Taxation Issues on Indian Reservations: Federal Regulations Explained
This presentation discusses the taxation challenges faced by Indian reservations, focusing on federal regulations adopted in 2013 to prohibit certain state and local taxes on leased Indian land for permanent improvements and activities. The regulations cover various aspects such as leasehold interests, non-tribal concessions, and taxation jurisdictions. Understanding these rules is crucial for addressing tax implications on Indian reservations.
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Presentation Transcript
CSAC-HLT Committee Presentation & The Questions It Raises Over Taxation On Indian & The Questions It Raises Over Taxation On Indian Reservations Reservations By: Jennifer C. Klein, Deputy County Counsel Sonoma County Counsel s Office By: Jennifer C. Klein, Deputy County Counsel Sonoma County Counsel s Office May 30, 2013 May 30, 2013
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
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 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. Permanent Improvements Activities Leasehold or Possessory Interest When on Leased Tribal Land When on Leased Tribal Land
162.017 What taxes apply to leases approved under this part?
(a) Subject only to applicable Federal law, permanent without regard to ownership of those improvements, are tax, assessment, levy, or other charge imposed by of a State. taxation by the Indian tribe with jurisdiction. permanent improvements improvements on the leased land, are not subject to not subject to any fee, any fee, tax, assessment, levy, or other charge imposed by any State or political subdivision of a State. Improvements may be subject to any State or political subdivision
(b) Subject only to applicable Federal law, activities under a leased premises are not subject to tax business use, privilege, public utility, excise, gross revenue taxes) imposed by any State or political subdivision be subject to taxation by the Indian tribe with jurisdiction. activities under a lease lease conducted on the not subject to any fee, , levy, or other charge (e.g., any fee, tax, assessment , assessment, levy, or other charge imposed by any State or of a State. Activities may political subdivision of a State
(c) Subject only to applicable Federal law, the leasehold or possessory interest subject to other charge imposed by any State or political subdivision of a State possessory interests may be subject to taxation by the Indian tribe with jurisdiction. 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 not any fee, tax, assessment, levy, or
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.
General Financial Impact? 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.
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.
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?
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
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
