Dark-Eyes v. Com'R of Revenue Services, No. 17140.

• Decision Date: 03 January 2006
• Docket Number: No. 17140.
• Citation: 887 A.2d 848,276 Conn. 559
• Court: Connecticut Supreme Court
• Parties: Jo-Ann DARK-EYES v. COMMISSIONER OF REVENUE SERVICES.

Page 848

887 A.2d 848

276 Conn. 559

Jo-Ann DARK-EYES v. COMMISSIONER OF REVENUE SERVICES.

No. 17140.

Supreme Court of Connecticut.

Argued September 6, 2005.

Decided January 3, 2006.

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Mark T. Kelly, with whom was David Wayne Winters, Cheshire, for the appellant (plaintiff).

Richard Blumenthal, attorney general, with whom was Susan Quinn Cobb, assistant attorney general, for the appellee (defendant).

Kevin T. Kane, state's attorney, and Sarah E. Steere, assistant state's attorney, filed a brief for the New London state's attorney's office as amicus curiae.

David S. Williams, Norwich and Donald Laverdue, pro hac vice, filed a brief for the Mashantucket Pequot Tribe as amicus curiae.

Lloyd L. Langhammer, Norwich, Donald C. Baur, pro hac vice, Washington, DC, and Jena A. MacLean, pro hac vice, filed a brief for the town of Ledyard et al. as amici curiae.

SULLIVAN, C.J., and NORCOTT, KATZ, PALMER and VERTEFEUILLE, Js.

KATZ, J.

The issue in this tax appeal is whether the plaintiff, Jo-Ann Dark-Eyes, an enrolled member of the federally recognized Mashantucket Pequot Tribe (tribe), was subject to state income tax on income she derived from sources within the tribe's reservation while living on property owned by the tribe and designated by the United States Congress as "private settlement lands" pursuant to the Mashantucket Pequot Indian Claims Settlement Act (settlement act), 25 U.S.C. §§ 1751 through 1760. The plaintiff appeals from the judgment rendered by the trial court dismissing her tax appeal, which challenged the assessment of the 1996, 1997 and 1998 income taxes by the defendant, the commissioner of revenue services. The plaintiff principally claims that, because she resided in "Indian country," as that term is defined under 18 U.S.C. § 1151,¹ during the taxable years in question, she was exempt from state income tax. She also claims that: (1) the assessment of state income tax on enrolled members of the tribe living in the state violates the federal constitution, absent the express consent of Congress; and (2) the department of revenue services regulation under which the defendant determined that the plaintiff was not entitled to an exemption as an enrolled member of a federally recognized tribe is void due to an impermissible delegation of authority. We affirm the judgment of the trial court.

The following undisputed facts and procedural history are relevant to our disposition of the plaintiff's appeal. In 1976, the tribe filed a lawsuit in which it asserted aboriginal or tribal title to land in and around the town of Ledyard claiming that, in 1855, approximately 800 acres of land had been conveyed out of tribal hands without congressional approval, in violation of the nonintercourse provisions of the Trade and Intercourse Act of 1790 (now codified at 25 U.S.C. § 177), thereby placing a cloud on the title to privately and publicly held land. The tribe, the affected private landholders and the state negotiated a tentative settlement that included, inter alia, extinguishing the tribe's aboriginal claims to the disputed land in exchange for federal recognition of the tribe, fee simple title to certain reservation lands and the establishment of a fund to purchase land from willing sellers within a designated 800 acre area in Ledyard (private settlement lands). In 1983, Congress enacted the settlement act to embody the agreement reached by the parties, thus authorizing the appropriation of settlement funds. 25 U.S.C. § 1754(a).² The settlement funds were available for the funding of economic development and for the purchase of private settlement lands, which, by operation of the act, were to be held in trust by the United States for the tribe's benefit. 25 U.S.C. § 1754(a) and (b). The act imposed a January, 1985 deadline for drawing on the fund for the purchase of the private settlement lands, after which time unused funds were to be disbursed for use toward economic development for the tribe. 25 U.S.C. § 1754(b)(2).

In 1993, the tribe purchased with nonsettlement moneys property located at 59 Coachman Pike in Ledyard (Coachman property), which was located within the area designated under the settlement act as private settlement lands. The plaintiff, a Connecticut resident and an enrolled member of the tribe, resided on the Coachman property from November 1, 1993, through September 30, 1998. The tribe held title to the Coachman property in fee simple until August 25, 1998, at which time, pursuant to a petition filed by the tribe under 25 U.S.C. § 465,³ a provision of the Indian Reorganization Act, the United States government accepted the property into trust for the tribe's benefit as a part of the tribe's reservation.

During 1996, 1997 and 1998 (taxable years), the plaintiff earned income from the Mashantucket Pequot Tribal Council. For each of the taxable years, she filed a Connecticut resident tax return claiming that she was exempt from the state income tax as an enrolled member of the tribe who resided in and earned her income from sources within Indian country.⁴

The defendant rejected the plaintiff's claim, the department of revenue services (department) having found that the Coachman property was not Indian country until it was taken into trust by the United States government in August, 1998.⁵ The department first acknowledged that, in accordance with § 12-702(c)(1)-3 of the Regulations of Connecticut State Agencies,⁶ which defines Indian country in accordance with the federal definition of that term under 18 U.S.C. § 1151, "income earned by enrolled members of a federally recognized tribe who reside in Indian country and whose income is derived from or connected with sources within Indian country is exempt from Connecticut income tax." See Regs., Conn. State Agencies § 12-702(c)(1)-3 (a). The department concluded, however, that a narrower definition of Indian country than that generally applied under § 1151 applies to this particular tribe, limiting Indian country to "only those settlement lands (as defined in the [settlement act] . . .) that have been taken in trust by the United States for the benefit of the Mashantucket Pequot Tribe as part of the reservation."⁷ (Citation omitted.) The plaintiff filed an administrative appeal from the ruling, and by letter, which constituted a "determination or disallowance of the [defendant]," the appellate division issued a final determination upholding the denial of the exemption.

The plaintiff then appealed from the department's decision to the Superior Court pursuant to General Statutes § 12-730.⁸ The parties filed cross motions for summary judgment and a stipulation of facts, on which the trial court rendered judgment in favor of the defendant dismissing the appeal, concluding that the plaintiff was not exempt from state income tax because she did not reside in Indian country during the period at issue. The trial court first reasoned that, under the settlement act, property within the private settlement lands that was purchased with the tribe's moneys, as opposed to settlement funds, could not become part of the tribal reservation unless and until the United States took the land into trust for the tribe under § 465 of the Indian Reorganization Act. The court, therefore, determined that the Coachman property was not part of the tribe's reservation during the taxable years. The trial court then concluded that Indian country, under the settlement act, encompasses only the tribe's reservation and, accordingly, the Coachman property was not Indian country during the period in question. The court also rejected the plaintiff's contention that the property was a "dependent Indian community" and, therefore, Indian country as defined generally under § 1151(b). It reasoned that: (1) the Coachman property "ha[d] not been set aside by the federal government for the use of the [tribe] as Indian land"; and (2) although the tribe had the option of transferring the Coachman property to be held in trust by the United States during the taxable years, the federal government did not exercise the type of active control over that property required for the tribe to be considered dependent during that period. Accordingly, the trial court dismissed the plaintiff's appeal. This appeal followed.⁹

On appeal, the plaintiff principally claims that the trial court improperly concluded that the Coachman property was not Indian country prior to being taken into trust because the court: (1) failed to apply the definition of Indian country under 18 U.S.C. § 1151, which includes dependent Indian communities; and (2) concluded that, even if § 1151 could apply, the property was not a dependent Indian community. The plaintiff also claims that the trial court improperly failed to conclude that the state's assessment of an income tax on enrolled members of the tribe living in the state violates the federal constitution and constitutes an impermissible delegation of authority to the defendant.¹⁰

The defendant counters that the settlement act provides a narrower definition of Indian country supplanting the broader definition under § 1151 that generally is applied under federal law. The defendant contends that the Coachman property is not Indian country under the settlement act because the property was not purchased with settlement funds and thereby automatically taken into trust, as required under that act. The defendant further claims that, even if the broader definition of Indian country under § 1151 controls, the Coachman property does not constitute a dependent Indian community under that section, as claimed by the plaintiff. Finally, the defendant contends that the assessment of income tax neither was unconstitutional nor an ultra vires act. Upon a review of the settlement act and other relevant federal authorities, we agree with the defendant that the Coachman property did not constitute Indian country during the taxable years in question. We also...