SUPERINTENDENT FIVE C. TRIBES, ETC. v. Com'r of Int. Rev.
Decision Date | 09 January 1935 |
Docket Number | No. 1038.,1038. |
Citation | 75 F.2d 183 |
Parties | SUPERINTENDENT FIVE CIVILIZED TRIBES, FOR SANDY FOX, CREEK NO. 1263, v. COMMISSIONER OF INTERNAL REVENUE. |
Court | U.S. Court of Appeals — Tenth Circuit |
Thomas J. Reilly and F. M. Goodwin, both of Washington, D. C., Jay W. Whitney, of Tulsa, Okl., and Leahy, Macdonald & Files, of Pawhuska, Okl., for petitioner.
Frank J. Wideman, Asst. Atty. Gen. (Sewall Key and J. P. Jackson, Sp. Assts. to Atty. Gen., on the brief), for respondent.
Before LEWIS, McDERMOTT, and BRATTON, Circuit Judges.
This petition to review a decision of the Board of Tax Appeals presents this close and difficult question: Where the guardian of a restricted Indian has invested moneys saved from the income from his ward's allotment, is the income from such investments taxable under the federal income tax law? It has been authoritatively decided that income received from his allotment, and income received by him from tribal property held in trust is not subject to income tax. Blackbird v. Commissioner (C. C. A. 10) 38 F.(2d) 976. It has been authoritatively decided that lands purchased for investment from such savings, although restricted, are subject to taxation by the state. Shaw v. Gibson-Zahniser Oil Corporation, 276 U. S. 575, 48 S. Ct. 333, 72 L. Ed. 709; United States v. Ransom (C. C. A. 8) 284 F. 108, affirmed 263 U. S. 691, 44 S. Ct. 230, 68 L. Ed. 508; United States v. Gray (C. C. A. 8) 284 F. 103; United States v. Mummert (C. C. A. 8) 15 F.(2d) 926. But whether the income from restricted property so acquired is subject to the federal tax has not been before the courts.
Sandy Fox is a full-blood restricted Creek Indian, whose property both real and personal is under the direct supervision and control of the Superintendent of the Five Civilized Tribes and the Secretary of the Interior. The income from his allotment being in excess of his needs, the surplus was invested for him by the Superintendent, and the income from such investments was held by the Superintendent in trust as part of the restricted property. In 1929 the Superintendent returned for taxation income derived from such invested savings in the sum of $16,149.17 and a tax of $102.50 thereon was assessed and paid. The Commissioner added to his return $3,117.50 interest on a tax refund received in the taxable year from the government and assessed a deficiency of $167.00. In a review before the Board of Tax Appeals, the taxpayer resisted this deficiency assessment and sought to recover the $102.50 paid. The Commissioner's ruling was in accord with a memorandum of its General Counsel, G. C. M. 9621; the Board of Tax Appeals affirmed the Commissioner in accord with an earlier decision directly in point. Snell v. Commissioner, 10 B. T. A. 1081.1
The interest received from the government on amounts erroneously paid in preceding years, is income received by the taxpayer during the taxable year, as were the amounts returned and on which the tax of $102.50 was paid. If this income is exempt from taxation, it must be either because of the status of the taxpayer or because of the nature of the income.
In Blackbird v. Commissioner (C. C. A. 10) 38 F.(2d) 976, this court held that the income2 of a restricted Osage Indian was not within the purview of the Income Tax Statutes, and Judge Lewis cited many authorities to the point that general acts of Congress do not apply to Indian wards of the government unless an intention to include them was clearly manifested. This court at the same time held that this general rule did not apply to an Osage Indian who had been granted a certificate of competency enabling him to alienate any of his property except his homestead. Choteau (Chouteau) v. Commissioner (C. C. A. 10) 38 F.(2d) 976.
The Blackbird and Choteau Cases were decided by one opinion. The government acquiesced in the ruling in the Blackbird Case, but certiorari was granted in the Choteau Case. In its opinion in the Choteau Case, 283 U. S. 691, 51 S. Ct. 598, 600, 75 L. Ed. 1353, the Supreme Court expressly disclaimed an intent to pass upon the taxability of the income of an incompetent Indian. It affirmed the decision of this court on the ground that Choteau had the power to alienate his surplus allotment, and that it was taxable by the state. That decision does not reach our case, for Sandy Fox could not alienate. Some of the language of that opinion may be pertinent for, without mentioning its expressions in earlier opinions, the court said:
Concerning the government's general policy toward the Indian, the court said:
Following the decision in the Choteau Case, this court was confronted with Pitman v. Commissioner, 64 F.(2d) 740. The taxpayer there was a full-blood Creek. The power of Creeks to alienate their allotments depends upon the quantum of blood. Act May 27, 1908 (35 Stat. 312). By section 4 of that act (page 313), unrestricted lands were subject to taxation. Section 9 of that act (page 315) provided that the death of an allottee removed all restrictions then existing, except that full-blood Indian heirs could not convey without the consent of the probate court. Mrs. Pitman inherited from her son some lands unrestricted in his lifetime, and a restricted homestead. This court held that, notwithstanding the taxpayer was a full-blood Creek, and as such not manifestly included in the federal taxing statute, her income from unrestricted land was subject to tax while her income from the restricted land was not.
These decisions support the conclusion that a full-blood Indian is an individual embraced within the term "every individual" as used in the federal taxing statute (26 USCA §§ 2011, 2012 a); that such exemption from taxation as he enjoys arises, not from his blood or race, but from the nature of the property giving rise to the income. But in the cases so far considered, the property from which the taxable income was derived was unrestricted and subject to state taxation. In our case, the property giving rise to the income is restricted, as is the income itself.
We come then to the question of whether the fact that land is restricted exempts it from taxation. That question has not been answered as far as federal taxes are concerned, but it has been conclusively answered as to state taxes. Commencing with the opinion of Judge Lewis in United States v. Gray, 284 F. 103, the Eighth Circuit Court of Appeals has consistently held that where lands, previously unrestricted and subject to taxation, were purchased with proceeds of the sale of restricted land, held in trust by the United States, and where the lands purchased were restricted in the hands of the Indian, such lands were subject to state taxation. United States v. Ransom (C. C. A. 8) 284 F. 108; United States v. Mummert (C. C. A. 8) 15 F.(2d) 926.
Notwithstanding that the court was dealing with a restricted, full-blood, minor Indian, the court held that the duty of paying taxes was one step in the emancipation of the Indian, saying:
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