Confederated Tribes of the Chehalis Reservation v. Thurston Cnty. Bd. of Equal., 10–35642.

• Decision Date: 30 July 2013
• Docket Number: No. 10–35642.,10–35642.
• Citation: 724 F.3d 1153
• Parties: CONFEDERATED TRIBES OF the CHEHALIS RESERVATION, a federally recognized Indian tribe on its own behalf and as parens patriae for its members; CTGW, LLC, a limited liability company organized under Delaware law, Plaintiffs–Appellants, v. THURSTON COUNTY BOARD OF EQUALIZATION, a political subdivision of the State of Washington; John Morrison, Thurston County Board of Equalization member, in his official capacity; Bruce Reeves, Thurston County Board of Equalization member, in his official capacity; Thurston County, a political subdivision of the State of Washington; Steven Drew, Thurston County Assessor, in his official capacity; Shawn Myers, Thurston County Treasurer; Elizabeth Lyman, Thurston County Board of Equalization member, Defendants–Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

724 F.3d 1153

CONFEDERATED TRIBES OF the CHEHALIS RESERVATION, a federally recognized Indian tribe on its own behalf and as parens patriae for its members; CTGW, LLC, a limited liability company organized under Delaware law, Plaintiffs–Appellants,

v.THURSTON COUNTY BOARD OF EQUALIZATION, a political subdivision of the State of Washington; John Morrison, Thurston County Board of Equalization member, in his official capacity; Bruce Reeves, Thurston County Board of Equalization member, in his official capacity; Thurston County, a political subdivision of the State of Washington; Steven Drew, Thurston County Assessor, in his official capacity; Shawn Myers, Thurston County Treasurer; Elizabeth Lyman, Thurston County Board of Equalization member, Defendants–Appellees.

No. 10–35642.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted June 5, 2013.

Filed July 30, 2013.

Gabriel S. Galanda and Anthony S. Broadman, Galanda Broadman, PLLC, Seattle, WA; Kevin M. Fong (argued) and Blaine I. Green, Pillsbury Winthrop Shaw Pittman, LLP, San Francisco, CA, for Plaintiffs–Appellants.

Jon Tunheim, Prosecuting Attorney, Jane Futterman and Scott C. Cushing (argued), Deputy Prosecuting Attorneys, Olympia WA, for Defendants–Appellees.

Rob Roy Smith, Ater Wynne LLP, Seattle, WA, for Amicus Curiae Marine View Ventures, Inc., Island Enterprises, Inc., and Port Madison Enterprises.

Appeal from the United States District Court for the Western District of Washington, Benjamin H. Settle, District Judge, Presiding. D.C. No. 3:08–cv–05562–BHS.

Before: ARTHUR L. ALARCÓN, M. MARGARET McKEOWN, and SANDRA S. IKUTA, Circuit Judges.

OPINION

IKUTA, Circuit Judge:

At issue in this case is whether state and local governments have the power to tax permanent improvements built on non-reservation land owned by the United States and held in trust for an Indian tribe. Pursuant to 25 U.S.C. § 465, and Mescalero Apache Tribe v. Jones, 411 U.S. 145, 93 S.Ct. 1267, 36 L.Ed.2d 114 (1973), we hold that they do not.

I

The Confederated Tribes of the Chehalis Reservation is a federally recognized Indian tribe in Southwest Washington.¹ In 2002, the Tribe purchased approximately forty-three acres of land known as the “Grand Mound Property,” which was located off the Tribe's reservation in Thurston County, Washington. Two years later, the Tribe asked the Department of the Interior to buy the Grand Mound Property and hold it in trust for the use and benefit of the Tribe pursuant to the Department's authority under 25 U.S.C. § 465.²Section 465 authorizes the Secretary of the Interior to acquire “any interest in lands, water rights, or surface rights to lands, within or without existing reservations,” and to hold title to such lands and rights “in the name of the United States in trust for the Indian tribe or individual Indian for which the land is acquired.” The statute also provides that “such lands or rights shall be exempt from State and local taxation.” Id.³

In 2005, while the Tribe's request was still pending before the Department, the Tribe and Great Wolf Resorts, Inc. entered into an agreement to form CTGW, LLC, a Delaware limited liability company, for the purpose of building a resort, conference center, and water park (collectively, the Great Wolf Lodge) on the Grand Mound Property. Under the agreement, the Tribe owned an undivided 51 percent interest in CTGW. In 2006, the Department agreed to purchase the Grand Mound Property pursuant to § 465 and to hold the land in trust for the Tribe.

The Tribe and CTGW subsequently entered into a lease agreement that gave CTGW the right to use the Grand Mound Property “for a hotel, indoor water park and convention center and related economic development or for any other lawful purpose” for twenty-five years. Article 11 of that lease provides:

All buildings and improvements on the Premises shall be owned in fee by [CTGW] during the term of this Lease provided that such buildings and improvements (excluding removable personal property and trade fixtures) shall remain on the Premises after the termination of this Lease and shall thereupon become the property of the [Tribe].

In short, under Article 11, CTGW would own the Great Wolf Lodge's physical structures for twenty-five years, at which time the Tribe would become the owner. The Bureau of Indian Affairs approved the lease on July 9, 2007, and it remained in effect at all times relevant to this suit. The Lodge opened the following year.

In 2007, Thurston County began assessing property taxes on the Great Wolf Lodge. The County recognized that § 465 exempted the Grand Mound Property from state and local taxation. It concluded, however, that the structures on the land were not tax exempt, because under the terms of the lease they were owned by CTGW and not the Tribe.

The Tribe and CTGW believed that federal law barred the County from imposing these property taxes, and brought suit against the County and related defendants on September 18, 2008, seeking declaratory and injunctive relief. ⁴ The district court awarded summary judgment to the County, holding that state and local governments are not necessarily prohibited from taxing permanent improvements, like the Great Wolf Lodge, that are owned by non-Indians. The Tribe and CTGW timely appealed,⁵ and we have jurisdiction pursuant to 28 U.S.C. § 1291.

II

On appeal, we review the summary judgment order de novo, asking “whether, viewing the evidence in the light most favorable to” the Tribe and CTGW, “there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law.” Ellins v. City of Sierra Madre, 710 F.3d 1049, 1056 (9th Cir.2013) (quoting Delia v. City of Rialto, 621 F.3d 1069, 1074 (9th Cir.2010)). “[S]ummary judgment is appropriate where there ‘is no genuine issue as to any material fact’ and the moving party is ‘entitled to a judgment as a matter of law.’ ” Alabama v. North Carolina, 560 U.S. 330, 130 S.Ct. 2295, 2308, 176 L.Ed.2d 1070 (2010) (quoting Fed.R.Civ.P. 56(c)).

A

This appeal raises the purely legal question whether the exemption of trust lands from state and local taxation under § 465 extends to permanent improvements on such lands.

The law relevant to this appeal traces back to United States v. Rickert, 188 U.S. 432, 23 S.Ct. 478, 47 L.Ed. 532 (1903), a case that precedes the enactment of § 465 by over thirty years. In Rickert, the federal government challenged the taxes imposed by Roberts County, South Dakota on “certain permanent improvements” on lands within the former Sisseton Indian Reservation. Id. at 432–33, 23 S.Ct. 478. The United States had allotted the lands to individual members of the Sisseton band of Sioux Indians, but held the lands in trust for a period of twenty-five years or longer. Id. at 435–36, 23 S.Ct. 478 (discussing Act of Feb. 8, 1887, ch. 119, § 5, 24Stat. 388, 389 (1887) (codified as amended at 25 U.S.C. § 348 (2006))). Rickert first held that state and local governments had no power to tax the land itself because it was owned by the federal government. Id. at 437–39, 23 S.Ct. 478 (“If, as is undoubtedly the case, these lands were held by the United States ... it would follow that there was no power in the state of South Dakota, for state or municipal purposes, to assess and tax the lands in question until at least the fee was conveyed to the Indians.”). In reaching this conclusion, the Court relied on the proposition that “property of the United States was exempt by the Constitution of the United States from taxation under the authority of any state.” Id. at 438, 23 S.Ct. 478 (citing Van Brocklin v. Tennessee, 117 U.S. 151, 155, 6 S.Ct. 670, 29 L.Ed. 845 (1886)). The Court then turned to the related question whether “the permanent improvements, such as houses and other structures upon the lands held by allotment,” were subject to state and local taxes as personal property. Id. at 441–42, 23 S.Ct. 478. The Court held that the state and local governments had no power to tax these improvements, concluding that “[e]very reason that can be urged to show that the land was not subject to local taxation applies to the assessment and taxation of the permanent improvements.” Id. at 442, 23 S.Ct. 478.

Decades after Rickert, the Court again addressed the question whether state and local governments had the power to tax permanent improvements on non-reservation land owned by the United States and held in trust for Indians. See Mescalero Apache Tribe v. Jones, 411 U.S. 145, 93 S.Ct. 1267, 36 L.Ed.2d 114 (1973). In that case, the Mescalero Apache Tribe operated a ski resort on land located adjacent to reservation lands, but outside “the existing boundaries of the reservation.” Id. at 146, 93 S.Ct. 1267. Although the record did not establish the precise form of the business entity that was operating the ski resort, the Court quickly dispensed with this issue, reasoning that “the question of tax immunity cannot be made to turn on the particular form in which the Tribe chooses to conduct its business” Id. at 157 n. 13, 93 S.Ct. 1267. The Mescalero Apache Tribe challenged two taxes imposed on the ski resort by New Mexico: a tax on the ski resort's gross receipts, and a use tax “based on the purchase price of materials used to construct two ski lifts at the resort.” Id. at 147, 93 S.Ct. 1267. The Tribe argued that federal law barred the state from assessing either tax, because the Tribe's interest in the lands was “within the immunity afforded by § 465.” Id. at 155 n. 11, 93 S.Ct. 1267;see also id. at 146, 93 S.Ct. 1267.

The Court rejected the Tribe's argument with respect to the gross receipts tax, holding that § 465 exempted “lands and rights in land” from taxation, and “not income derived from [the land's] use.” Id. at 155, 93 S.Ct. 1267. But the Court struck down the use tax, reasoning that this form of tax was equivalent to a tax on land, and therefore barred by § 465. In reaching this conclusion, the Court...