Big Eagle v. United States
Decision Date | 09 May 1962 |
Docket Number | No. 158-59.,158-59. |
Parties | Hayes BIG EAGLE (1), Ruby Bolton (2), and Charles Whitehorn (3) v. The UNITED STATES. |
Court | U.S. Claims Court |
Philip R. Miller, Washington, D. C., with whom was Asst. Atty. Gen., Louis F. Oberdorfer, for defendant. Edward S. Smith and Eugene Emerson, Washington, D. C., were on the brief.
This case was referred pursuant to Rule 45, 28 U.S.C. to Trial Commissioner Marion T. Bennett, with directions to make findings of fact and recommendations for conclusions of law. The commissioner has done so in a report filed July 27, 1961. Plaintiffs elected to submit the case on the commissioner's report without brief. Defendant filed its exceptions to the commissioner's report and brief and the case was submitted to the court on oral argument by counsel for the parties. Since the court is in agreement with the findings and recommendations of the trial commissioner, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case. Plaintiffs, therefore, are entitled to recover and judgment, together with interest as provided by law, will be entered in favor of plaintiffs Hayes Big Eagle (1) in the sum of $151, Ruby Bolton (2) in the sum of $172.39 and Charles Whitehorn (3) in the sum of $96.01.
It is so ordered.
This is a tax refund case before the court pursuant to its jurisdiction under 28 U.S.C. §§ 1346(a) (1) and 1491. The issue is whether royalty income from Osage tribal mineral deposits credited to the individual trust accounts of noncompetent Osage Indians is exempt from Federal income tax. The essential facts are stipulated.
Prior to the Osage Allotment Act of June 28, 1906, 34 Stat. 539, the Osage reservation was held by the United States in trust for the Osage tribe. By the act, the tribal lands and funds were equally divided among the 2,229 tribal members. The lands were surveyed and allotted directly to individuals and the minerals were evenly divided through the provision for "headrights," which is the term used to describe a right to 1/2229th share of the distributable income from the minerals, plus a reversionary title to a like share of the minerals whenever the mineral trust terminates. The act provided that the royalties derived from the extraction of the minerals be placed in the United States Treasury and held in trust for a period of 25 years to the credit of the individual members of the tribe, subject to periodic distributions. By statutory amendment the trust period has been extended to 1983 (52 Stat. 1034, section 3). While the trust exists, legal title to the minerals is in the United States as trustee, but thereafter the minerals will vest absolutely in the allottees or their heirs. See section 2(7) and section 5 of the act, supra. These basic arrangements have not been changed in any of the 12 amendments to the act between 1906 and 1957.1
At all times material here, the plaintiff taxpayers were adult, fullblood, Osage Indians who have never received certificates of competency. In addition, Big Eagle is under guardianship. Each of the three individuals had inherited an interest in the Osage tribal trust fund as follows: Hayes Big Eagle, 1.47916 mineral headrights; Ruby Bolton, 1.00073 headrights; and Charles Whitehorn, 1.33333 headrights, of which one was his original headright and the remaining .33333 was inherited. For the calendar year 1953, the plaintiffs received mineral headright income as follows:
Hayes Big Eagle ............ $2,501.85 Ruby Bolton ................ 1,692.64 Charles Whitehorn .......... 2,255.20
The income listed above was all collected by defendant's duly authorized officers and credited to each petitioner's individual trust account. The funds were not distributed directly to them, for disbursements from the trust accounts could only be made upon application and according to their need as determined by the Secretary of Interior or his authorized representative.
The duly authorized agents of defendant at the Osage Indian Agency prepared Federal income tax returns for each of these plaintiffs covering the year 1953. The returns were filed on the following dates:
Hayes Big Eagle ...... June 18, 1954 Ruby Bolton .......... April 12, 1954 Charles Whitehorn .... June 10, 1954
The defendant by its officers paid itself as Federal income tax for 1953 the following sums: $151 from the trust account of Hayes Big Eagle; $172.39 from the trust account of Ruby Bolton; and $96.01 from the trust account of Charles Whitehorn. These funds were credited to the special tax account and periodically the Osage Agency transferred the accumulated funds in a lump sum to the Internal Revenue Service.
Timely claims for refund were filed on behalf of plaintiffs but denied by the District Director of Internal Revenue, as noted in the findings of fact. This suit followed.
No Federal income tax has heretofore been collected from the mineral right or headright income of noncompetent Osage Indians. Defendant now asserts that such income is taxable for two reasons. Defendant cites the broad provisions of the Internal Revenue Code of 1939 (26 U.S.C. §§ 11(a), 21(a), 22(a)), stating that said provisions impose a tax on the net income of "every individual" derived "from any source whatever." Defendant also says that the Osage Allotment Act, as amended, neither expressly nor impliedly confers tax exempt status on either the taxpayers themselves or on their headright income.
To refute the first defense, plaintiffs rely upon the decision of the U.S. Court of Appeals for the Tenth Circuit in Mary Blackbird v. Commissioner, 10 Cir., 38 F.2d 976, 977 (1930).2 The case is squarely in point. The identical issue was presented as to taxation of income from the mineral-based headrights of a noncompetent Osage Indian. These rights were held in trust by defendant. The court said:
The court in Blackbird also cited opinions by the Attorney General to the effect that it had never been the practice to legislate for the Indian generally along with the rest of the people and that legislation, especially revenue laws, should not be applied to Indians unless Congress in clear and unambiguous language so directed. 34 Ops. Att'y Gen. 439; 35 Ops. Att'y Gen. 4, 1107.
Following the Blackbird decision in 1930, the Revenue Service in 1936 again asserted its right to collect a tax under circumstances precluded by decision G. C.M. 16100, XV-1CB80. But, this ruling was revoked when it was realized that the decision in Blackbird constituted an estoppel of judgment. G.C.M. 18242, 1937-1CB57. The third assertion of taxability (G.C.M. 26399, 1950-2CB8) brings this case in issue. Defendant feels that under the rationale of Commissioner v. Sunnen, 333 U.S. 591, 68 S.Ct. 715, 92 L.Ed. 898, it is no longer collaterally estopped on account of the weakening of the Blackbird doctrine by the next two cases now referred to.
Defendant says that Blackbird's wings have been clipped by the Supreme Court and cites Chouteau v. Burnet, 283 U.S. 691, 51 S.Ct. 598, 75 L.Ed. 1353 (1931). Although the name is spelled differently in the references given, the Indian seems to be the same one involved in the Blackbird case, reference to whom is made in the preceding footnote. The case was before the Supreme Court to review a judgment of the Tenth Circuit Court of Appeals, affirming a decision of the Board of Tax Appeals, Chouteau v. Commissioner, 14 B.T.A. 1254. Chouteau was a competent Indian so certified. The Supreme Court quoted the Revenue Act of 1918 saying that the income of "every individual" is subject to tax "from any source whatever" and went on to say that the act does not expressly exempt the sort of "person having petitioner's status," which was that of a competent Indian, who, since receipt of his certificate of competence, had been taxable. The Court did not mention the Blackbird case nor go into the question of taxability of a noncompetent Indian except to suggest that in the case of Chouteau his income was beyond the control of the United States in the sense that he could use it as he pleased when he got it from the government and that the same was subject to tax when there is no intent definitely expressed by the statute to exempt...
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