Agua Caliente Band of Indians v. Riverside Cnty.
| Decision Date | 08 February 2016 |
| Docket Number | Case No. ED CV 14-0007 DMG (DTBx) |
| Court | U.S. District Court — Central District of California |
| Parties | Agua Caliente Band of Cahuilla Indians v. Riverside County, et al. |
David J. Masutani, AlvaradoSmith APC, Los Angeles, CA, Catherine F. Munson, Kilpatrick Townsend and Stockton LLP, Washington, DC, Mark H. Reeves, Kilpatrick Townsend and Stockton LLP, Augusta, GA, Rob Roy E. Smith, Kilpatrick Townsend and Stockton LLP, Seattle, WA, for Agua Caliente Band of Cahuilla Indians.
Ronak N. Patel, Riverside, CA, Benjamin S. Sharp, Jennifer A. Maclean, Mark Harrison Foster, Jr., Perkins Coie LLP, Washington, DC, Meredith R. Weinberg, Perkins Coie LLP, Seattle, WA, Roderick E. Walston, Best Best and Krieger LLP, Walnut Creek, CA, for Riverside County, et al.
Proceedings: IN CHAMBERS—ORDER RE DEFENDANTS' MOTION FOR JUDGMENT ON THE PLEADINGS [42]
Present: The Honorable DOLLY M. GEE, UNITED STATES DISTRICT JUDGE
On January 2, 2014, the Agua Caliente Band of Cahuilla Indians ("the Tribe") filed a Complaint ("Compl.") against Defendants Riverside County, Larry W. Ward, Paul Angulo, and Don Kent alleging unlawful taxation by Riverside County on lessees using and occupying Indian Trust land within the Tribe's Reservation. [Doc. # 1.] The Tribe seeks (1) a declaration that the assessment and collection of taxes on lessees' possessory interest in lands and permanent improvements on lands held in trust by the United States for the benefit of the Tribe and its members are unlawful and (2) an injunction against Riverside County's future assessment or collection of these taxes. (Id. ¶ 4.)
On February 18, 2014, the Desert Water Agency ("DWA") moved to intervene as a defendant in the Tribe's suit. [Doc. # 17.] On April 21, 2014, the Court granted DWA's motion to intervene permissively. [Doc. # 34.]
On July 28, 2014, Defendants filed a Motion for Judgment on the Pleadings ("MJP") as to the Tribe's action against the County, but not as to any claims against DWA. [Doc. # 42.] On June 25, 2014, the Tribe filed an opposition to the MJP ("MJP Opp."). [Doc. # 43.] On June 27, 2014, Defendants filed a response in support of the MJP ("MJP Reply"). [Doc. # 45.]
On August 27, 2014, the Court ordered supplemental briefing from both parties on arguments raised for the first time in Defendants' Reply, namely that 25 C.F.R. § 162.017(c) is invalid because it exceeds the authority of the Bureau of Indian Affairs, and that 25 C.F.R. § 162.017(c) does not preempt the County's possessory interest taxes because the regulation states that it is "subject to applicable federal law." [Doc. # 46.]
On September 17, 2014, Defendants filed a supplement to the MJP ("Supp MJP").
[Doc. # 49.] On October 8, the Tribe filed a supplemental opposition to the MJP ("Supp. Opp."). [Doc. # 50.] On October 15, 2014, the DWA filed a supplemental reply in support of the MJP ("Supp. Reply."). [Doc. # 56.]
On October 15, 2014, the National Intertribal Tax Alliance ("NITA") filed an amicus curiae brief with the permission of the court. [Doc. # 55.] On November 25, 2014, Barbara Etherington, Roger Etherington, Judith Fabris, and Heidi L. Herpel filed an amicus curiae brief with the permission of the court. [Doc. # 77.]
On June 29, 2015, the Court granted the Tribe's motion for partial voluntary dismissal of its claims as to the DWA's ad valorem tax, groundwater replenishment fee, and water service charge. [Doc. # 107.]
On August 27, 2015, the Tribe filed a notice of supplemental authority. [Doc. # 110.] On August 28, 2015, DWA filed a response to the notice of supplemental authority. [Doc. # 111.] On August 31, 2015, the Country of Riverside filed a response to the notice of supplemental authority. [Doc. # 112.]
Having duly considered the parties' written submissions, the Court DENIES Defendants' motion for judgment on the pleadings.
The Tribe is a federal recognized sovereign Indian tribe operating under a Constitution and by-laws approved by the Commissioner of Indian Affairs on April 18, 1957 (as amended). (Compl. ¶ 5.) The Tribe is composed of Cahuilla Indians who have lived in the Coachella Valley "since time immemorial." (Id. ¶ 10.) The Tribe brings this action on its own behalf and as parens patriae on behalf of its members, a substantial number of whom are lessors of trust land within the Tribe's reservation. (Id. ¶ 5.)
Riverside County is a municipal governmental entity. (Id. ¶ 6.) Larry W. Ward is sued in his official capacity as the Riverside County Assessor, Paul Angulo is sued in his official capacity as the Riverside County Auditor-Controller, and Don Kent is sued in his official capacity as the Riverside County Treasurer-Tax Collector. (Id. ¶¶ 7-9.)
The lands at issue are part of the Tribe's Reservation, which was established on May 15, 1876 by an executive order of President Ulysses S. Grant from lands in the Coachella Valley. (Id. ¶ 11.) The Reservation was expanded by an executive order of President Rutherford B. Hayes on September 29, 1877, and currently covers more than 31,396 acres of land within the exterior geographic boundaries of Riverside County, all of which is within the Tribe's aboriginal territory. (Id. ) As a sovereign Indian nation, the Tribe has legal jurisdiction over its Reservation lands, and has enacted a number of statutes and ordinances regulating the use and possession of those lands, including a comprehensive land use ordinance, building and safety code, environmental laws, and tribal tax code. (Id. ¶ 12.)
Much of the land comprising the Reservation is held in trust by the United States for the benefit of the Tribe and its members ("trust lands"). (Id. ¶ 13.) The trust lands are subject to numerous federal statutes and regulations that govern their use and disposition, including standards and requirements for surface leasing of the trust lands. (Id. ¶ 14.)
Subject to the approval of the United States Secretary of the Interior and various applicable federal statutes and regulations, the Tribe and its members lease certain parcels of Reservation trust land for commercial development and other purposes. (Id. at ¶ 15.) There are approximately 20,000 master leases, mini-master leases, subleases, and sub-subleases for use and occupancy of Reservation trust land. (Id. ¶ 16.) These leases are subject to an array of federal statutes governing the lease of Indian trust land, such as 25 U.S.C. § 415 (), and regulations, such as 25 C.F.R. § 162 et seq . (promoting and regulating leasing on Indian land for housing, economic development, and other purposes). (Id. ) Many of the leased parcels of the trust lands include permanent improvements, which are either owned outright by the Indian lessor or owned by the lessee for the term of the lease with a reversionary ownership interest in the Indian lessor that vests upon expiration or termination of the least. (Id. ¶ 17.)
Both the Tribe and Tribal member lessors derive critical income from these surface leasing interests. (Id. ¶ 18.) The income generated from the leasing of Reservation trust lands and associated improvements plays a critical role in funding the Tribe's government, its ability to provide governmental services to tribal members, and the ability of the Tribe and its members to be economically self-sufficient. (Id. )
Defendants currently assess, levy, and collect a possessory interest tax ("PIT") on the lessees of the Reservation trust lands and permanent improvements thereon. (Id. ¶ 19.) A taxable possessory interest exists where a person or entity leases, rents, or uses real property owned by a government agency for its exclusive use. (Id. )2 The PIT is assessed against the person or entity in possession of the property. (Id. ¶ 20.) The county assessors use the income, comparative sales, or cost approach to determine the value of the possessory interest. (Id. ¶ 23.) As applied on the Tribe's reservation, the PIT is therefore based on the value of the trust lands and permanent improvements erected on the trust lands. (Id. )
The PIT is a general revenue-generation tax that has no direct bearing on or nexus with services provided by Riverside County to the Tribe or its members. (Id. at ¶ 24.) The majority of Riverside County's PIT revenues are spent or otherwise disbursed outside of the Tribe's Reservation. (Id. ) Defendants spend a substantial percentage of PIT revenues collected from the Tribe's Reservation outside the Coachella Valley. (Id. )
The levying of the PIT against lessees of the trust lands lowers the lands' lease value, and the economic burden of the PIT falls at least in part on the Tribe and its members. (Id. ¶ 21.) Collection of the PIT also limits the Tribe's tax revenue. (Id. ¶ 22.) In order to avoid double taxation of lessees, the Tribe has voluntarily agreed to hold its lawful tribal tax in abeyance until Defendants cease the assessment and collection of the PIT. (Id. )
On January 4, 2013, a new federal regulatory scheme governing the taxation of Reservation trust lands went into effect. (Id. ¶ 25.) The regulations state, inter alia , that:
Subject only to applicable Federal law, the leasehold or possessory interest is not subject to any fee, tax, assessment, levy, or other charge imposed by any State or political subdivision of a State. Leasehold or possessory interests may be subject to taxation by the Indian tribe with jurisdiction.
25 C.F.R. § 162.017(c).3 The Bureau of Indian Affairs ("BIA") Federal Register notice describing the new regulations states that the federal statutes and regulations governing leasing on Indians lands "occupy and preempt the field of Indian leasing," and that the federal statutory scheme is "comprehensive" and "pervasive," such that it "precludes State taxation." 77 Fed. Reg. 72440-01 (Dec. 5, 2012).
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...contradicted by exhibits incorporated into the complaint by reference, as the EOBs are here. Agua Caliente Band of Cahuilla Indians v. Riverside Cty. , 181 F. Supp. 3d 725, 732 (C.D. Cal. 2016) ("A court must construe the factual allegations in the pleadings in the light most favorable to t......
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...contradicted by exhibits incorporated into the complaint by reference, as the EOBs are here. Agua Caliente Band of Cahuilla Indians v. Riverside Cty., 181 F. Supp. 3d 725, 732 (C.D. Cal. 2016) ("A court must construe the factual allegations in the pleadings in the light most favorable to th......
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