Gabe Galanda to Explain Tribal Sovereignty Issues Re State-Legalized Marijuana

On Monday, Gabe Galanda will address the Affiliated Tribes of Northwest Indians General Assembly, during ATNI's Mid-Year Convention this week at the Chehalis Tribe's Great Wolf Lodge, regarding the tribal and federal legalities associated with state-legalized marijuana, as well as related tribal economic opportunities.

The topic couldn't be hotter. Consider the following recent headlines about legalized marijuana in Indian Country:

Gabriel “Gabe” Galanda is the Managing Partner at Galanda Broadman. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California. Gabe can be reached at 206.300.7801 or gabe@galandabroadman.com.

So What Is a "Permanent Improvement" to Indian Land?

Much is being made of the new U.S. Department of the Interior leasing regulation, 25 C.F.R. § 162.017, which makes clear that "permanent improvements" to leased Indian land are “not subject to any fee, tax, assessment, levy, or other charge imposed by any State or political subdivision of a State." Related FAQs from those in tribal economic development, include: What is a permanent improvement? What makes an improvement permanent? And most commonly, does [insert type of real or personal property] constitute a tax-exempt permanent improvement? This blog attempts to help folks answer such pivotal questions from a legal point of view.

25 U.S.C. § 465 of course explicitly exempts Indian trust land from state and local taxation. In Mescalero Apache Tribe v. Jones, it was held that Section 465 exempts not only tribal land from state and local taxation, but any tax that the Court deems to be an equivalent to a tax on land, including any “permanent improvements” thereon. 411 U.S. 145, 158 (1973).

Such is true regardless of how the state characterizes those improvements. See Drye v. United States, 528 U.S. 49, 52-53 (1999) (federal law, not state law, defines “property and rights to property” for purposes of a federal tax statute); Confederated Tribes of Chehalis Reservation v. Thurston County Bd. of Equalization, 724 F.3d 1153, 1158 (9th Cir. 2013) (“[I]t is irrelevant whether permanent improvements constitute personal property under [state] law.”).

Under federal law, there is no one definition of a “permanent improvement” for taxation purposes. PPL Corp. v. C.I.R., 135 T.C. 176, 193 (U.S. Tax Ct. 2010).

Instead, courts look to six factors, the “primary focus” of which “is the question of the permanence of depreciable property and the damage caused to it or to realty upon removal of the depreciable property.” Id. (quoting Trentadue v. C.I.R., 128 T.C. 91, 99 (U.S. Tax Ct. 2007)). These factors are as follows:

(1) “Is the property capable of being moved, and has it in fact been moved?” Whiteco Industries Inc. v. Commissioner of Internal Revenue, 65 T.C. 664, 672 (U.S. Tax Ct. 1975).

(2) “Is the property designed or constructed to remain permanently in place?” Id.

(3) “Are there circumstances which tend to show the expected or intended length of affixation, i.e., are there circumstances which show that the property may or will have to be moved?” Id.

(4) “How substantial a job is removal of the property and how time-consuming is it? Is it ‘readily removable’?” Id. at 673.

(5) “How much damage will the property sustain upon its removal?” Id.

(6) “What is the manner of affixation of the property to the land?” Id.

There you have it. So is your improvement permanent?

Gabriel “Gabe” Galanda is the Managing Partner at Galanda Broadman. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California. Gabe can be reached at 206.300.7801 or gabe@galandabroadman.com.

Tribal Online Lenders Need a Legal Attitude Adjustment

A review of recent federal judicial decisions against tribal online lenders shows that they are losing the war--resoundingly. Arguments under Tuscarora that federal consumer protection laws of general applicability, have fallen flat. Arguments that these tribal enterprises are immune from federal enforcement action (see U.S. v. James), have not surprisingly fared even worse. Tribal sovereignty is being eroded in the process of each federal court controversy.

The tribal online lending industry needs a legal attitude adjustment. Or is it only a matter of time before the industry meets its demise. Instead of throwing traditional federal Indian legal arguments against the walls of federal courthouses, in hope that they stick--they haven't yet--the industry needs to heed lessons learned by other tribes when over-zealous federal agencies like the IRS, FBI or ATF come barreling onto an Indian reservation or into a tribal economy.

Among other non-conventional tribal defense strategies, one that has been deployed effectively against such federal agencies of late is preemptive consultation:

[C]onsultation can be used as a sword—a preemptive strike that forces U.S. agencies to consult before taking action in Indian country—as well as a shield to guard from federal and private attacks on Indian sovereignty. As it stands, several federal agencies freely enforce their prerogative over tribes, under the guise of so-called federal laws of general applicability and increasingly with federal court approval. Still, at each stage of federal encroachment or enforcement, federal law requires consultation with tribal officials.

See e.g. "ATF Withdraws PACT Act FAQs; Downgrades Tobacco Investigations?"

As counter-intuitive as it might be for tribes to bring their enemies close (as Sun Tzu and Michael Corleone both advise), that is exactly what those tribes that are involved in online and are under federal siege, should do in hopes of regaining some battle ground. That is because if the FTC or CFPB violates normative protocols for pre-enforcement consultation between sovereigns, the agency can be sued under the APA and enjoined or stymied from proceeding. This strategy is fully discussed in "The Federal Indian Consultation Right: A Frontline Defense Against Tribal Sovereignty Incursion."

After all, what else, or how much longer, can the tribal online lending industry stand to lose?

Gabriel “Gabe” Galanda is the Managing Partner at Galanda Broadman. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California. Gabe can be reached at 206.300.7801 or gabe@galandabroadman.com.

Gabe Galanda Stumps Against Interior's Land Buy Back; Serves as Professor in Residence

This week, Gabe Galanda visited the University of Arizona College of Law in Tucson for a speech at the 2nd Annual Tribal Lands Conference, and a Professorship in Residence at the Indigenous Peoples Law & Policy Program. Gabe's speech at the Conference, which was themed "The Cobell Settlement Land Buy-Back Program for Tribal Nations," was titled: "The Perils of Indian Law Buy Back." He explained that "while Interior’s plan disclaims any facilitation of forced sales under 25 U.S.C. 2204(a), the $1.55 Billion in 'buy back' monies will catalyze controversial intra-tribal forced sales."

Gabe further explained how any such forced sale could violate various federal laws, including the Fifth Amendment of the U.S. Constitution and the United States' trust fiduciary duty at common law, as well as international human rights law, including Articles 1 and 10 of the United Nations Declaration on the Rights of Indigenous Peoples and Article 11 of the Rights of Man and of the Citizen. His slides are available here, and his prior published commentaries are here.

During his Professorship in Residence, Gabe engaged indigenous law students during a program moderated by Dean Marc Miller, in the development series called "A Conversation With...," which features prominent law school alumni. He also delivered a lecture to Professor Ray Austin's class titled, "Tribal Economic Development: Looking Through the Prism of Indian Taxation & Sovereign Immunity."

In his lecture, Gabe explained very recent developments in federal Indian law regarding the powers of tribal taxation, sovereign immunity and territorial authority. His slides are available here.

Gabriel “Gabe” Galanda is the Managing Partner of Galanda Broadman PLLC, of Seattle, an American Indian owned law firm. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California. Gabe can be reached at 206.300.7801 or gabe@galandabroadman.com.

2nd Circuit Gets Stupid With IGRA

In a horrid opinion in Mashantucket Pequot v. Town of Ledyard, the Second Circuit scrutinized IGRA's tax preemption provision, 25 U.S.C. 2710(d)(4), which provides:

nothing in this section shall be interpreted as conferring upon a State or any of its political subdivisions authority to impose any tax, fee, charge, or other assessment upon an Indian tribe or upon any other person or entity authorized by an Indian tribe to engage in a class III activity.

Astonishingly, the Second Circuit held that this provision somehow does not operate to outlaw state taxes on Class III slot machine vendors, meaning on "entit[ies] authorized by an Indian tribe to engage in a class III activity." The panel reasoned that “IGRA does not directly preempt, by its text of by plain implication. . . . IGRA addresses state taxation, without prohibiting taxes." Wow.

Indeed, in the way of judicial realism, the Second Circuit overlooked contrary interpretations of 2710(d)(4) by its sister circuits. Consider, for example, what panels in Cabazon II (9th Cir. 1994) and Rincon (9th Cir. 2010), have said about that statute over the last two decades:

Cabazon II: “IGRA preempts the State of California from taxing offtrack betting activities on tribal lands.” Rincon: “[N]othing in IGRA can reasonably be construed as conferring on states the power to impose anything [fees or taxes]; all the states are empowered to do is negotiate.” Id.: “Under 2710(d)(4), it is not only ‘taxes’ that are precluded, it is any ‘tax, fee, charge, or other assessment.’”

We've now arguably got a circuit split. Until that--heaven forbid--might ever be resolved on high, gaming tribes in the West should be protected from the state tax man under cover of Cabazon II and Rincon. Those mega-gaming tribes in the Northeast, maybe not so much.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe assists tribal governments and businesses in all matters of tribal economic development and diversification, including entity formation and related tax strategy. He also helps tribes and tribal businesses and joint ventures withstand attack from federal, state and local government. Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

Oregon Tribal Lawyer Anthony Broadman Talks About Cities' Role in the Future of Indian Gaming

This month's edition of Indian Gaming magazine leads with an article by Bend, Oregon tribal lawyer Anthony Broadman about the increasingly pervasive role of cities in budding Indian gaming developments.

Where do businesses target high density customer bases? Where can tribal governmental gaming expand in the post-exclusivity age? The answer to both questions is the same: Cities. As tribes seek new markets, and novel revenue sources, we are seeing an uptick in conflicts in connection with attempts to capture urban gaming markets. These are both the Hail-Mary lawsuits of anti-gambling community organizations and high-level intergovernmental disputes among cities, states, the BIA, and competing tribal governments.

Anthony Broadman is a partner at Galanda Broadman PLLC. He can be reached at 206.321.2672, anthony@galandabroadman.com, or via www.galandabroadman.com.

Galanda, Broadman and Dreveskracht's Law Review Articles Named to Prof. Matthew Fletcher's Must-Read List

Leading American indigenous rights scholar Professor Matthew Fletcher has published, "American Indian Legal Scholarship and the Courts: Heeding Frickey’s Call," in the March 2013 volume of California Law Review.

In the article, he cites law review articles by Gabe Galanda, Anthony Broadman and Ryan Dreveskracht, respectively, in "a list of articles produced in the five years or so since Frickey’s call that...have overcome the law review market’s hurdles to meet Frickey’s criteria."

In harkening the late Prof. Philip P. Frickey's call "for dramatic changes to the goals and methodologies of American Indian legal scholarship...in favor of more grounded and empirical scholarship, work that could inform the Court about the realities on the ground in Indian country," Prof. Fletcher concludes his paper with "a celebration of the impact Frickey’s call already has had on the academy":

[S]everal American Indian legal scholars are doing their damnedest to meet Frickey’s call. Federal and state judges are not the only audience. Legal scholarship is for practicing attorneys; tribal, state, and federal leaders; and many others, too. And so I conclude this short paper with my own reading list of recent work that unquestionably fulfills the call for new realism in American Indian legal scholarship. I include articles dating back five years or so that meet one or more of the criteria articulated by Frickey. I also add a list of excellent “nuts and bolts” articles.

Prof. Fletcher's "must-read" list includes:

Gabriel S. Galanda, Arbitration in Indian Country: Taking the Long View, 65 DISP.RESOL.J., Nov. 2010-Jan. 2011, at 30.

Anthony Broadman, Know Your Enemy: Local Taxation and Tax Agreements in Indian Country, AM. INDIAN L.J., Trial Issue 2012, at 1.

Ryan David Dreveskracht, Native Nation Economic Development Via the Implementation of Solar Projects: How to Make It Work, 68 WASH.&LEE L.REV. 27 (2011).

Gabe, Anthony and Ryan are truly honored by Prof. Fletcher's citation to and inclusion of their law review scholarship in his most important paper regarding the state and future of American Indian legal scholarship.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  Trained by the American Arbitration Association, Gabe arbitrates disputes between tribal and non-tribal governments and other parties, as well as mediates such disputes.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Anthony Broadman is also a partner at the firm, practicing in Bend, Oregon. His practice focuses on company-critical business litigation and representing tribal governments, especially in federal, state and local tax controversy. Ryan Dreveskracht is an associate at the firm. His practice focuses on representing businesses and tribal governments in public affairs, energy, gaming, taxation, and general economic development.

Brighter Days for Tribal Green Energy

Despite dark and dreary partisan gridlock in Washington, DC, rays of light are emanating from within the Beltway and upon renewable energy projects in Indian Country.

First, the Fiscal Cliff bill extended both the production and investment tax credits for renewable energy projects.  Previously, these tax credits were only available for wind projects that were completed by 2012 and biomass, landfill gas, and waste-to-energy projects completed by the end of 2013.

Thanks to the Fiscal Cliff bill, these credits have both been extended until the end of 2014.  These incentives provide a credit against federal income tax liability for electricity produced by renewable energy projects.  The amount of the credit is based on either (1) the number of kilowatt hours of electricity produced by the taxpayer and sold to an unrelated party in a given year (production tax credits) or (2) the expenditures made before the project is placed in service and for which the taxpayer has made an election to treat the expenditures as progress expenditures (investment tax credits).  Together, these incentives can be leveraged to fund around 30% of a project's costs.

The bill also extends both the Indian employment tax credit and the accelerated depreciation incentive.  Both of these incentives help encourage renewable energy development and energy independence in Indian country by lowering the operating and development costs of these projects.

The accelerated depreciation incentive allows Indian Country energy investors to use shorter recovery periods when calculating depreciation deductions for its production equipment.   “Qualified Indian reservation property” must be used predominately in the active conduct of a trade or business on the Reservation and must be 3-, 5-, 7-, 10-, 15-, or 20-year property or non-residential real property.  “Qualified infrastructure property” that is located off-reservation, but connected to qualified infrastructure within the reservation, is also eligible for shorter recovery periods.

Power lines, water systems and telecommunication facilities are examples of qualified infrastructure property.  Real property rented to others on an Indian reservation is also eligible for an accelerated depreciation schedule.  Because the shorter recovery periods for qualified Indian and infrastructure property are in addition to the normal expense deduction of up to $100,000 for such assets, the depreciation tax savings to non-Indian manufacturers could also be significant.  The bill reauthorizes the provision until 2014.

The Indian Employment Tax Credit provides businesses with an incentive to hire individuals who are enrolled members of an Indian tribe (or the spouse of an enrolled member) and who live on or near an Indian reservation.  A $4,000 tax credit is available to such businesses each tax year, for each “qualified employee” that is paid “qualified wages.”

A qualified employee must: (1) be an enrolled member of an Indian tribe or the spouse of a tribal member; (2) perform substantially all of his or her services for the business on the reservation; and, (3) reside on or near the reservation.  Qualified wages are any wages the business pays or incurs for services performed by a qualified employee, including health insurance costs.  The bill retroactively extended the program to December 31, 2013.

In addition to the Fiscal Cliff bill, the IRS has recently issued a ruling that is highly favorable to Indian energy development partners looking to take advantage of tax credits.  In IRS Ruling No. 201310001 the IRS determined that  “an Indian tribal government is  neither a governmental unit described in § 50(b)(4) nor an organization exempt from tax imposed by Chapter 1 for purposes of § 50” of the Internal Revenue Code.

Although counterintuitive, this is a good thing.  Because IRC § 50(b)(3) provides that no investment credit “shall be determined . . . with respect to any property used by an organization . . . which is exempt from the tax imposed,” entities wishing to invest in tribal energy projects were potentially ineligible for pass-through investment credits.  This ruling, however, means that tribes may now “elect to pass investment credits associated with the Renewable Energy Assets” to non-Indian lessees.  As discussed above, the ability to pass these investment credits onto non-Indian partners can be leveraged to fund a large piece of a project’s startup costs.

In all, the days ahead for tribal green energy development projects just got a bit brighter.

Ryan Dreveskracht is an Associate at Galanda Broadman, PLLC.  His practice focuses on representing businesses and tribal governments in public affairs, energy, gaming, taxation, and general economic development.  His recent publication in the Energy Law Journal, "Alternative Energy in American Indian Country: Catering to Both Sides of the Coin," is available here.   He can be reached at 206.909.3842 or ryan @galandabroadman.com.

Gabe Galanda Stumps On "Modern Federal Indian Tax Implications for Tribal Economic Development"

On March 13, Gabe Galanda spoke at the RES 2013 conference in Las Vegas, regarding tribal tax issues.  Here is his presentation Modern Federal Indian Tax Implications for Tribal Economic Development.  He addresses the following recent Indian tax developments:

Fiscal Cliff: Indian Country Tax Incentives Restored

Federal Leasing Regulations: Indian Country Tax Relief

PACT Act: Awful Precedent for State Taxation of N2N Commerce

Trending: State Taxation of Indian Country’s “Fringes”

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe assists tribal governments and businesses in all matters of tribal sovereignty and self-governance, especially in legal opposition to federal, state and local government encroachment.  Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

Washington Tribal Lawyer Gabe Galanda to Discuss Indian Tax Issues (Twice) at RES 2013

Gabe Galanda has been invited by the National Center for American Indian Enterprise Development (NCAIED) to speak on two Indian taxation panels at RES 2013 in Las Vegas, Nevada, the premier tribal economic development and diversification conference in the country.  He will speak on March 13.

Track 4: TAXATION, Part 1 – IRS Tax Implications on Tribes, Tribal Enterprises and Tribal members. Tribes and intertribal organizations have formed the Intertribal Organization Tax Initiative (IOTI) to carry out united tribal action to confront new forms of intrusion into the sovereign affairs of tribes by federal and state taxation policies. Tribal governments have had to defend against expansive Internal Revenue Service (IRS) examinations and audits of tribal government services to members. Tribal governmental and economic development programs have been hindered by the more burdensome federal tax requirements imposed on tribes than on state governments. Meanwhile, states continue to seek mechanisms to obtain state revenues from tribal commerce. This break-out session, featuring representatives of the IOTI Tax Initiative, will report on key tax policy developments and what to expect in the coming year, including pending IRS guidelines on the General Welfare exclusion and tribal proposals for tax reform legislation as well as other tax policy efforts that have been undertaken to defend tribal sovereignty, strengthen nation-building and stimulate economic development.

Moderator: Susan Masten – Vice-Chairwoman, Yurok Tribe and Vice-Chairwoman Board of Directors, National Center for American Indian Enterprise Development Kitcki Carroll – Executive Director, United South & Eastern Tribes, Inc. F. Michael Willis, Partner, Hobbs Straus Dean & Walker, LLP. Gabriel Galanda – Partner, Galanda Broadman, PLLC Dante Desiderio – Executive Director, Native American Finance Officers Association

Track 4: TAXATION, Part 2 – Tribal Tax Revenue Opportunities for Tribes. Moderator: Larry Kinley CEO, Lummi Commercial Company and Member Board of Directors, National Center for American Indian Enterprise Development Gabriel Galanda – Partner, Galanda Broadman, PLLC Robert Porter – Senior Counsel, SNR Denton Robert Whitener – Owner, The Whitener Group, LLC

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe assists tribal governments and businesses in all matters of tribal sovereignty and self-governance, especially in legal opposition to federal, state and local government encroachment.  Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.