Heiner v. Colonial Trust Co Lewellyn v. Same

Citation275 U.S. 232,72 L.Ed. 256,48 S.Ct. 65
Decision Date21 November 1927
Docket Number220,Nos. 219,s. 219
PartiesHEINER, Collector of Internal Revenue, v. COLONIAL TRUST CO. LEWELLYN, Former Collector of Internal Revenue, v. SAME
CourtUnited States Supreme Court

The Attorney General and Mr. Wm. D. Mitchell, Sol. Gen., of Washington, D. C., for petitioners.

Messers. R. C. Allen and I. J. Underwood, both of Tulsa, Okl., and Charles Alvin Jones and M. W. Acheson, Jr., both of Pittsburgh, Pa., and John W. Davis, of New York City, for respondent.

Mr. Justice STONE delivered the opinion of the Court.

Respondent's decedent procured an oil lease from the Tribal Council of the Osage Tribe of Indians covering land of the Tribe in Oklahoma. The lease was in the form prescribed by the Secretary of the Interior and was approved by him. The lessor reserved as royalties an agreed percentage of the gross proceeds from the sale of the oil produced, to be paid to the Superintendent of the Osage Indian Agency. On the net income derived by decedent from the sale of the oil between 1917 and 1921 there were assessed and collected income taxes aggregating more than $800,000. Respondent brought these suits in the District Court for Western Pennsylvania to recover the tax paid, on the theory that, as the interests of the Indians were concerned, Congress had not intended by the various revenue acts to tax the income derived from the exploitation of their lands by non-Indian lessees, and that it was thus impliedly exempt from the tax. Judgments of the District Court for respondent (Colonial Trust Co. v. Heiner, 12 F.(2d) 481) were affirmed by the Circuit Court of Appeals for the Third Circuit (17 F.(2d) 36), and the cases are here on certiorari, the parties having stipulated that No. 220 shall abide the result in No. 219.

Section 1(a) of the Revenue Act of 1916, (Chapter 463, 39 Stat. 756 (Comp. St. § 6336a)) provides:

'That there shall be levied, assessed, collected, and paid annually upon the entire net income received in the preceding calendar year from all sources by every individual, a citizen or resident of the United States, a tax * * *' at specified rates.

Section 2(a) of the Revenue Act of 1916, as amended by the act of 1917 (chapter 63, 40 Stat. 300, 329 (Comp St. § 6336b)), provides:

'That, subject only to such exemptions and deductions as are hereinafter allowed, the net income of a taxable person shall include gains * * * growing out of the * * * use of or interest in real or personal property also (gains) from * * * the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever.'

The pertinent sections of the later revenue acts during the period do not differ materially from those quoted from the 1916 act. Act Feb. 24, 1919, c. 18, §§ 210, 213, 40 Stat. 1057, 1062, 1065; Act Nov. 23, 1921, c. 136, §§ 210, 213, 42 Stat. 227, 233, 237 (Comp. St. §§ 6336 1/8 e, 6336 1/8 ff).

These statutes in terms plainly embrace the income of a non-Indian lessee derived from the lease of restricted Indian lands. But we are reminded by respondent that both the lease here involved and the income it brings the lessee are beyond the taxing power of the states, for the lease is merely the instrument which the government has chosen to use in fulfilling its task of developing to the fullest the lands and resources of its wards, and a state may not by taxation lessen the attractiveness of leases for such a purpose, Gillespie v. Oklahoma, 257 U. S. 501, 42 S. Ct. 171, 66 L. Ed. 338; Indian Oil Co. v. Oklahoma, 240 U. S. 522, 36 S. Ct. 453, 60 L. Ed. 779. And see Choctaw, O. & Gulf R. R. v. Harrison, 235 U. S. 292, 35 S. Ct. 27, 59 L. Ed. 234; Jaybird Mining Co. v. Weir, 271 U. S. 609, 46 S. Ct. 592, 70 L. Ed. 1112. And reliance is placed on those cases indicating that general acts of Congress are not applicable to the Indians where to apply them would affect the Indians adversely. Washington v. Miller, 235 U. S. 422, 427,...

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