APPEAL OF BRUNT, Docket No. 2869.
| Decision Date | 21 October 1926 |
| Docket Number | Docket No. 2869. |
| Citation | 5 BTA 134 |
| Parties | APPEAL OF LEAH BRUNT, ADMINISTRATRIX, ESTATE OF THEODORE S. BRUNT. |
| Court | U.S. Board of Tax Appeals |
T. J. Leahy, Esq., for the petitioner.
Ellis W. Manning, Esq., for the Commissioner.
The question is whether income received by a member of the Osage tribe of Indians, derived from the oil and gas rights of the tribe, is taxable. It is stipulated that if the income in question is held to be taxable there is for 1919 an overpayment of $43.37 and for 1920 a deficiency of $150.39.
FINDINGS OF FACT.
Leah Brunt is the administratrix of the estate of Theodore S. Brunt, who during his lifetime was an enrolled member of the Osage tribe of Indians and sustained tribal relations with said tribe in Oklahoma. During 1920 there was distributed to him $5,000 as his pro rata share of the proceeds from the sale of oil leases by the Osage tribe of Indians, and $4,900 as his pro rata share of royalties from oil and gas leases theretofore made by said tribe under regulations approved by the Secretary of the Interior. These amounts were paid to the decedent through the Osage Indian Agency at Pawhuska, Okla.
The question presented affects all restricted Indians of the Osage tribe. It applies particularly to the years 1919 and 1920, and therefore its decision is not affected by the fact that citizenship has since been conferred upon the Osages. The facts are stipulated by the parties but they do not disclose the exact status of the decedent, except his enrollment as a member of the Osage tribe. Whether he was certified as competent by the Secretary of the Interior under the Allotment Act of 1906, does not appear, but from the briefs we assume that no such certificate had been issued. If this assumption is erroneous our decision is nevertheless the same, as will appear.
The theory upon which the Commissioner asserts the tax in question is in short compass, being simply that since by the Revenue Act of 1918, sections 210 and 211, a tax is imposed "upon the net income of every individual," there being no exception expressly applicable either to the Indian as a subject of the tax or to the income in question as an item of gross income "from whatever source derived," the tax here is expressly imposed. The petitoner argues that the Osage tribe is a political entity not within the taxable class enumerated in the statute; that its property is held in trust by the Government for the tribe, the income not being subject to tax against the tribe or upon distribution against the members of the tribe, and that the Sixteenth Amendment does not authorize the tax. Bringing these two opposing arguments together, it will be seen that they require an exhaustive examination into the nature and scope of the relation between the United States and the Indian, with full regard for the history of that relation, in order that the decision reached may not bring about an inconsistency between the policy of Congress in Indian affairs and its policy in tax legislation. This is not to say that our decision may be founded upon our conception of legislative policy rather than upon the clear intendment of the taxing statute, but only that, when we are called upon to construe the Revenue Act we may not so far disregard other existing legislation as to bring about a conflict so that a clearly evinced purpose of Congress may be obstructed. See New York, Ontario & Western Ry. Co., 1 B. T. A. 1172.
The history of Indian affairs need not be elaborately dealt with here.1 The Supreme Court outlined it generally in Matter of Heff, 197 U. S. 488, as follows:
In the early dealings of the Government with the Indian tribes the latter were recognized as possessing some of the attributes of nations, with which the former made treaties, and the policy of the Government was, sometimes by treaties and sometimes by the use of force, to put a stop to the wanderings of these tribes and locate them on some definite territory or reservation, there establishing for them a communal or tribal life. While this policy was in force, and this location of wandering tribes was being accomplished, much of the legislation of Congress ran in the direction of the isolation of the Indians, preventing general intercourse between them and their white neighbors in order that they might not be defrauded or wronged through the superior cunning and skill of those neighbors. The practice of dealing with the Indian tribes as separate nations was changed by a proviso inserted in the Indian appropriation act of March 3, 1871 (16 Stat. 566; carried into section 2079 Rev. Stat.), which reads: "No Indian nation or tribe within the territory of the United States shall be acknowledged or recognized as an independent nation, tribe, or power with whom the United States may contract by treaty." From that time on the Indian tribes and the individual members thereof have been subjected to the direct legislation of Congress which, for some time thereafter, continued the policy of locating the tribes on separate reservations and perpetuating the communal or tribal life.
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Of late years a new policy has found expression in the legislation of Congress — a policy which looks to the breaking up of tribal relations, the establishing of the separate Indians in individual homes, free from national guardianship and charged with all the rights and obligations of citizens of the United States.
This decision was overruled in United States v. Nice, 241 U. S. 591, in which the power of Congress to regulate the sale of liquor to Indian allottees was upheld.
As to the status of the Indian and the tribe, see Elk v. Wilkins (1884), 112 U. S. 94, in which it is said:
The Indian tribes, being within the territorial limits of the United States, were not, strictly speaking, foreign States; but they were alien nations, distinct political communities, with whom the United States might and habitually did deal, as they thought fit, either through treaties made by the President and Senate, or through acts of Congress in the ordinary forms of legislation. The members of those tribes owed immediate allegiance to their several tribes, and were not part of the people of the United States. They were in a dependent condition, a state of pupilage, resembling that of a ward to his guardian.
The court said in United States v. Kagama (1886), 118 U. S. 375:
They were, and always have been, regarded as having a semi-independent position when they preserved their tribal relations; not as States, not as nations, not as possessed of the full attributes of sovereignty, but as a separate people, with the power of regulating their internal and social relations, and thus far not brought under the laws of the Union or of the State within whose limits they resided.
And in Choate v. Trapp (1912), 224 U. S. 665:
The Tribes have been regarded as dependent nations, and treaties with them have been looked upon not as contracts, but as public laws which could be abrogated at the will of the United States.
See also Roff v. Burney, 168 U. S. 218.
Prior to allotment the Indians' title to land in the reservations was restricted to that of occupancy alone, the United States retaining the fee. Jones v. Meehan, 175 U. S. 1. See also Cherokee Nation v. Hitchcock, 187 U. S. 294. The right in the timber was not complete, as it did not include the right to cut for commercial sale. United States v. Cook, 19 Wall. 591; Beecher v. Wetherby, 95 U. S. 517. After allotment with an express provision for tax exemption of the land, the right to the exemption from state tax was as good as the title to the allotted land itself. Choate v. Trapp, 224 U. S. 665, so held, and the court said:
The patent and the legislation of Congress must be construed together, and when so construed they show that Congress, in consideration of the Indians' relinquishment of all claim to the common property, and for other satisfactory reasons, made a grant of land which should be non-taxable for a limited period. The patent issued in pursuance of those statutes gave the Indian as good a title to the exemption as it did to the land itself. Under the provisions of the Fifth Amendment there was no more power to deprive him of the exemption than of any other right in the property. No statute would have been valid which reduced his fee to a life estate, or attempted to take from him ten acres, or fifty acres, or the timber growing on the land. After he accepted the patent the Indian could not be heard, either at law or in equity, to assert any claim to the common property. If he is bound, so is the tribe and the Government when the patent was issued.
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The provision that "all land shall be non-taxable" naturally indicates that the exemption is attached to the land — only an artificial rule can make it a personal privilege. But if there is any conflict between the natural meaning and the technical construction, — if there were room for doubt, or if there were any question as to whether this was a personal privilege and repealable, or an incident attached to the land itself for a limited period, that doubt, under this rule, must be resolved in favor of the patentee.
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There have been comparatively few cases which discuss the legislative power over private property held by the Indians. But those few all recognize that he is not excepted from the protection guaranteed by the Constitution. His private rights are secured and enforced to the same extent and in the same way as other residents or citizens of the United States. In re Heff, 197 U. S. 488, 504; Cherokee Nation v. Hitchcock, 187 U. S. 294, 307; Smith v. Goodell, 20 Johns. (N. Y.) 188; Lowry v. Weaver, 4 McLean, 82; Whirlwind v. Von der Ahe, 67 Mo. App. 628; Taylor v. Drew, 21 Arkansas, 485, 487. His right of private property is not subject to impairment by legislative action, even while he is, as a member of a tribe and subject...
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