Taxability of Indian Treaty Fishing Income, 85-16
| Decision Date | 12 December 1985 |
| Docket Number | 85-16 |
| Citation | 9 Op. O.L.C. 103 |
| Parties | Taxability of Indian Treaty Fishing Income |
| Court | Opinions of the Office of Legal Counsel of the Department of Justice |
Allan Gerson Deputy Assistant Attorney General Office of Legal Counsel.
Various treaties between the United States and Indian tribes secure to the Indian signatories the "right of taking fish at all usual and accustomed grounds and stations." In determining whether income derived from the exercise of these fishing rights is subject to federal tax, the relevant analysis is that employed by the Supreme Court in Squire v. Capoeman, 351 U.S. 1 (1956). Squire held that Indians are subject to the payment of income taxes as are other citizens unless a tax exemption is "clearly expressed" in an applicable treaty or statute. Squire also held that in analyzing a particular treaty or statute applicable to Indians, ambiguous language should be construed in the Indians' favor. The Tax Court has properly resolved the inherent tension between these two canons of construction by concluding that income earned by Indians from the exercise of treaty fishing rights is subject to the federal income tax.
MEMORANDUM OPINION FOR THE SECRETARY OF THE INTERIORYour letter to the Attorney General regarding the taxability under federal law, of income earned by certain Indian tribes from the exercise of commercial fishing rights guaranteed by treaty has been submitted to the Office of Legal Counsel for review. This review, which examines the different positions of the Department of the Interior (Interior) and the Internal Revenue Service (IRS) on this subject, is being undertaken pursuant to Executive Order No. 12146 (July 18, 1979) reprinted in 28 U.S.C. § 509 note, and 28 C.F.R. § 0.25, which authorize the Office of Legal Counsel, on behalf of the Attorney General, to resolve legal disputes between Executive Branch agencies.
In 1983, the Solicitor of Interior concluded that treaty language reserving fishing rights to Indian tribes precluded federal taxation of income derived from the exercise of those rights. The IRS does not share that view, and has attempted to collect income taxes on fishing income earned by tribal fishermen from commercial fishing operations.[1] A number of Indians who have received notices of deficiency from the IRS have filed petitions for redetermination in the Tax Court.[2]
As you note in your letter, the Department of Justice will need to resolve this issue in order to arrive at a uniform position of the United States, should the pending cases proceed to litigation handled by the Department. We have [ 104] therefore reviewed the dispute in that context. As set forth below, we believe that the position of the IRS represents the more reasonable and sound reading of the applicable Supreme Court precedent, and therefore can be maintained in litigation handled by this Department.
The treaties at issue here were negotiated in the 1850s with Indian tribes living in what is now the State of Washington in order to extinguish the last group of conflicting claims to lands lying west of the Cascade Mountains and north of the Columbia River.[3] See Washington v. Washington State Commercial Passenger Fishing Vessel Ass'n, 443 U.S. 658, 661-62 (1979). In exchange for their interest in most of the territory, the Indians were given monetary payments and the "exclusive use" of relatively small tracts of land, as well as certain other rights, including the right to fish. Id. With immaterial variations, the treaties each provide:
The right of taking fish at all usual and accustomed grounds and stations is secured to said Indians in common with all citizens of the Territory, and of erecting temporary houses for the purpose of curing the same; together with the privilege of hunting, gathering roots and berries, and pasturing their horses on all open and unclaimed lands.
Treaty of Olympia, art. Ill. 12 Stat. 971, 972 (July 1, 1855/Jan. 25, 1856). The scope of the fishing rights secured by these treaties, and the extent to which a state may interfere with those rights, has been considered on a number of occasions by the Supreme Court. See, e.g., United States v. Winans, 198 U.S. 371 (1905); Seufert Bros. v. United States, 249 U.S. 194 (1919); Tulee v. Washington, 315 U.S. 681 (1942); Puyallup Tribe v. Department of Game, 391 U.S. 392 (1968) (Puyallup I); Department of Game v. Puyallup Tribe, 414 U.S. 44 (1973) (Puyallup II); Puyallup Tribe v. Department of Game, 433 U.S. 165 (1977) (Puyallup III); Commercial Passenger Fishing, 443 U.S. 658. The Court has recognized that the rights secured by the treaties include the right to fish for commercial, as well as subsistence, purposes, and that the fishing right was critically important to the Indians in their acceptance of the treaties.[4] The Court has specifically rejected the argument that the treaties guarantee to the [ 105] Indians only the opportunity to compete with nontreaty fishermen on an individual basis, finding instead that the treaties entitle the Indians to take a fair share of the available fish.[5] In reaching that conclusion, the Court has found it significant that the Indians reserved to themselves preexisting fishing rights, rather than obtaining rights from the government:
Because the Indians had always exercised the right to meet their subsistence and commercial needs by taking fish from treaty area waters, they would be unlikely to perceive a "reservation" of that right as merely the chance, shared with millions of other citizens, occasionally to dip their nets into the territorial waters.
Commercial Passenger Fishing, 443 U.S. at 678-79.
The Court has defined an "equitable measure" of the treaty right to be a division of the harvestable portion of each run that passes through a "usual and accustomed" place into "approximately equal treaty and nontreaty shares." Id. at 685. The treaty share should be reduced, however, "if tribal needs may be satisfied by a lesser amount." Id. Drawing on cases involving Indian reserved water rights, [6] the Court stated:
[T]he central principle here must be that Indian treaty rights to a natural resource that once was thoroughly and exclusively exploited by the Indians secures so much as, but no more than, is necessary to provide the Indians with a livelihood — that is to say, a moderate living. Accordingly, while the maximum possible allocation to the Indians is fixed at 50%, the minimum is not; the latter will, upon proper submissions to the District Court, be modified in response to changing circumstances.
Id. at 686-87 (footnote omitted).
The Court has also made clear that a state cannot interfere with the exercise of the fishing right, other than nondiscriminatory regulations reasonable and necessary for conservation of the fish. Thus, a state may not grant a nontreaty fisherman rights to use a "fish wheel" — a device capable of catching fish by the ton and totally destroying a run of fish, thereby effectively excluding the Indians from the right to take fish at a "usual and accustomed place." United States v. Winans, 198 U.S. 371, 384 (1905). A state may not require Indians to [ 106] obtain a fishing license as a prerequisite to exercise of their treaty rights, Seufert Bros. v. United States, 249 U.S. 194, 198 (1919), and must give Indians access across private lands, if necessary, in order to assure access to treaty fishing locations, Tulee v. Washington, 315 U.S. 668, 685 (1942). State regulations justified on the basis of conservation must be both reasonable and necessary, Puyallup II, 414 U.S. at 45, and cannot discriminate against exercise by the Indians of their fishing rights, id. at 48; Puyallup I, 391 U.S. at 398.
On the other hand, the Indians cannot rely on their treaty right to exclude others from access to certain fishing sites outside the reservation in order to deprive other citizens of the state of a "fair apportionment" of a particular run. Commercial Passenger Fishing, 443 U.S. at 683-84. In sum:
Nontreaty fishermen may not rely on property law concepts, devices such as the fish wheel, license fees, or general regulations to deprive the Indians of a fair share of the relevant runs of . . . fish in the case area. Nor may treaty fishermen rely on their exclusive right of access to the reservations to destroy the rights of other "citizens of the Territory." Both sides have a right, secured by treaty, to take a fair share of the available fish. That, we think, is what the parties to the treaty intended when they secured to the Indians the right of taking fish in common with other citizens.
The analysis in these treaty fishing cases relies heavily on factual evidence about the understanding of the parties at the time the treaties were negotiated and the importance of the fishing rights to the Indians who signed the treaties. The Court, consistent with its approach in other cases involving construction of Indian treaties, gave "special meaning" to the rule that "it is the intention of the parties, and not solely that of the superior side, that must control any attempt to interpret the treaties, " id. at 675, because of the circumstances of the negotiations:
[This Court] has held that the United States, as the party with the presumptively superior negotiating skills and superior knowledge of the language in which the treaty is recorded, has a responsibility to avoid taking advantage of the other side. "The treaty must therefore be construed, not according to the technical meaning of its words to learned lawyers, but in the sense in which they would naturally be understood by the Indians."
Id. at 675-76 (quoting Jones v. Meehan, 175 U.S. 1, 11 (1899)).
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