Federal Regulation: 25 C.F.R. 162.017

Report
CSAC-HLT Committee Presentation
& The Questions It Raises Over
Taxation On Indian
Reservations
By:
Jennifer C. Klein, Deputy County Counsel
Sonoma County Counsel’s Office
May 30, 2013
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Federal Regulation
Adopted December 5, 2013
Effective January 4, 2013
Attempt to prohibit certain state and local
taxes and fees imposed on Leased Indian
Land for:
◦ “Permanent Improvements”
◦ “Activities”
◦ “Leasehold or Possessory Interest”
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“Indian Land” means land held in trust or
restricted status for a tribe or individual
Indian. Essentially “reservation” land.
In general, state and local governments do
not have “civil regulatory” jurisdiction (i.e.
land use) on Indian land, but do have
“criminal prohibitory” jurisdiction (i.e.
assaults).
The Regulation Covers the Following…
◦ “Permanent Improvements”
 Buildings, other permanent structures
◦ “Activities”
 Sales, business activity, other transactions
 Delivery of water, electricity, other services
◦ “Leasehold or Possessory Interest”
 Non-tribal concession at tribal casino (i.e. restaurant)
 Non-tribal use and possession of exempt tribal land.
…When on Leased Tribal Land
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§ 162.017 What taxes apply to leases
approved under this part?
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(a) Subject only to applicable Federal law,
permanent improvements on the leased land,
without regard to ownership of those
improvements, are not subject to any fee,
tax, assessment, levy, or other charge
imposed by any State or political subdivision
of a State. Improvements may be subject to
taxation by the Indian tribe with jurisdiction.
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(b) Subject only to applicable Federal law,
activities under a lease conducted on the
leased premises are not subject to any fee,
tax, assessment, levy, or other charge (e.g.,
business use, privilege, public utility, excise,
gross revenue taxes) imposed by any State or
political subdivision of a State. Activities may
be subject to taxation by the Indian tribe with
jurisdiction.
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(c) Subject only to applicable Federal law, the
leasehold or possessory interest is not
subject to any fee, tax, assessment, levy, or
other charge imposed by any State or political
subdivision of a State. Leasehold or
possessory interests may be subject to
taxation by the Indian tribe with jurisdiction.
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Existing Law:
◦ Concept of Preemption
◦ Balancing Test from U.S. Supreme Court
 Cotton Petroleum v. New Mexico (1989)
 White Mountain Apache v. Bracker (1980)
◦ Federal Statute: 25 USC Section 398c.
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General Financial Impact?
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How much is County collecting in fees and taxes?
Now?
In the future?
Any casinos under construction? Expansion?
◦ Think broadly: sales tax, property tax, assessment,
fees, other charges?
◦ What services or infrastructure are supported by
those taxes and fees?
◦ Impacts to those services or infrastructure?
◦ Some jurisdictions will have more or less “lease
Indian Land” falling under this regulation.
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Other Considerations:
◦ Unfair competitive advantage enjoyed by those who
operate on leased Indian lands – particularly if Tribe
does not impose equivalent tribal tax or fee.
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Other Considerations:
◦ Timing of Impacts may vary depending on the type
of tax or fee.
 Possessory Interest taxes determined based on
possession on January 1st of any given year.
 Sales taxes – date of transaction
 Water, utility delivery – potentially on going
 Other?
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Desert Water Agency v. Dept. of Interior, BIA
◦ Suit filed March 29, 2013
◦ DWA argues regulation either doesn’t apply to DWA
or that the law is invalid because it conflicts with
authorizing statute, 25 USC sec. 398c.
◦ Feds have 60 days to respond.
◦ Test Case
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Identify potential impacts for each county or
taxing authority
Talk to Assessor and Tax Collector
Collecting information concerning on
reservation activities may already be a
challenge; information may be incomplete
Develop legal strategy for responding to
regulation with County Counsel
Consider coordinating response with state or
other affected public entities.
The End
Thank you

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