indian taxation

Fenner on Indian Country in Cyber Space

Matthew L.M. Fletcher

Ben Fenner of Fredericks Peebles & Morgan, LLP has published “Indian Country in Cyber Space: Bella Hess and Commerce Clause Constraints on Interstate, Mail Order Transactions” in the Albany Law Review.

From the introduction:

When political processes fail, the rule of law prevails or people rise to power. When the political process fails between tribes and the United States, defined as it is by federal statutes and case law, there is no rule of law and, therefore, leaders emerge. So it is that the panoply of tribal leaders is vast and ranges from ordinary men and women in seemingly mundane circumstances to warriors and negotiators who are household names.

***

The ability of the government to justify the annihilation of whole cultures was, and is today, driven by a perceived lack of resources (a euphemism for greed). And no resource is as scarce today, it seems, as money; few areas of federal Indian law are as contentious as states’ ability to tax and regulate tribal activity. While tribal immunity from state taxation is well-settled, what of state ability to tax Internet transactions originating on reservations? Part II of this Article is an overview of preemption in federal Indian law. Part III looks specifically to taxation and regulation of mail-order transactions. Part IV concludes that tribes may structure online transactions fulfilled on-reservation to preclude state taxation.

Western Mohegan Motion for Reconsideration (N.D. N.Y.)

Matthew L.M. Fletcher

The non-federally recognized Indian tribe Western Mohegan tribe sought to avoid county taxes on its land, and a resulting foreclosure for failure to pay.

Here are the materials:

Motion for Reconsideration

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Huron Nottawaseppi Awaits Decision from Michigan Tax Tribunal on Tax Status of Pine Creek Reservation

Matthew L.M. Fletcher

From the Battle Creek Enquirer:

Tribe awaits ruling on tax-exempt status

ATHENS TOWNSHIP — The Nottawaseppi Huron Band of Potawatomi is awaiting a Michigan Tax Tribunal decision on whether the tribe is liable for township taxes on its Pine Creek Reservation.

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Osage Nation v. Oklahoma – CA10

Matthew L.M. Fletcher1 Comment

The Osage Nation sued the State of Oklahoma and Oklahoma Tax Commission officials seeking an injunction against the collection of state income taxes against Osage members in Osage Indian Country. The district court denied the state’s Eleventh Amendment motion to dismiss. The CA10 reversed as to the State, but very grudgingly affirmed as to the officials, relying on Ex parte Young.

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CRS Reports — Additional Available Reports

Matthew L.M. Fletcher

We previously offered links to Congressional Research Service reports related to Indian law here.

Since then, we’ve located a few more:

Federal Taxation of Tribes and Indians (2007)

American Indian Education Programs (2007)

Religious Freedom Restoration Act (2006)

Small Business Administration Programs (2007)

Tales from the Cert Pool: Montana Taxes at Crow

Matthew L.M. Fletcher

The Supreme Court denied cert in a case captioned Montana v. Crow Tribe of Indians, 484 U.S. 1039 (1988) (No. 87-343). The case involved the State’s attempt to impose severance and gross proceeds on a non-Indian mining company.

The cert pool memo (from a Rehnquist clerk no less) ripped the State’s argument:

[Montana]’s contention that its taxes should not be preempted because they fall on Westmoreland, rather than on the Crow Tribe itself, is ludicrous. The state severance and gross proceeds taxes have restricted the amount of taxation [Crow] can levy on its lessees. The CA9 found that the marketability of [Crow]’s coal was significantly diminished by [Montana]’s taxes, resulting in a corresponding decrease in the amount of money accruing to[Crow]’s coffers.

Cert Pool Memo at 7.

How times have changed. After Cotton Petroleum and Wagnon, states can strategically tax for the specific purpose of limiting on-reservation activities and all but eliminate tribal tax base.

Tales from the Cert Pool: Circuit Splits and Federal Indian Law

Matthew L.M. Fletcher

Most cases now reach the Supreme Court because of circuit splits or splits in authority between federal courts of appeal and state supreme courts, but federal Indian law is an exception. In my study of the digital archive of Justice Blackmun’s cert pool memos from docket years 1986-1993, perhaps a quarter of cases that attracted the Court’s attention (reaching the so-called “discuss list” at conference) did so because there was a split.

One reason for the lack of circuit splits in federal Indian law is geography — well over 80 percent of cert petitions arise out of the Eighth, Ninth, and Tenth Circuits (and the states located within those circuits).

Moreover, because the cert petition subject matters are based on treaties or statutes that apply only within a state or a region, there is little likelihood of there ever being a split where the federal circuit and the state supreme court agree. Two examples from my forthcoming paper, “Factbound and Splitless”:

In South Dakota v. Spotted Horse, the Justice Blackmun’s clerk wrote a supplemental memo to the cert pool memo in which she wrote, “As the poolwriter noted, there will never be a split on the question of South Dakota’s jurisdiction over these tribal highways because both CA8 and the S.D. SCt agree that the State is without jurisdiction.” In Tarbell v. United States, a criminal case involving the application of a federal statute that applied to New York Indians, the cert pool memowriter (Mark Snyderman, an O’Connor clerk) noted, “Of course, NY state is probably the only other jurisdiction that would have an opportunity to rule on the issue.”

In one famous instance, the Court granted cert in a case thinking there was a circuit split when there really wasn’t (or more accurately, the split dissolved when the Court decided the case). The cases were Anderson v. Wisconsin Dept. of Revenue and Oklahoma Tax Commission v. Sac and Fox Nation. In Anderson, the WI Supreme Court ruled that Indians living off the rez but working on the rez have to pay state income taxes. In Sac and Fox, the CA10 ruled that Indians living on trust land and working for the tribe on trust land don’t have to pay tax. That’s the split, but the split disappeared when the Court decided that trust land is the same as “Indian Country” — making the factual predicate for the split (the residence of the tribal member: one was off, one was on) disappear.

I go into greater depth in the paper, but the story basically is this. The OTC’s petition in Sac and Fox reached the Court first, but neglected to mention the Wisconsin case. The Wisconsin case reached the cert pool next, alleging the split in authority. The cert pool writer thought the Sac and Fox case was factually messier (because of the trust land question) so recommended the Court grant cert in Anderson. Also, the cert pool memowriter argued that the OTC was a bad litigant for not noting the split in the first place, so recommended that the Court go for the Wisconsin case instead. But Anderson filed indigent, and he shouldn’t have, so the Court had to order him to comply with SCT rules before his appeal would proceed. In the meantime, the Court decided to hear Sac and Fox instead. The Anderson pool memo is here and the Sac and Fox memo is here.

And it’s good thing too. Bill Rice’s mastery of oral argument before the Supreme Court can be heard here (with a little help from Edwin Kneedler).

Had the Court decided Anderson instead, it seems clear to me that it would have ruled against Anderson, who was living off the rez and refusing to pay state income taxes. Who know what would have happened to Sac and Fox Nation?

Angelique Eaglewoman: Tribal Values of Taxation within the Tribalist Economic Theory (SSRN)

Matthew L.M. Fletcher

Angelique Eaglewoman/Wambdi A. Wastewin of Hamline law has posted “Tribal Values of Taxation within the Tribalist Economic Theory” on SSRN. The paper is forthcoming from the Indigenous Nations Journal (KU).

From the Abstract:

Tribal governments in mid-North America exercise inherent sovereignty by imposing taxes within tribal territories. The recent history of commerce and commercial relationships is explored in this article along with the underlying cultural values that have guided economic relations. Taxation as a natural embodiment of tribal values of sharing and generosity fit within this tribalist economic theory. As Tribal Nations interacted with the newly formed settler government in this area, the United States, this new government sought to colonize tribal peoples, tribal resources, lands, and institutions. This colonial mentality continues to operate against Tribal Nations impeding and interfering with tribal resource management, resource utilization, taxation and the realization of prosperity. Recent developments in international indigenous human rights law support the assertion of full tribal sovereignty in the tribal territorial to the exclusion of the United States, including in the area of taxation. With this support in international law, Tribal Nations are able to continue to exercise economic development in harmony with the tribal values exemplified in the tribalist economic theory.

Tales from the Cert Pool: Justice Blackmun’s Papers on Cotton Petroleum

Matthew L.M. Fletcher1 Comment

Cotton Petroleum Corp. v. New Mexico is one of the harshest outcomes in the modern era of Indian law cases decided by the Supreme Court. In this case, the Court held that states may tax non-Indian-owned businesses doing business in Indian Country, even where the tribe has imposed its own tax. In short, the states may double-tax non-Indians, effectively preempting tribal taxes on the tribe’s own land.

The recent uploading of Justice Blackmun’s papers on the internet offers a glimpse into the background of the case.

In Cotton Petroleum, two documents are available: The cert pool memo and Justice Blackmun’s docket sheet recording the votes of the Justices.

The Court decided to grant certiorari in this case over the recommendation of the cert pool memo to deny cert. Justices White, Stevens, O’Connor, and Blackmun voted to grant cert (in accordance with the Rule of Four, only four votes are required to grant cert), while Rehnquist, Brennan, Marshall, Scalia, and Kennedy voted to deny.

One interesting (and awful) tidbit from the cert pool memo is that the memowriter noted that the tribal interests weren’t represented in the litigation and that, importantly, Cotton Petroleum hadn’t introduced evidence about the impact of New Mexico’s tax on tribal sovereignty:

“As [New Mexico] and [state] amici explain, this Court’s precedents require a showing of actual impact on tribal interests in self-government before pre-emption will be found, and [Cotton Petroleum] failed to introduce evidence of such impact in this case.” Cert Pool Memo at 7.

As noted above, the impact of New Mexico’s tax on tribal sovereignty was devastating, but since Cotton Petroleum was never in a position to make the argument, it was never developed.

Moreover, in a case denied cert that same Term, Rodney, Dickason v. Revenue Division of New Mexico, the cert pool memowriter (Deborah Malamud of NYU) argued that “the Indian preemption framework serves a substitute for the now-repudiated doctrine that state law has no effect on Indian reservations…. As that doctrine was geographical in nature, perhaps it makes sense that those same limits should apply to its modern substitute.” Cert Pool Memo in Rodney, Dickason at 8-9. But, alas, the Court decided not to adopt such a workable bright-line rule.

More tales from the cert pool memos will follow over the next several weeks.

A Judicial Framework for Applying Supreme Court Jurisprudence to the State Income Taxation of Indian Traders by Scott Taylor (St. Thomas)

Matthew L.M. Fletcher

Scott Taylor: A Judicial Framework for Applying Supreme Court Jurisprudence to the State Income Taxation of Indian Trader

From the abstract:

State income taxation of Indian traders is a legal issue that the United States Supreme Court is likely to address within the next five years. This article provides a theoretical framework for resolution of the issue by considering the political framework of the United States Constitution and the historical role that federally recognized Indian tribes have played within the American legal system. As the cases work their way through the state judicial systems, this article will provide an important theoretical starting point for the lawyers and judges dealing with the question. And when the United States Supreme Court finally addresses the issue, the Court will be able to consider the usefulness of my framework.

Virtually everyone who sells goods and services to one of the more than 560 federally recognized Indian tribes (or to their on-reservation members) is an Indian trader. Most Indian traders are in states that have an income tax. Although the United States Supreme Court has held that these sales are exempt from states sales taxes, no federal case has yet answered the income tax question. Tribes are interested in the issue because the outcome will affect their ability to tax Indian traders. States are interested because it will affect their tax revenue. Indian traders are interested because it will affect the state income taxes they pay.

The theoretical framework that I propose builds on some of the Supreme Court jurisprudence on federal Indian law. My framework looks at the structure of Congress, the inclusion of states, and the exclusion of tribes. Given Congress’ power over Indian affairs, the Supreme Court should decide cases in favor of the tribal interest whenever Congress has spoken with less than clarity. If states do not like the judicial answer, they can go to Congress and seek a legislative remedy, as they did with the Indian Gaming Regulatory Act in the 1980s.

Congress has regulated Indian traders for over 200 years but has never stated whether states can tax them. Given the presence of this federal regulation, the United States Supreme Court in the 1960s decided that states could not impose their sales taxes on Indian traders. In a line of subsequent Supreme Court cases, the federal preemption logic has remained largely unchanged. This same logic, when viewed in light of Congress’ role in Indian affairs and the political exclusion of tribes from Congress, leads to the conclusion that Indian traders should be exempt from state income taxes.