United States v. Anderson
| Decision Date | 07 October 1977 |
| Docket Number | No. CV-75-1-HG.,CV-75-1-HG. |
| Citation | 442 F. Supp. 10 |
| Parties | UNITED STATES of America, Plaintiff, v. George ANDERSON, Defendant. |
| Court | U.S. District Court — District of Montana |
Thomas A. Olson, U. S. Atty., Billings, Mont., for plaintiff.
Dennis A. Dellwo, Dellwo, Rudolf & Schroeder, Spokane, Wash., for purpose of filing amicus curiae brief on behalf of Fort Peck Indian Tribes, only.
John C. Sheehy, Billings, Mont., for defendant.
On January 6, 1975, the United States filed this suit praying that the defendant be adjudged delinquent in his income taxes in the amount of $139,999.87,1 including penalty and interest, and that certain tax liens filed against the defendant's property be declared valid. The Government also asked that this Court foreclose upon said liens, and that judgment be granted to the Government for any deficiency. The defendant has moved for summary judgment on the ground that the taxes in question were assessed on income which was derived from ranching activities conducted exclusively on Indian lands, and which was thus exempt from tax. This Court has jurisdiction under 28 U.S.C. §§ 1340, 1345.
The Assiniboine and Sioux Tribes of the Fort Peck Indian Reservation moved to intervene as a party defendant under Federal Rules of Civil Procedure, Rule 24. This motion was denied by Memorandum and Order dated February 13, 1976.
The defendant is a non-competent2 Sioux Indian enrolled as a member of the Fort Peck Tribes. He derives his income from the raising of cattle. He is beneficial owner as allottee of a tract composed of 316.24 acres of restricted trust land. In addition, the defendant is grantee by deed of the beneficial ownership of some 320.4 acres of land originally allotted to another Indian. The Government concedes exemption as to the income from these tracts.
The defendant is the holder of a grazing permit allowing him to graze cattle on Range Unit No. 122, which is composed of 4,160 acres of land beneficially owned by some 17 different Indian allottees, and of 640 acres beneficially owned by the Tribe. All of this land is held in trust by the United States for the use and benefit of the allottees or the Tribe.
Pursuant to an order of this Court, the parties have submitted a memorandum of the status of this case. They agree that should this motion for summary judgment be granted, no further action of the Court would be required, barring a successful appeal and remand. However, if this motion is denied, the parties agree that discovery and trial will be necessary to determine the extent of the defendant's tax liability.
The question for decision here is whether the income of a non-competent Indian, derived solely from the grazing of cattle on a range unit composed of individually allotted and communally held tribal lands, is subject to the federal income tax. Counsel for the respective parties have cited no cases in this jurisdiction, and the Court's research has revealed none, in which this precise question has been decided.3 The Court therefore treats the case as one of first impression.
In considering the question raised here, an understanding of the historical basis of present federal Indian land use policies is helpful. Such understanding must begin with the Allotment Act of 1887, 24 Stat. 388, codified at 25 U.S.C. § 331, et seq. This Act was passed pursuant to the commonly held opinion at the time that the main obstacle to solution of the "Indian problem" was the Indian tradition of communal ownership of realty. See M. Price, Law and the American Indian, 531-541 (1973). Reservation lands were parceled out to each enrolled tribal member, who was to be supplied by the Government with the physical and intellectual wherewithal to cultivate the land. Title to the land was to be held by the United States as trustee for the allottee for a period of time sufficient to allow him to become accustomed to the white man's ways, after which time the allottee would become owner of the fee. The Act also provided a means by which unallotted reservation land could be acquired by the United States, which would in turn make it available to non-Indian homesteaders. 25 U.S.C. § 348.
The results of this policy of partition and distribution were disastrous. One particular problem was raised by the provisions of § 348 regarding descent and distribution. Allotted lands were specifically made subject to the laws of intestate succession of the state or territory in which the land was located. As a result, after two or three generations of subdivision through heirship, the descendants of the original allottee were left with individual parcels of land which were simply too small to cultivate or graze effectively. See M. Price, Law and the American Indian, 646-649 (1973), and authorities cited therein.
In 1934, the Indian Reorganization Act, 48 Stat. 984, 25 U.S.C. §§ 461, et seq., was passed to remedy this problem. It terminated the allotment policy, 25 U.S.C. § 461, and provided a means by which the reservations could rebuild their land bases through purchase of contiguous lands with federal funds. 25 U.S.C. § 465. It further provided that tribes could, through adoption of a constitution and by-laws, establish themselves as corporate political entities. 25 U.S.C. § 476. Most important for purposes of this case, the Reorganization Act authorized the Secretary of the Interior to promulgate rules and regulations to promote optimum use of Indian land resources. 25 U.S.C. § 466.
The regulations, codified at 25 C.F.R. §§ 151.1, et seq., provide for consolidation of the allotments of certain allottees into grazing units such as the one utilized by the defendant in the case at bar. The objectives of these regulations are significant:
The question before the Court must be considered against this statutory and regulatory backdrop, for Courts have consistently recognized that the question of Indian taxation does not begin and end with the language of the taxing statute. Squire v. Capoeman, 351 U.S. 1, 6, 76 S.Ct. 611, 100 L.Ed. 883 (1956); see Choteau v. Burnet, 283 U.S. 691, 696, 51 S.Ct. 598, 75 L.Ed. 1353 (1931). Rather, consideration of relevant treaties, statutes, and other expressions of federal policy are required.
In Squire, the Supreme Court handed down its most significant decision on the federal tax status of Indian allottees. The question before the Court was whether a non-competent Indian could be taxed on income derived from the sale of timber grown on his allotted land. The Court recognized the broad general applicability of tax statutes, and the general rule that exemptions from such statutes must be clearly expressed, but stated "we cannot agree that taxability of respondents is unaffected by the treaty, the trust patent or the Allotment Act." 351 U.S. at 1, 76 S.Ct. at 614. After an examination of this relevant background, the Court concluded that the income in question was tax exempt, based on the guarantee in 25 U.S.C. § 348 that allotted land would eventually be conveyed to the allottee or his heirs "in fee . . . free of all charge or incumbrance whatsoever . . .."4
The Court does not find this case to be within the specific holding of Squire; the cases are clearly distinguishable on grounds that the defendant here is not an allottee of the land of which the grazing unit is composed. However, the Court is convinced that a full effectuation of federal Indian land use policies requires that income derived from grazing units be free from tax.
The inefficient use of Indian lands under the Allotment Act was one of the major concerns of Congress in enacting subsequent legislation. This concern is reflected in the heavy emphasis on land use in the Reorganization Act and in the regulations promulgated thereunder by the Secretary of the Interior. It is clear that the federal government, specifically the Congress and the Department of the Interior, are most concerned about promoting optimum Indian land use and eventual economic independence.
In Squire, the Supreme Court recognized that income tax laws ought not to be construed so as to impede the accomplishment of federal objectives in the area of Indian land use. 351 U.S. at 10, 76 S.Ct. 611. The concerns expressed in that case, that the proceeds of the sale of timber from allotted lands must of necessity be tax exempt if the allottee is to achieve economic independence, are equally applicable in the case at bar. In many cases, individual allotments of land are simply too small to be grazed efficiently. In addition, the individual allottees whose land may comprise a grazing unit are general unable to work the land.5 If efficient use is to be made of grazing...
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U.S. v. Anderson
...Indian economic independence precluded all taxation of the income Anderson derived from the licensed grazing unit. United States v. Anderson, 442 F.Supp. 10, 13 (D.Mont.1977). II. Analysis Despite our sympathy for Anderson and similarly situated Indians, we must reverse the district court. ......
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Jourdain v. Comm'r of Internal Revenue
...to actually allot the land under the Supreme Court's decision in Squire v. Capoeman in order to exempt income (see United States v. Anderson, 442 F.Supp. 10 (D. Mont. 1977)), and that under the General Allotment Act income directly derived from tribal lands is not taxable either to the trib......