Negative Ninth Circuit Indian Property Tax Precedent in the Making

Last Thursday a Southern California federal court handed down an Indian property tax ruling that is of potentially significant negative implication for tribes in the Ninth Circuit.

U.S. District Court Judge Dolly Gee issued a summary judgment decision in favor of Riverside County and against the Agua Caliente Band of Cahuilla Indians, affirming state possessory interest taxes (“PIT”) assessed by the County and imposed on non-Indian lessees who use and occupy Indian trust land within the Agua Caliente Indian Reservation.  

A couple things of note:

First, the Court ruled that Section 465's preemption applied only to "lands or rights that were placed in the United States’ name in trust for the Indian’s benefit under the IRA or the Act of July 28, 1955—neither of which are at issue." This is a significant clarification, given that the best, if not only, way to win Indian tax preemption cases these days is under a federal statute or regulation.

Second, the United States, as amicus curiae in the case, contended "that the comprehensiveness of the federal and regulatory scheme governing the leasing of Indian land, coupled with the federal interest in tribal sovereignty, 'weigh heavily against state and local taxation.'” But although finding those federal interests "strong" under Bracker, the Court found that they "must nonetheless yield to . . . state interests." United States intervention--whether as a party or friend of the court--had previously been seen as tipping Bracker balancing in favor of tribes.

Expect that if the decision stands on appeal to the Ninth Circuit Court of Appeals, state revenue agents will have a field day enhancing use taxes like PIT, to circumvent property tax preemption. 

Gabriel S. Galanda is the managing lawyer of Galanda Broadman, PLLC, in Seattle. Gabe is a descendant of the Nomlaki and Concow Tribes, belonging to the Round Valley Indian Tribes of Northern California. 

One To Watch: State Court Class Action Over Wapato Point Excise Taxation & BIA Leasing Regulations

A Wapato Point sublessee has filed a class action lawsuit in Grant County, Washington, against the Chelan County Treasurer to obtain a refund of Washington State real estate excise taxes on "transactions involving the assignment of subleases of real property and improvements thereon situated on Indian land."

Wapato Point is a famed Colville Indian allotment along the shores of Lake Chelan, Washington, a major tourist destination.

Plaintiff sued on behalf of all persons "who have been subjected to the imposition of Washington real estate excise tax on transactions involving transfers or assignments of leasehold interests on Indian property situated in the state of Washington."  Presumably at least the Plaintiff, if not the entire putative class of persons, is non-Indian. The size of that class and scope of any tax refunds from those transfers or assignments---use privileges---remains to be seen.

Plaintiff was allowed to sue the Chelan County Treasurer in Grant County Superior Court under a Washington state statute that allows county defendants to be sued in an adjoining county, in order to eliminate any home-court advantage for county government.  The Grant County Superior Court likely has minimal experience with Indian legal or jurisdictional issues. 

The lynchpin to the Plaintiff's lawsuit are the BIA's following leasing regulations, which took effect in January 2013 and which are rooted in federal statute, specifically 25 U.S.C. 465:

Plaintiff's case finds support in the Eleventh Circuit Court of Appeals' decision last year in Seminole Tribe of Florida v. Stranburg, most notably this passage

§ 465 precludes state taxation of that “bundle of privileges that make up property or ownership of property.” See id. at 158, 93 S.Ct. at 1275. The ability to lease property is a fundamental privilege of property ownership. By taxing the “privilege” of “engag[ing] in the business of renting, leasing, letting, or granting a license for the use of any real property,” the State of Florida is taxing a privilege of ownership just as New Mexico's tax in Mescalero taxed the privilege of use. . . . In conclusion, we hold that Florida's Rental Tax is expressly precluded by 25 U.S.C. § 465, and, in the alternative, is preempted by the comprehensive federal regulation of Indian land leasing. 

The real estate excise taxes at issue certainly seem to implicate the privilege of "leasing, letting, or granting a license for the use" of the Wapato Point lands at issue in the Grant County suit.

Presumably, in addition to arguing federal statutory exemption, Plaintiff will also argue Bracker preemption.  Bracker, the Supreme Court test that generally governs the taxation of non-Indians in Indian Country, is among the "federal law" referenced in the quoted BIA leasing regulations.  

As with all Indian tax cases, the Grant County suit will prove to be a fierce battle against state taxing forces, especially given the venue in deeply red (GOP) rural America; the financial implications of the proposed class action for both Chelan County and the state; and Washington State Department of Revenue (DOR)'s general aversion to the BIA's leasing regulations.  DOR can be expected to somehow back the Chelan County Treasurer in defense of the suit.

Complicating things further, the balancing of tribal (Colville) and federal interests may occur without a tribal party to the suit. Historically speaking, both of those interests needed to be aggressively developed by Indian parties for Bracker interest-balancing to be meaningful. Today, however, federal laws like § 465 coupled with the BIA leasing regulations may suffice to balance those two interests.

In all, the case is one to watch, closely.

Gabriel S. Galanda is the managing lawyer of Galanda Broadman, PLLC, in Seattle. Gabe is a descendant of the Nomlaki and Concow Tribes, belonging to the Round Valley Indian Tribes of Northern California. He thanks Leslie Cushman for brainstorming the implications of this new lawsuit with him.

Five Galanda Broadman Tribal Lawyers Receive Professional Accolades

Super Lawyers magazine has named Gabe Galanda (Round Valley) a Super Lawyer, and honored Anthony Broadman, Ryan Dreveskracht, Joe Sexton and Amber Penn-Roco (Chehalis) as Rising Stars, all in the field of Native American Law.  Each lawyer was evaluated on twelve indicators of peer recognition and professional achievement. 

Chambers USA 2017 also recently named Gabe as one of the best lawyers in the country in the field of Native American Law.  Chambers, headquartered in London, identifies and ranks the world's best lawyers and law firms based on in-depth, objective research.

Galanda Broadman, “An Indian Country Law Firm,” is dedicated to advancing tribal legal rights and Indian business interests.  With offices in Seattle and Yakima, Washington and Bend, Oregon, the firm represents tribal governments, businesses and citizens in critical litigation, business and regulatory matters, especially in matters of Indian Treaty rights, tribal sovereignty, and civil rights.

IHS Issues Guidance Re: Nooksack Disenrollment, Health Care, Drinking Water

On Friday, the federal Indian Health Service (IHS) issued a set of Frequently Asked Questions (FAQs) regarding the disenrollment-fueled annihilation at Nooksack, after holding two listening sessions in Bellingham last month.  

The federal guidance is unprecedented, especially as to disenrollment, a subject that the federal government typically does not touch. A few excerpts:

Q: Is IHS taking our funding because of the Nooksack 306 members?

A: No; the IHS cannot engage in an ISDEAA contract with the Nooksack Indian Tribe until the Department of Interior determines the Tribe is acting in accordance with the Tribe's Constitution and Bylaws. The holdover council does not have standing to represent the Nooksack Indian Tribe in a government-to-government relationship with the Indian Health Service, as well as other federal agencies.

Q: Is the IHS determining who represents the Nooksack Indian Tribe?
A: No, the Department of the Interior is the lead for the federal government in issues involving tribal governance.

Q: Is our tribal clinic closing?

A: The IHS cannot say whether the tribal clinic will remain open; that is a decision only the Tribe can make. However, after June 13, 2017, the IHS will not have any relationship with the tribal clinic and the tribal clinic will no longer have access to the cost-savings and tort coverage it receives as an ISDEAA contractor.

Q: What actions are being taken by the Environmental Protection Agency (EPA) to ensure safe drinking water for the Nooksack Tribal Community?

A: According to the March 27, 2017, letter from the EPA the Tribe failed to meet drinking water regulations. The EPA has issued Unilateral Administrative Orders that took effect on April 10, 2017.

Q: What has IHS done to help the Nooksack Tribal community have safe drinking water?

A: IHS engineers and utility consultants have provided the Tribe with technical assistance to help meet the EPA regulatory requirements.

Q: Can IHS do more to provide additional support to ensure Nooksack Tribal community has safe drinking water?

A: IHS utility consultants maintain communication with members from the tribal water utility and will continue technical assistance. However, IHS cannot assist with constructing improvements to the community water systems until the Tribal Council governance issues are resolved.

Galanda Broadman, PLLC, represents over 330 Nooksack Tribal members, including but not limited to at least 50 members who are not proposed for disenrollment but simply want a Tribal Council election to be conducted.

Casino ATM Provider Claiming Federal Indian Tax Preemption, Dissed by Wash. State Superior Court

By Anthony Broadman

An appeal of a Washington state trial court order will test the reach of IGRA and Bracker preemption of taxes on non-Indians providing services to Tribal casinos in the state. 

Everi Payments provides ATM services to Tribal casinos in Washington.  The Washington Department of Revenue (DOR) has assessed Everi over $1.4 million in “B&O taxes,” our state’s gross receipts tax.

Everi sued DOR in Thurston County Superior Court, which granted summary judgment to DOR, holding that federal law does not preempt B&O taxes on ATM services provided to Tribal casinos.

Everi Payments has appealed that decision to Division Two of the Washington State Court of Appeals.  Given the likelihood the case will eventually ascend to the Washington State Supreme Court, remains one to watch.

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.

Washington DOR Issues Tax Guidance on Tribal Firework Sales

DOR's memo, issued on Monday, is here.  An excerpt:

Sales of fireworks delivered to the tribe’s citizens are exempt from sales tax; however, when sales are made to non-Indians from the tribal fireworks vendor, those sales are subject to sales tax.

The memo signals that the state intends to give greater attention to the taxation of fireworks sales to non-Indians this summer.