Jourdain v. Comm'r of Internal Revenue
| Decision Date | 08 March 1979 |
| Docket Number | Docket No. 6021–76. |
| Citation | 71 T.C. 980 |
| Parties | ROGER A. JOURDAIN AND MARGARET E. JOURDAIN, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Held, a noncompetent Indian is taxable on compensation received as chairman of the tribal council from funds which had their source in receipts and revenues that the tribe as a whole derived directly from tribal lands. Walker v. Commissioner, 37 T.C. 962 (1962), affd. in part and revd. in part326 F.2d 261 (9th Cir. 1964), no longer followed. Held, further, petitioner not liable for negligence penalty. Rodney J. Edwards, for the petitioners.
Robert F. Cunningham, for the respondent.
Respondent determined deficiencies in petitioners' income tax and additions thereto as follows:
Due to a concession by respondent, the issues remaining for our consideration are: (1) Whether income received by petitioner Roger A. Jourdain from the Red Lake Band of Chippewa Indians Tribal Council for services rendered as its tribal chairman and other income earned by petitioner from private sources constitute taxable income or whether such items are exempt from income tax, and (2) whether the additions to tax under sections 6651(a) and 6653(a) 1 were properly imposed.
Some of the facts have been stipulated. The stipulation of facts, together with the exhibits attached thereto, are incorporated herein by this reference.
Petitioners Roger A. and Margaret E. Jourdain, husband and wife, filed joint income tax returns using the cash method of accounting for the years 1971 and 1972 with the Internal Revenue Service Center, Ogden, Utah. Petitioners resided at the Red Lake Indian Reservation, Red Lake, Minn., at the time their petition herein was filed. Because Margaret Jourdain is a petitioner herein solely by reason of her filing jointly with her husband, all references hereafter to petitioner are solely to Roger Jourdain.
Petitioners maintained their legal residence at Red Lake Indian Reservation, Red Lake, Minn., at all times material to this case. Both petitioners were and remain duly enrolled members of the Red Lake Band of Chippewa Indians. However, petitioners do not possess certificates of competency from the United States Government.2
The Red Lake Band of Chippewa Indians is an American Indian tribe. A peace treaty known as the Treaty of Greenville between the United States and several Indian tribes including the Chippewas was signed on August 3, 1795. The treaty provided, in pertinent part, as follows:
Indians have right to hunt on lands relinquished by U.S. & c.
To prevent any misunderstanding about the Indian lands relinquished by the United States in the fourth article, it is now explicitly declared, that the meaning of that relinquishment is this: The Indian tribes who have a right to those lands, are quietly to enjoy them, hunting, planting, and dwelling thereon so long as they please, without any molestation from the United States; but when those tribes, or any of them, shall be disposed to sell their lands, or any part of them, they are to be sold only to the United States; and until such sale, the United States will protect all the said Indian tribes in the quiet enjoyment of their lands against all citizens of the United States, and against all other white persons who intrude upon the same. And the said Indian tribes again acknowledge themselves to be under the protection of the said United States and no other power whatever.
Indians may expel settlers from their lands.
If any citizen of the United States, or any other white person or persons, shall presume to settle upon the lands now relinquished by the United States, such citizen or other person shall be out of the protection of the United States; and the Indian tribe, on whose land the settlement shall be made, may drive off the settler, or punish him in such manner as they shall think fit; and because such settlements made without the consent of the United States, will be injurious to them as well as to the Indians, the United States shall be at liberty to break them up, and remove and punish the settlers as they shall think proper, and so effect that protection of the Indian lands herein before stipulated.
Indians may hunt on lands ceded to U.S.
The said tribes of Indians, parties to this treaty, shall be at liberty to hunt within the territory and lands which they have now ceded to the United States, without hindrance or molestation, so long as they demean themselves peaceably, and offer no injury to the people of the United States.
Trade to be opened with the Indians.
Trade shall be opened with the said Indian tribes; and they do hereby respectively engage to afford protection to such persons, with their property, as shall be duly licensed to reside among them for the purpose of trade, and to their agents and servants; but no person shall be permitted to reside at any of their towns or hunting camps as a trader, who is not furnished with a license for that purpose, under the hand and seal of the superintendant of the department north-west of the Ohio, or such other person as the President of the United States shall authorize to grant such licences; to the end, that the said Indians may not be imposed on in their trade. And if any licensed trader shall abuse his privilege by unfair dealing, upon complaint and proof thereof, his licence shall be taken from him, and he shall be further punished according to the laws of the United States. And if any person shall intrude himself as a trader, without such license, the said Indians shall take and bring him before the superintendant or his deputy, to be dealt with according to law. And to prevent impositions by forged licences, the said Indians shall at least once a year give information to the superintendant or his deputies, of the names of the traders residing among them. [Reproduced literally.]
The Red Lake Band is located on the Red Lake Indian Reservation (hereafter reservation) within the boundaries of the State of Minnesota. The reservation consists of approximately 750,000 acres of common tribal land held in trust by the United States Government for the benefit of the Red Lake Band. The jurisdiction of the Red Lake Band extends to all land on the reservation in Minnesota. The Red Lake Band's governing body consists of eight district representatives and three officers (chairman, secretary, and treasurer) who make up the elected representatives of the tribal council. Petitioner has continuously served as council chairman since his first election to that office in 1959 through the date of trial of this case (March 1977).
At all relevant times, the Red Lake Band possessed the right of self-government. Its revised constitution and bylaws provide, in pertinent part, that ‘All reservation land shall remain tribal property and shall neither be sold or divided by allotment.’ Consequently, tribal property cannot be alienated or transferred by the Red Lake Tribal Council or any member of the Red Lake Band.
Other than a land-use permit issued to him by the Red Lake Band Council for a homesite and garden on the Red Lake Indian Reservation, petitioner, during the years at issue or at any time material herein, has never been the recipient of an allotment, as that term is commonly understood under the provisions of the General Allotment Act of 1887 (25 U.S.C.A. sec. 331 et seq.),3 or by reason of any agreement or treaty.
The tribal council has the authority, subject to limitations imposed by its constitution or laws of the Federal Government, to administer any funds within the control of the Red Lake Band, including payment of salaries and expenses of tribal officers or employees. All such salaries and expenses were authorized by resolution duly enacted by the Red Lake Band. The funds used to pay petitioner's salary were advances disbursed from trust funds held by the United States Government for the Red Lake Band. The trust fund consists of tribal receipts from royalties, leases, and other sources together with accrued interest earned on the tribal funds while held in trust by the Government. 4 These funds were distributed after approval by the Secretary of Interior through the Bureau of Indian Affairs (BIA), Red Lake Agency accounting office, by issuing checks to the Red Lake Band tribal treasurer in response to the tribal council's quarterly budget request, approved by tribal resolution, for operating funds. The budget request specified the amount the tribe was to receive for the administration of the tribal council. The funds were then disbursed by the treasurer of the Red Lake Band Council for operating expenses of the council, including officers' salaries. It was impossible to identify what part of the trust funds distributed to the tribe constituted principal and what part constituted interest earned on the principal while held in trust.
During the years 1971 and 1972, the tribal council paid petitioner income identified as chairman's salary in the amounts of $15,750 and $18,000, respectively. The tribal council withheld both income tax and FICA tax from petitioner's wages, and petitioner will be entitled to receive Social Security benefits when he becomes eligible. In addition to his salary as chairman, petitioner received funds totaling $266.92 and $290.38 in 1971 and 1972, respectively, from the tribal council in excess of his allowable employee business and travel expenses incurred on behalf of the tribal council. Petitioner did not include these amounts in gross income on either his 1971 or 1972 income tax returns.
Petitioner received additional income of $2,420 and $2,245 in 1971 and 1972, respectively,...
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