Sac and Fox Nation v. Oklahoma Tax Com'n, s. 91-6236

• Decision Date: 16 June 1992
• Docket Number: 91-6237,Nos. 91-6236,s. 91-6236
• Citation: 967 F.2d 1425
• Parties: SAC AND FOX NATION, Plaintiff-Appellee and Cross-Appellant, v. The OKLAHOMA TAX COMMISSION, Defendant-Appellant and Cross-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1425

967 F.2d 1425

SAC AND FOX NATION, Plaintiff-Appellee and Cross-Appellant, v. The OKLAHOMA TAX COMMISSION, Defendant-Appellant and Cross-Appellee.

Nos. 91-6236, 91-6237.

United States Court of Appeals, Tenth Circuit.

June 16, 1992.

G. William Rice (N. Brent Parmer and Gregory H. Bigler with him on the briefs) of G. William Rice, P.C., Cushing, Okl., for plaintiff-appellee and cross-appellant.

David Allen Miley, Asst. Gen. Counsel (David Hudson, Gen. Counsel, with him on the briefs), Oklahoma Tax Com'n, Oklahoma City, Okl., for defendant-appellant and cross-appellee.

Before MOORE and BRORBY, Circuit Judges, and HUNTER, ^* District Judge.

BRORBY, Circuit Judge.

We are called upon here to resolve two issues arising from a conflict between the asserted taxing power of the State of Oklahoma and the tax immunity claimed by the Sac and Fox Nation, a federally recognized Indian tribe: (1) Whether the Oklahoma Tax Commission has legal authority to tax income derived from the Sac and Fox; and (2) whether the Oklahoma Tax Commission has legal authority to impose an excise tax and licensing fee on motor vehicles properly tagged by the Sac and Fox. We conclude the district court succinctly characterized the relevant issues and correctly applied existing precedent. We therefore affirm.

I. Background

Both parties appeal the district court's ruling on cross motions for summary judgment. ¹ Notably, neither party argues that summary judgment was procedurally incorrect due to the existence of a genuine issue of material fact. Instead, they challenge the legal determinations made by the district court after applying relevant authority to the stipulated facts. We review those determinations de novo. Brown v. Palmer, 944 F.2d 732, 733-34 n. 1 (10th Cir.1991) (citing Gonzales v. Millers Casualty Ins. Co., 923 F.2d 1417, 1419 (10th Cir.1991)).

Factually, the record reveals this dispute arises primarily on land held in trust by the United States Government for the benefit of the Sac and Fox (also referred to as "the Tribe"). These lands consist of Tribal headquarters which are located in central Oklahoma on a quarter section (160 acres) excepted from operation of the Sac and Fox Allotment Agreement Act of February 13, 1891; one section (640 acres) reserved from the Allotment Agreement for the Sac and Fox School; and remaining individual trust allotments owned by the Sac and Fox.

The Sac and Fox brought this suit in response to Oklahoma's assertion of tax authority over income derived from the Tribe and over motor vehicles properly tagged by the Tribe. The Complaint prayed for an injunction preventing the Oklahoma Tax Commission from enforcing state tax laws against persons residing or employed within Sac and Fox territorial jurisdiction. The Tribe asserted sovereign immunity as the basis for its claim.

The Sac and Fox Tribe employs both tribal members and nonmembers. The earnings of all tribal employees are subject to a tribal income tax. While the Oklahoma Tax Commission does not challenge the Tribe's right to levy its own tax, the Commission claims all tribal employees must also pay state income taxes. The Commission enforces state income taxes against tribal members and nonmembers by issuing tax assessments against individuals failing to pay the state tax.

The Tribe also taxes the ownership of motor vehicles principally garaged on land within its jurisdiction. Upon payment of the tribal tax, each motor vehicle owner receives a Sac and Fox license plate, certificate of title and registration certificate. Here again, the Oklahoma Tax Commission does not contest the Tribe's tax authority. However, the State requires "retroactive" payment of money equivalent to the taxes, penalties, and interest it would have imposed upon motor vehicles during the time they were taxable by the Tribe as a prerequisite to issuance of an Oklahoma title and registration when such vehicles are sold, traded, or otherwise removed from tribal jurisdiction.

Against this factual background, we begin our legal analysis from the premise first enunciated in McClanahan v. Arizona State Tax Comm'n, 411 U.S. 164, 93 S.Ct. 1257, 36 L.Ed.2d 129 (1973), that direct state taxation of tribal property or the income of a tribal member earned solely on a reservation is presumed to be preempted, absent express congressional authorization. See also California v. Cabazon Band of Mission Indians, 480 U.S. 202, 215-16 & n. 17, 107 S.Ct. 1083, 1091-92 & n. 17, 94 L.Ed.2d 244 (1987); Bryan v. Itasca County, 426 U.S. 373, 375-77, 96 S.Ct. 2102, 2104-06, 48 L.Ed.2d 710 (1976); Moe v. Confederated Salish and Kootenai Tribes, 425 U.S. 463, 475-76, 96 S.Ct. 1634, 1642-43, 48 L.Ed.2d 96 (1976); Mescalero Apache Tribe v. Jones, 411 U.S. 145, 148, 93 S.Ct. 1267, 1270, 36 L.Ed.2d 114 (1973). Conversely, a state may nondiscriminatorily tax nonmember activities on a reservation so long as such taxation does not conflict with relevant statutes or treaties or impermissibly interfere with a tribe's ability to govern itself. See Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 175, 109 S.Ct. 1698, 1706-07, 104 L.Ed.2d 209 (1989); Cabazon, 480 U.S. at 215-16, 107 S.Ct. at 1091-92; Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134, 151-61, 100 S.Ct. 2069, 2080-85, 65 L.Ed.2d 10 (1980). Moreover, we acknowledge that trust land, validly set apart for Indian use under government supervision, "qualifies as a reservation for tribal immunity purposes." Oklahoma Tax Comm'n v. Citizen Band Potawatomi Indian Tribe, --- U.S. ----, ----, 111 S.Ct. 905, 907, 112 L.Ed.2d 1112 (1991). ²

II. Income Tax

A. Taxation of Tribal Members

In McClanahan, the Supreme Court held the State of Arizona could not levy or collect an income tax on wages earned by a Navajo tribal member from her work on the Navajo reservation. 411 U.S. at 173, 93 S.Ct. at 1263. Applying a federal preemption analysis against the backdrop of the Indian sovereignty doctrine, the Court reasoned that "by imposing the [income] tax ... the State has interfered with matters which the relevant treaty and statutes leave to the exclusive province of the Federal Government and the Indians themselves." ³ Id. at 165, 93 S.Ct. at 1259.

It would serve little purpose to retrace the McClanahan analysis here. The Sac and Fox is a federally recognized Indian tribe operating under a tribal constitution and federal corporate charter. ⁴ The treaties, statutes and correspondence cited by both parties indicate Congress consistently has recognized the integrity of the Sac and Fox Tribe and its right to self-govern within relevant jurisdictional boundaries. Nothing in the record conflicts with the acknowledged contemporary congressional goal of Indian self-government, including tribal self-sufficiency and economic development. See Cabazon, 480 U.S. at 216, 107 S.Ct. at 1091. This case is therefore indistinguishable from McClanahan in that tribal compensation of Sac and Fox member-employees falls totally within the sphere of activity reserved to the federal government and to the Sac and Fox Tribe itself. See 411 U.S. at 179-80, 93 S.Ct. at 1266-67.

The State asserts no congressional authority for imposing the state taxes at issue. Therefore, applying the McClanahan presumption, we conclude Oklahoma has exceeded its authority--the state income tax is unlawful as applied to Sac and Fox members whose income is derived solely from tribal sources on tribal lands.

B. Taxation of Nonmembers

When evaluating Oklahoma's authority to tax the income of nonmember tribal employees, precedent weighs in the State's favor. Although the Supreme Court has never explicitly addressed state taxation of nonmember income derived from tribal sources, the Court has, in general, considered favorably nondiscriminatory state taxation of nonmember activities on a reservation so long as such taxation does not conflict with relevant statutes or treaties or impermissibly interfere with a tribe's ability to govern itself. Colville, 447 U.S. at 151-61, 100 S.Ct. at 2080-85; Moe, 425 U.S. at 481-83, 96 S.Ct. at 1645-46. See also Cotton Petroleum, 490 U.S. at 175, 109 S.Ct. at 1706-07; Cabazon, 480 U.S. at 215-16, 107 S.Ct. at 1091-92. In other words, state taxation of nonmember activity on a reservation is legitimate if the burden imposed on the tribe is minimal--if the tax does not frustrate tribal self-government or run afoul of congressional enactments concerning the affairs of reservation Indians. Moe, 425 U.S. at 483, 96 S.Ct. at 1646 (citations omitted).

The Tribe relies primarily on the Indian Commerce Clause and treaty language granting the Sac and Fox jurisdiction over all who "settle upon their lands" as support for its broad assertion of exclusive tax authority. Additionally, the Tribe asserts that decisions on state taxation of gaming within Indian country should control the determination of whether non-tribal members are subject to state income taxes.

The Tribe's argument is unavailing for several reasons. First, "[i]t can no longer be seriously argued that the Indian Commerce Clause, of its own force, automatically bars all state taxation of matters significantly touching the political and economic interests of the Tribes." Colville, 447 U.S. at 157, 100 S.Ct. at 2083. Second, the Tribe cites no authority showing the Supreme Court, this court, or any other court has interpreted the jurisdictional language of any Indian treaty so as to grant a tribe exclusive jurisdiction over non-tribal members. Third, we conclude the gaming decisions are entirely distinguishable from the present case. The payment of wages to nonmember employees is not comparable to the operation of bingo games designed to attract nonmembers onto Indian land in order to generate revenue. Finally, and most importantly, notwithstanding its bald assertion to the contrary, the Tribe has failed to show how the imposition of a state income tax on nonmember tribal...