Anderson v. Wisconsin Dept. of Revenue, 91-0167
| Decision Date | 02 July 1991 |
| Docket Number | No. 91-0167,91-0167 |
| Citation | 473 N.W.2d 520,163 Wis.2d 1015 |
| Parties | John A. ANDERSON, Plaintiff-Appellant, d v. WISCONSIN DEPARTMENT OF REVENUE, Defendant-Respondent. |
| Court | Wisconsin Court of Appeals |
Michael D. Flanagan, Foley & Lardner, Milwaukee, for plaintiff-appellant.
James E. Doyle, Atty. Gen., and Gerald S. Wilcox, Asst. Atty. Gen., Madison, for defendant-respondent.
Before CANE, P.J., and LaROCQUE and MYSE, JJ.
John Anderson appeals a judgment affirming the Wisconsin Tax Appeals Commission determination that Anderson's income is subject to state income tax. Anderson contends that, although he resides off-reservation in Wisconsin, he is immune from state income tax for his on-reservation employment based on McClanahan v. State Tax Comm'n, 411 U.S. 164, 93 S.Ct. 1257, 36 L.Ed.2d 129 (1973). Anderson alternatively contends that state income tax on Indian income from reservation employment is an unreasonable interference with tribal sovereignty and has been preempted by federal law. We conclude that McClanahan is inapposite to the issue in this case and that Wisconsin's authority to tax income derived from on-reservation employment of a tribal member who resides off-reservation is neither an unreasonable interference with tribal sovereignty nor preempted by federal law. We therefore affirm the commission's determination.
The relevant undisputed facts are as follows. Anderson is an enrolled member of the Lac Courte Oreilles Band of the Lake Superior Chippewa Indians. The tribe employed him to work on the reservation in various educational activities. Anderson worked as a guidance counselor at the high school, as director of education for the tribe and as a public information officer for the elementary and high schools. Since 1982 he has served as the president of the Lac Courte Oreilles Community College. The elementary school, high school and college are funded primarily by federal sources.
Anderson did not file Wisconsin income tax returns for the calendar years 1980 through 1983. Anderson subsequently filed returns showing his income from off-reservation activities but exempting his on- reservation educational activities. The commission determined that because Anderson resided off-reservation, his income was subject to state income tax regardless of whether it was derived from on-reservation employment.
This case involves the application of law to undisputed facts. We may therefore substitute our conclusions for those of the Tax Appeals Commission and the trial court. DOR v. Milwaukee Brewers, 108 Wis.2d 553, 556, 322 N.W.2d 528, 529 (Ct.App.1982), aff'd, 111 Wis.2d 571, 577, 331 N.W.2d 383, 386 (1983). Because the only issue is a legal one and there is no evidence of any special agency expertise or experience and because the weight accorded the commission's determination does not affect the outcome, we give no weight to the agency determination. See Local No. 695 v. LIRC, 154 Wis.2d 75, 84, 452 N.W.2d 368, 372 (1990).
Wisconsin is a sovereign state authorized to impose taxes on those domiciled in Wisconsin. See Lawrence v. State Tax Comm'n, 286 U.S. 276, 279, 52 S.Ct. 556, 557, 76 L.Ed. 1102 (1932). Section 71.02(1), Stats., imposes a personal income tax upon "every natural person residing within the state." It is undisputed that Anderson is a resident of this state living in Hayward, Wisconsin, and is not domiciled on the reservation. Therefore, the clear and unambiguous provisions of the taxing statute apply to Anderson.
Anderson first contends that McClanahan precludes Wisconsin from levying a state income tax on a tribal member for work performed on the reservation. We conclude that McClanahan is inapposite to the issue before us. In McClanahan, the individual lived and worked on the reservation. The Court specifically limited its holding, stating, "this case involves the narrow question whether the State may tax a reservation Indian for income earned exclusively on the reservation." Id. at 168, 93 S.Ct. at 1260. The Court used the term "reservation Indian" to refer to an Indian living on the reservation, stating, for example, "Congress has consistently acted upon the assumption that the States lacked jurisdiction over Navajos living on the reservation." Id. at 175, 93 S.Ct. at 1264 (emphasis added). Because Anderson lives off-reservation, McClanahan does not preclude Wisconsin from taxing Anderson's on-reservation income.
Anderson next argues that Wisconsin's income tax places an impermissible burden on tribal sovereignty. Anderson cites Williams v. Lee, 358 U.S. 217, 79 S.Ct. 269, 3 L.Ed.2d 251 (1959), for the proposition that the state may not act to infringe on the tribe's right to self-governance. Anderson contends that the state may assert its authority only to the point at which state incursion would have an adverse effect on tribal self-government. See id. at 220, 79 S.Ct. at 270-71. Anderson maintains that the state income tax on Anderson's on-reservation income makes such an incursion. We disagree.
By imposing state income tax on Anderson, the state is not regulating or controlling Indian education so as to infringe on tribal sovereignty. Wisconsin is simply seeking to tax Anderson as reimbursement for the services rendered to him as a resident of the state. The incidence of this tax falls on Anderson because of his decision to live within the state rather than on the reservation. Anderson's choice of residence, not the nature of his employment, gives rise to his tax liability.
Anderson argues that the ultimate burden of the tax falls upon the tribe because, in order to compensate for the tax burden, the tribe must offer salaries larger than those that it would otherwise offer. Anderson argues that this tax thus restricts the tribe's ability to recruit qualified teachers and increases the tribe's financial burden in maintaining tribal educational activities. This argument also misses the mark. The state taxes Anderson based on his choice of residence, not from any attempt by the state to regulate tribal educational activities. The state concedes that if Anderson resided on the reservation, McClanahan would preclude the state from taxing Anderson's on-reservation income. The tribe's fears of the consequences flowing from the state's imposition of income tax on off-reservation residents working on the reservation is best resolved by tribal employees electing to reside on the reservation.
Anderson argues that Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 109 S.Ct. 1698, 104 L.Ed.2d 209 (1989), dictates that "[a]ny adverse effect on the Tribe's finances caused by the taxation of a private party contracting with the Tribe would be ground[s] to strike the state tax." However, this quote is taken out of context. In making this statement, the court was referring to what would be the result under the pre-1937 doctrine of intergovernmental tax immunity and, in this regard, stated, "we decline to return to this long-discarded and thoroughly repudiated doctrine." Id.
Anderson next argues that a comprehensive federal regulatory scheme governing Indian education has preempted the state's power to tax Anderson's on-reservation income. Anderson relies on Ramah Navajo School Bd. v. Bureau of Revenue, 458 U.S. 832, 102 S.Ct. 3394, 73 L.Ed.2d 1174 (1982), and White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 100 S.Ct. 2578, 65 L.Ed.2d 665 (1980), in making this assertion.
In Ramah, the Supreme Court held that federal...
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Anderson v. Wisconsin Dept. of Revenue
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