543 F.2d 1253 (9th Cir. 1976), 75-1485, Fort Mojave Tribe v. San Bernardino County
|Citation:||543 F.2d 1253|
|Party Name:||The FORT MOJAVE TRIBE, by and through its Tribal Council in Class Action on behalf of all members of said Tribe, Plaintiff-Appellant, v. The COUNTY OF SAN BERNARDINO, a political subdivision of the State of California, Defendant-Appellee.|
|Case Date:||September 28, 1976|
|Court:||United States Courts of Appeals, Court of Appeals for the Ninth Circuit|
Raymond C. Simpson (argued), Palos Verdes Estates, Cal., for plaintiff-appellant.
Robert R. Walker, Deputy County Counsel (argued), San Bernardino, Cal., for defendant-appellee.
Before GOODWIN and SNEED, Circuit Judges, and KING, [*] District judge.
SNEED, Circuit Judge:
This case requires us to determine whether a possessory interest tax may be imposed on non-Indian lessees of property held in trust by the United States Government for reservation Indians. Five years ago we held, in Agua Caliente Band of Mission Indians v. County of Riverside, 442 F.2d 1184 (9th Cir. 1971), cert. denied, 405 U.S. 933, 92 S.Ct. 930, 30 L.Ed.2d 809 (1972), that such a tax was valid. The trial judge in the instant case found Agua Caliente to be controlling. We continue to support the holding of that case. We consider it proper, however, to look closely at the specific status of the Fort Mojave Indians in deciding whether the rationale of the Agua Caliente case should be applied to this situation. Also, it is important to review this area of the law in the light of recent Supreme Court decisions concerning taxation by state and local governments affecting Indians.
I. Factual Situation.
The Fort Mojave Tribe is organized under the provisions of the Indian Reorganization Act of 1934, 48 Stat. 984, 25 U.S.C. §§ 461-479 (hereinafter called the "Act"), unlike the Agua Caliente Band. Thus the Fort Mojave Indians operate under a recognized system of self-government, with a constitution and a business charter which cannot be revoked or surrendered except by Act of Congress. All reservation land is held in trust for the Fort Mojave Tribe as a whole; no individual allotments were ever made under the General Allotment Act of 1887, 25 U.S.C. § 331 et seq.
The Fort Mojave Indians, as part of a plan for the economic development of their reservation, have entered into several 99-year leases with non-Indian lessees. The major development plans include a resort and housing project, as well as the possibility of building a major nuclear power plant. The reservation is located within three states, California, Nevada and Arizona. Since California is the only one of these three states that imposes a possessory interest tax, 1 development of the California section of the reservation may be slowed. 2 The Indians are opposing the California tax because they want to be able to make leasing decisions without regard to the state in which the property is located. The Indians also object to the California tax because they have their own possessory interest tax. They fear that this "double taxation" will further impede development.
II. Analytic Framework.
The Supreme Court recently has outlined the general framework by which Indian jurisdiction and taxation cases are to be analyzed. In McClanahan v. Arizona State Tax Commission, 411 U.S. 164, 93 S.Ct. 1257, 36 L.Ed.2d 129 (1973) the Court states that "the trend has been away from the idea of inherent Indian sovereignty as a bar to state jurisdiction and toward reliance on federal pre-emption." Although the Indian sovereignty doctrine is still relevant,
"because it provides a backdrop against which the applicable treaties and federal statutes must be read," it is no longer the proper major focus of analysis. McClanahan, supra at 172, 93 S.Ct. at 1262. Instead we must carefully analyze the applicable federal statutes to determine whether state action has been pre-empted. If not, the state statute need only satisfy the test laid down in Williams v. Lee, 358 U.S. 217, 79 S.Ct. 269, 3 L.Ed.2d 251 (1958), viz. that it not infringe on the rights of reservation Indians to make their own laws and be ruled by them. We turn now to an analysis of the applicable statutes as illumined by recent Supreme Court decisions.
III. Analysis of Statutes.
The Indian Reorganization Act
The Indians' major argument is that their status as a self-governing tribe organized under the provisions of the Indian Reorganization Act precludes the imposition of this tax by the County of San Bernardino. Section 16 of the Act 25 U.S.C. § 476 provides that "the constitution adopted by said tribe shall also vest in such tribe or its tribal council the following rights and powers . . . to prevent the sale, disposition, lease or encumbrance of tribal lands, interests in lands, or other tribal assets without the consent of the tribe." The Indians argue that the imposition of a possessory interest tax on the lessee encumbers their reversionary interest in the land. Alternatively, they argue that the lease itself is an "other asset" of the tribe which is encumbered if subject to taxation. We reject these arguments as going beyond the expressed Congressional intent in enacting the Act to further the achievement of economic independence for the Indians and the establishment of effective systems of tribal self-government. H.R.Rep.No.1804, 73d Cong., 2d Sess. 6 (1934).
While the imposition of a possessory interest tax on the leasehold interest will have an economic effect on the Indian lessors, and perhaps, although not certainly, will reduce the amount of rent they will be able to collect the legal incidence of the tax clearly falls on the lessee. 3 The lessor will never be personally liable for any delinquent taxes arising under this taxing statute. Agua Caliente Band of Mission Indians v. County of Riverside, supra at 1186. Cal.Rev. & Tax.Code, § 107; cf. Palm Springs Spa, Inc. v. County of Riverside, 18 Cal.App.3d 372, 95 Cal.Rptr. 879 (1971). Under these circumstances, there cannot be a direct encumbrance on the lessor's reversionary interest. Similarly, the lease, apart from the lessor's reversionary interest, even if considered an asset of the tribe, is not directly encumbered simply because the amount of the tax is determined by the value of the leasehold. Whatever may be the scope of the indirect burden placed on the lessor's interest in this case, we hold that it is not sufficient to constitute an encumbrance of an "interest in land or other tribal asset."
Our conclusion is buttressed by the Supreme Court's decision in Mescalero Apache Tribe v. Jones, 411 U.S. 145, 93 S.Ct. 1267, 36 L.Ed.2d 114 (1973). There the Court, relying on the statement that section 476 of the Act was designed to encourage tribal enterprises "to enter the white world on a footing of equal competition," 78 Cong.Rec. 11732, found that traditional tax immunities had neither been expanded nor reduced by the Act. Mescalero, supra at 153-54 n.9, 93 S.Ct. 1267. Because the court would not imply tax exemptions absent clear statutory guidelines it upheld the imposition of a state tax on the gross receipts of a ski resort operated by the Mescaleros on land located outside the boundaries of their reservation. We follow that lead here and refuse to find that the Act created a tax exemption for non-Indian lessees of Indian land. Congress has given no clear indication that such a result was desired. When such a signal is given, the state and local governments must retreat.
We turn to another relevant federal statute. California is one of the five states
mandated by PL-280 to exercise both civil and criminal jurisdiction over the Indian country within their borders. Thus, both the Agua Caliente Band and the Fort Mojave Tribe are subject to California jurisdiction. Section 4(b) of PL-280, 28 U.S.C. § 1360(b), specifically provides that the grant of civil jurisdiction precludes taxation of "any real or personal property . . . belonging to any Indian or any Indian tribe." We interpreted that language in Agua Caliente as not forbidding the imposition of a possessory interest tax on the lessee of Indian property. Agua Caliente, supra at 1187.
This holding has been strengthened by the Supreme Court's recent holding that PL-280 left traditional tax immunities intact, despite a transfer of civil jurisdiction to certain states. Bryan v. Itasca County, 426 U.S. 373, 96 S.Ct. 2102, 48 L.Ed.2d 710 (1976);...
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