Squire v. Capoeman, No. 134

• Court: United States Supreme Court
• Writing for the Court: WARREN
• Citation: 76 S.Ct. 611,351 U.S. 1,100 L.Ed. 883
• Docket Number: No. 134
• Decision Date: 23 April 1956
• Parties: Clark SQUIRE, Collector of Internal Revenue for the District of Washington, Petitioner, v. Horton CAPOEMAN and Emma Capoeman, his wife

351 U.S. 1 76 S.Ct. 611 100 L.Ed. 883 Clark SQUIRE, Collector of Internal Revenue for the District of Washington, Petitioner,

v.

Horton CAPOEMAN and Emma Capoeman, his wife.

No. 134. Argued Jan. 19, 1956. Decided April 23, 1956.

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Mr.Charles F. Barber, Washington, D.C., for petitioner.

Mr. John W. Bragun, Washington, D.C., for respondent.

Mr. Chief Justice WARREN delivered the opinion of the Court.

The question presented is whether the proceeds of the sale by the United States Government of standing timber on allotted lands on the Quinaielt Indian Reservation may be made subject to capitalgains tax, consistently with applicable treaty and statutory provisions and the Government's role as respondents' trustee and guardian.

When white men first came to the Olympic Peninsula, in what is now the State of Washington, they found the Quinaielt Tribe of Indians and their neighboring allied tribes occupying a tract of country lying between the

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Coast Range and the Pacific Ocean. This vast tract, with the exception of a small portion reserved for their exclusive use, was ceded by the Quinaielts and their neighbors to the United States in exchange for protection and tutelage by the treaty of July 1, 1855, and January 25, 1856, 12 Stat. 971. According to this treaty, the Quinaielts were to have exclusive use of their reservation 'and no white man shall be permitted to reside thereon without permission of the tribe * * *.' Article II. Years later, Congress passed the General Allotment Act of 1887.¹ Thereunder, Indians were to be allotted lands on their reservations not to exceed 160 acres of grazing land or 80 acres of agricultural land,² and 25 years after allotment the allottees were to receive the lands discharged of the trust under which the United States had theretofore held them, and to obtain a patent 'in fee, discharged of said trust and free of all charge or incumbrance whatsoever',³ though the President might extend the period. ⁴

Respondents, husband and wife, were born on the reservation, and are described by the Government as full-blood, noncompetent Quinaielt Indians. They have lived on the reservation all their lives with the exception of the time served by respondent husband in the Armed Forces of the United States during World War II.

Pursuant to the treaty and under the General Allotment Act of 1887, respondent husband was allotted from the treaty-guaranteed reservation 93.25 acres and received

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a trust patent⁵ therefor dated October 1, 1907.⁶ During the tax year here in question, the fee title to this land was still held by the United States in trust for him, and was not subject to alienation or encumbrance by him, except with the consent of the United States Government, which consent had never been given. The land was forest land, covered by coniferous trees from one hundred years to several hundred years old. It was not adaptable to agricultural purposes, and was of little value after the timber was cut.

In the year 1943, the Bureau of Indian Affairs of the United States Department of the Interior entered into a contract of sale for the standing timber on respondent's allotted land for the total price of $15,080.80. The Government received the sum of $8,418.28 on behalf of respondent in that year.⁷

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Upon demand of petitioner, Collector of Internal Revenue for the District of Washington, respondents filed a joint income tax return on October 10, 1947, for the tax year 1943, reporting long-term capital gain from the sale of the timber in that year. Simultaneously, they paid the taxes shown due. Thereafter, they filed a timely claim for refund of the taxes paid and contended that the proceeds from the sale of timber from the allotted land were not subject to federal income taxation because such taxation would be in violation of the provisions of the Quinaielt Treaty, the trust patent, and the General Allotment Act. The claim for refund was denied, and this action was instituted. The District Court found that the tax had been unlawfully collected and ordered the refund. 110 F.Supp. 924. The Court of Appeals, agreeing with the District Court but recognizing a conflict between this case and the decision of the Tenth Circuit in the case of Jones v. Taunah, 186 F.2d 445, affirmed. 9 Cir., 220 F.2d 349. Because of the apparent conflict, we granted certiorari. 350 U.S. 816, 76 S.Ct. 58.

The Government urges us to view this case as an ordinary tax case without regard to the treaty, relevant statutes, congressional policy concerning Indians, or the

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guardian-ward relationship between the United States and these particular Indians. It argues:

'As citizens of the United States they are taxable under the broad provisions of Sections 11 and 22(a) of the Internal Revenue Code of 1939, which imposes a tax on the net income of every individual, derived from any source whatever. There is no exemption from tax in the Quinaielt Treaty, the General Allotment Act, the taxing statute, or in any other legislation dealing with taxpayers' affairs. * * *

'Even if it be assumed that the United States would be prohibited from imposing a direct tax on the allotted land held in trust for the taxpayers, there would, nevertheless, be no prohibition against a federal tax on the income derived from the land, since a tax on such income is not the same as the tax on the source of the income, the land.'⁸

We agree with the Government that Indians are citizens and that in ordinary affairs of life, not governed by treaties or remedial legislation, they are subject to the payment of income taxes as are other citizens. We also agree that, to be valid, exemptions to tax laws should be clearly expressed. But we cannot agree that taxability of respondents in these circumstances is unaffected by the treaty, the trust patent or the Allotment Act.

The courts below held that imposition of the tax here in question is inconsistent with the Government's promise to transfer the fee 'free of all charge or incumbrance whatsoever.' Although this statutory provision is not expressly couched in terms of nontaxability, this Court has said that

'Doubtful expressions are to be resolved in favor of the weak and defenseless people who are the wards

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of the nation, dependent upon its protection and good faith. Hence, in the words of Chief Justice Marshall: 'The language used in treaties with the Indians should never be construed to their prejudice. If words be made use of, which are susceptible of a more extended meaning than their plain import, as connected with the tenor of the treaty, they should be considered as used only in the latter sense.' Worcester v. State of Georgia, 6 Pet. 515, 582, 8...