on to the state sales tax at Foxwoods is an economic representation of the tribal tax base in stark forms. The state gets 6 percent of tribal sales, and the tribe (if its lucky) can tack on an additional 1 percent. What does the state have to do for this money? Absolutely nothing. They already get 25 percent of the net win in Connecticut. Because of these very unfair Supreme Court decisions, AG Blumenthal can wax politic about sales taxes that are pure windfalls to his state.

Materials in the New York City Smokeshop Case

Matthew L.M. Fletcher

Here are the materials in the New York City v. Golden Feather Smoke Shop case (E.D. N.Y.), reported here. Earlier materials are here.

NYC Motion for Preliminary Injunction

Golden Feather Opposition to Motion

Peace Pipe Smoke Shop Opposition

NYC Reply Brief in Support of Motion (Attachment: IMO Gutlove & Shirvant)

Golden Feather DCT Order on Motion for PI

NYT’s Article on New York State’s Tobacco Fight with Indian Tribes

Matthew L.M. Fletcher1 Comment

From the NYTs:

A federal judge ruled on Tuesday that a group of tobacco vendors on an Indian reservation on Long Island cannot sell tax-free cigarettes to the general public until a court rules in a closely watched legal battle between the reservation and New York City.

A temporary injunction issued by Judge Carol B. Amon of Federal District Court in Brooklyn gave the city at least a temporary victory in its efforts to collect hundreds of millions of dollars in tax revenue.

“The city will go after every dollar that is owed to city taxpayers,” Mayor Michael R. Bloomberg said in a statement on Wednesday. Under Judge Amon’s ruling, a group of cigarette businesses on the Poospatuck Indian Reservation near Mastic can sell tax-free cigarettes only to tribe members, for personal use, until a verdict is reached in a federal lawsuit the city filed in September.

The judge stayed the ruling for 30 days to give the vendors time to appeal.

“The judge’s ruling is completely wrong,” said Harry Wallace, a lawyer and the chief of the Unkechaug Indian Nation, which is on the Poospatuck reservation, adding that it ignored the Indian nation’s sovereignty.

Continue reading →

Federal Court Denies Injunction in Muscogee Cigarette Seizure Case

Matthew L.M. Fletcher1 Comment

Thanks to Mike for this. Here’s a news article on this case.

A federal court dismissed a request for an injunction against the Oklahoma Tax Commission for seizing tobacco products owned by the Muscogee (Creek) Nation. State law enforcement had seized the smokes on some pretty spurious grounds, pulling the trucks over for “weaving” and “following too close” (not texting!?!). The court rejected most of the Commission’s defenses, including standing and sovereign immunity, but dismissed the claim on the basis that Indian tribes are not “persons” that can sue under Section 1983, per Inyo County.

Sounds to us like a Section 1983 legislative “fix” is in order, too, like all the other problems created by the Supreme Court in the last decade.

Muscogee Injunction DCT Order

More later.

Citizen Potawatomi Nation Files Amicus Brief in Barrett v. United States

Matthew L.M. Fletcher

Here — CPN Amicus Brief

Other materials are here. And here is the Supreme Court docket.