Senate Finance Committee Tax Reform Options Paper


An excerpt:


Indian tribes and wholly-owned tribal corporations chartered under Federal law are not subject to Federal income taxes. In contrast, a corporation owned by a tribe or tribal members and organized under State law is subject to Federal income tax on income earned from commercial activities conducted on or off the tribe’s reservation. Generally, tribal members are subject to Federal income taxes except for certain income. For example, income earned from the exercise of certain fishing rights is excluded from income.

Tribes are often depressed economic communities with high unemployment. From 2007 to 2010, the American Indian unemployment rate increased from 7.5% to 15.2%. The unemployment rate for Alaska Natives was even higher—21.3% in 2010. The tax code contains several provisions to boost economic activity within and on tribal lands. Tribes are also allowed to issue tax-exempt bonds; however, such bonds are limited to “essential government functions”, a requirement that does not apply to states.

1. Modify tribal tax-exempt bonds

a. Modify tax-exempt bonds for tribal governments (FY14 Administration Budget Proposal; estimated in 2013 to cost less than $1 billion over 10 years; Joint Committee on Taxation, JCX-19-05R, 2005)

i.  Repeal the essential governmental function requirement so that eligibility standards are the same for tribal governments and state and local governments (Testimony of Dr. Lindsay Robertson before the Finance Committee, May 15, 2012; Department of the Treasury, “Report and Recommendations to Congress Regarding Tribal Economic Development Bond Provision under Section 7871 of the Internal Revenue Code,” 2011)

ii. Conform private activity bond standard to those of state and local governments

1. Could restrict project location to reservations

2. Could prohibit issue or use of bonds for gambling facilities

2.  Exempt certain tribal activities from taxation

a. Create a ten-year, tax-free zone for selected areas of Indian country in which economic activity would not be subject to any federal, state, or local income, sales, or excise taxes (Testimony of President Robert Odawi Porter before the Finance Committee, May 15, 2012; Lummi Indian Business Council comments to Committee on Ways and Means working group on Charitable/Exempt organizations, submitted April 15, 2013)

3. Clarify the general welfare exclusion doctrine for certain benefits provided by tribes to members (Various Tribal comments to Committee on Ways and Means working group on Charitable/Exempt organizations, submitted April 15, 2013)

a. Codify the income exclusion for government benefits provided by Indian tribes under the general welfare exclusion doctrine

b. Adopt a moratorium on audits relating to the general welfare exclusion doctrine while implementing Notice 2012-75

4. Make permanent or expand temporary provisions

a. Make permanent the Indian employment credit and accelerated depreciation on Indian reservations (Choctaw Nation of Oklahoma comments to Committee on Ways and Means working group on Charitable/Exempt organizations, submitted April 15, 2013)

b. Expand the Indian employment tax credit to more closely resemble the Work Opportunity Tax Credit (Testimony of Donald Laverdure before the Finance Committee, July 22, 2008)

5. Conform the definition of Indian and reservation for tax purposes (Testimony of Director D’Shane Barnett before the House Appropriations Subcommittee on the Interior, Environment, and Related Agencies, March 19, 2013)

6. Modify the adoption tax credit to allow Tribal Governments to determine whether a child has special needs (FY14 Administration Budget Proposal; estimated in 2013 to cost less than $1 billion over 10 years)

Tenth Circuit Rules against Muscogee (Creek) Nation in Challenge to Tobacco Master Settlement Agreement

Here is today’s opinion in Muscogee (Creek) Nation v. Pruitt.

And the briefs:

Muscogee Opening Brief

Oklahoma Answer Brief

Muscogee Reply

Lower court materials here.

Badly Split Wisconsin Supreme Court Refuses to Refund Taxes Paid by Ho-Chunk Nation

Here is the opinion in Ho-Chunk Nation v. Wisconsin Dept. of Revenue. An excerpt from the majority:

For the reasons set forth below, we affirm. “[R]eservations or trust lands” are also referred to in the sentence preceding the provision in question; a sensible reading of the statute (Wis.Stat. § 139.323) requires that the two references be read as identifying the same land. The grammatical construction of the sentence itself lends further support to our holding because “was designated” precedes both “a reservation” and “trust land” and means the same thing about each. Given that there is no basis in the federal regulations for recognizing a preliminary, unofficial status for reservations or trust lands, there is likewise no basis for reading this statute as intending to apply to land that has received only preliminary informal approval.

And an excerpt from the dissent:

Unlike this dissent, the majority opinion does not justify its holding on any historical or policy basis. It relies instead on unpersuasive interpretive tools. In my view, the only way we would be justified in denying the Ho-Chunk Nation the requested refund on its DeJope tax collections would be to cite documentary evidence showing that this property was considered and intentionally excluded.

Saginaw Chippewa Employee Gas Discount

From the Mt. Pleasant Morning Sun:

Tribal Council for the Saginaw Chippewa Indian Tribe is offering Tribal employees a 10 cent per gallon discount.

More than 4,200 employees were notified Friday of the discount available at both Sagamok and Saganing Sagamok convenience store gas stations.

“I think (Tribal) council is aware of the tough economic times our employees are going through,” Tribal Chief Fred Cantu said. “And we know that there are people who work here that drive from as far away as Lansing and Saginaw.

“I think council felt their employees should share in the discount we offer to our (Tribal) members because we feel that our employees are like family to us.”

Better hope this isn’t taxable income….

Angelique Eaglewoman: The Philosophy of Colonization Underlying Taxation Imposed Upon Tribal Nations within the United States

Angelique Eagelwoman (soon to be at Idaho Law) has posted “The Philosophy of Colonization Underlying Taxation Imposed Upon Tribal Nations within the United States” on SSRN. Here is the abstract:

Tribal Nations are inherently sovereign by internal definition as well as by classic European political science theory. Voluntary wealth distribution was the basis for the functioning of tribal government rather than externally imposed demands for pro rata shares of individual tribal member income. Through treaty-making with Tribal Nations, the United States expanded and asserted its ability to govern the influx of European immigrants and captive Africans by recognizing tribal territorial boundaries and seeking peaceful relations. Within the United States Constitution, Tribal Nations are mentioned in terms of not being taxed and as engaged with Congress in terms of commerce. Despite this history, U.S. relations shifted on one of military dominance over Tribal Nations skewing the sovereign-to-sovereign relationship set forth in treaty agreements.

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Burlington Northern v. Vaughn (CA9) Materials

BNSF v. Vaughn involves the Hualapai tribe’s attempt to impose taxes on BNSF railroad. BNSF brought an Ex parte Young action against two tribal officials: the chairman and the tax collector, seeking an injunction. The tribe argued that the railroad was required to exhaust its tribal remedies and that the tribe and its officials hadn’t waived tribal immunity. The district court disagreed. Here, the Ninth Circuit held that the tribe could bring an interlocutory appeal of the rejection of the immunity defense, but held that the tax collector was not immune from suit and remanded for further proceedings.

Here are the materials:

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

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)

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.