Category Archives: Indian Law

Karnopp Petersen Attorneys to Speak on Emerging Land Issues in Indian Country

Ellen Grover

Ellen H. Grover

Howard G. Arnett

Howard G. Arnett

On Friday, October 25, two KP lawyers are set to speak at the Oregon State Bar Indian Law Section’s CLE on Emerging Land Issues in Indian Country taking place at the University of Oregon School of Law.

Ellen H. Grover will provide insight into the impacts of climate change in Indian Country and Howard G. Arnett will focus on emerging tribal land uses related to the outdoor recreation industry.

The CLE agenda includes panel discussions dealing with natural resource development, climate change, timber cases, treaty rights, and the native outdoor recreation industry. View more information about the event and the full schedule here.

 

New Case Supports Tribal Taxation and Self-Determination, Relies on BIA Leasing Regulations

A new case, dated September 5, 2014, out of the Southern District of Florida provides additional support for tribal taxation without state tax interference and for upholding new provisions in the Bureau of Indian Affairs’ (“BIA”) residential and commercial leasing regulations which assert preemption of state and local taxes assessed related to property under BIA leases.  In the Confederated Tribes of the Chehalis Reservation v. Thurston County, 724 F3d 1153 (9th Cir 2013) case, the Ninth Circuit Court of Appeals held that 25 USC § 465 preempted state and local taxes of improvements on tribal trust land, regardless of ownership.  This case in effect affirmed the BIA regulations set forth in 25 CFR § 162.017(a) which addressed preemption of state and local taxes directly on permanent improvements, themselves.

In the current case, Seminole Tribe of Florida v. State of Florida, Civil Action No. 12-62140-Civ-Scola, the Seminole Tribe of Florida filed a lawsuit challenging two Florida taxes: (1) a utility tax imposed by the Florida Department of Revenue through the servicing energy utility’s billings (“Utility Tax”), and (b) a rental tax on leases held by non-tribal entities pertaining to tribally owned trust property (“Rental Tax”).  The Rental Tax question is relevant to additional BIA regulations set forth in 25 CFR § 1602.017(b-c) which pertain to taxes on activities under a lease and on leasehold or possessory interests.

Rental Tax.  The Florida District court held that the Rental Tax was invalid on two bases.  The first was, similar to the Chehalis case, based on 25 USC § 465, which prohibits taxation of tribal trust land, including the improvements thereon.  Mescalero Apache Tribe v. Jones, 411 US 145 (1973).  Florida’s Rental Tax was a “use” tax, and the court held that use of property and the right to manage property and receive income from property are among the bundle of privileges that make up property or the ownership of property.  Therefore a tax on the lease and/or use of the property was a tax on the property itself.  Because the property was owned in trust by the Tribe, the tax therefore ran afoul of 25 USC § 465 which clearly prohibits a tax of tribal trust property.

The second basis for invalidating the tax was under the leasing statute, 25 USC § 415.  The court evaluated the Rental Tax under the principles of the Indian Commerce Clause and the sovereign status of Indian tribes, both of which prohibit state taxes on non-Indians on Indian reservations if the tax is either preempted by federal law or it interferes with a tribe’s ability to exercise its sovereign functions.  White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 142 (1980); Ramah Navajo Sch. Bd., Inc. v. Bureau of Revenue of N.M., 458 U.S. 832, 837 (1982).

Here, the court’s discussion directly addressed the BIA leasing regulations in which the Secretary of Interior (“Secretary”) concluded that “the very possibility of an additional State or local tax has a chilling effect on potential lessees as well as the tribe that as a result might refrain from exercising its own sovereign right to impose a tribal tax to support its infrastructure needs.” 77 Fed Reg 72440, 72448 (December 5, 2012).  The court noted the clear delegated authority for the Department of Interior to promulgate regulations under 25 USC § 415.  Because of this clear delegation, the historical and daily involvement with Indian tribes, the complex and extensive history of tribal relations, and the comprehensive and thorough analysis of the Secretary, the court gave significant deference to the Secretary in evaluating the factors that are relevant to the Bracker and Ramah tests.  In summary, the court relied on the BIA regulations to invalidate the tax because the Secretary’s preemption analysis was thorough and persuasive in explain that the federal regulatory scheme regarding leases of restricted Indian land was “so pervasive that it precludes the additional burdens imposed by Florida’s Rental Tax.”  In particular, the court noted that BIA’s “new regulations have changed the landscape in this area of the law, specifically regarding the issue of preemption.”

 

Importantly, the court distinguished this situation from the Cotton Petroleum Corp. v. New Mexico, 490 US 163 (1989), line of oil and gas lease cases, which set forth a more significant test to justify preemption based on the burden on the tribe of the state tax.  The court contrasted the lack of comprehensive analysis performed by Interior in that case with the comprehensive analysis in the BIA land lease regulations and noted the different leasing schemes as well as the evidence of Congressional approval of taxes in the oil and gas lease schemes.  In summary, the court concluded that the Secretary’s careful description of the comprehensive nature of the statutory scheme set forth in the land leasing statute context, 25 USC § 415, as well as any lack of Congressional evidence of the approval of state taxes under these land leases distinguished the holding in the Cotton Petroleum cases from this situation.

Utility Tax.  The Florida District Court also held that Florida’s Utility Tax was invalid.  The Utility Tax was imposed on gross receipts from utility services delivered to the retail customer.  The tax was billed to and paid by the customer, including the Tribe, in its monthly utility bill.  Under federal law, a state may not directly tax an Indian Tribe on an Indian reservation unless a federal statute expressly permits the tax. Okla. Tax Comm’n v. Chickasaw Nation, 515 U.S. 450, 458 (1995).  Courts will undertake an inquiry on the “legal incidence” of a tax to determine if a state is impermissibly taxing an Indian tribe.  Here, the court found that the legal incidence was on the Tribe and not on the utility, since a) the tax was built into the monthly bill to the Tribe; b) the Tribe would pay the bill including the tax; and c) there was no evidence in state law that the utility would be liable for paying the tax if the Tribe did not pay the bill or the tax.

In summary, while the Florida District Court case is not controlling precedent in Oregon (unlike the 9th Circuit Chehalis ruling which is controlling), it nevertheless is a significant example of how a court will directly address and/or rely on the BIA leasing regulations in a preemption analysis and it provides further evidence that the landscape on state and local taxation related to tribal trust assets may be changing to help facilitate tribal taxation and self-determination.

Interior Begins Implementation of Land Buy-Back Program for Tribal Nations

During the past year, the Department of the Interior developed its land buy-back program (“Program”) to implement the land consolidation requirements contained in the Cobell Settlement Agreement (“Settlement”).  The Settlement established a $1.9 billion Trust Land Consolidation Fund (“Fund”) for tribes to consolidate fractional land interests across Indian Country over a ten year period.  The Program’s purpose is to facilitate distribution of the Fund.  It sets out a process for individual owners of fractional land interests who want to sell their interests to receive a fair market value payment for those interests.  All lands sold will be then be held in trust for the tribe with jurisdiction over the parcel sold.

The Fund amount may not be sufficient to purchase all fractional interests that exist across Indian country.  Accordingly, the Department has developed an implementation strategy aimed at acquisitions that “best reduce fractionation, address the effect of allotment, promote tribal sovereignty, and facilitate economic development.”  Specifically, the Department is targeting 40 reservations with approximately 90 percent of the total fractional interests in Indian country (“Targeted Reservations”).  To maximize the number of reservations participating in the Program (including the 110 reservations that have fractional interests but are not included among the Targeted Reservations), the Department intends to develop flexible purchase ceilings at each reservation where the Program is active.  Using a formula that takes into account factors relevant to fractionation, the Department will cap the amount of the Fund that can be used to purchase fractional interests within any one reservation.  The Department is also interested in entering into cooperative agreements with tribes, which would make additional funds available for tribes to carry out various aspects of the Program, including owner outreach and education.

The Department is currently holding an open solicitation period ending in March 2014, inviting tribes with jurisdiction over the Targeted Reservations to submit letters of interest or cooperative agreement applications for participation in the Program.  Targeted Reservation tribes that do not submit anything during the solicitation period will be scheduled for implementation directly by the Program.  While at least some tribes with less fractioned lands will be part of the Program, it is less clear the level of participation these tribes will enjoy in the early implementation of the Program.

The Department entered into its first cooperative agreement in December with the Oglala Lakota Nation, and has made purchase offers on the Pine Ridge Reservation and the Makah Indian Reservation.  Although the Makah reservation is not identified as a Targeted Reservation, the tribe facilitated the offers through informal collaboration with Program staff.  The Department has indicated that while it intends to include a limited number of less fractionated lands in its early implementation efforts, it does not expect that the Program will focus on buy back efforts in most of the less fractionated lands until fiscal year 2017.  The number of interested sellers in a particular location will be an important factor in the Department’s assessment of where to spend the remainder of the Fund among the less fractionated lands.  Tribes with fractional interests on their reservations that are not listed as a Target Reservation should initiate contact with Program staff as soon as possible if they want to be considered for inclusion among the few less fractionated lands that will be included in early implementation efforts.  Even if they are not included in early implementation, tribes with less fractionated lands should continue to communicate with Program staff regarding the level of interest in the Program among fractional owners within their reservations, and should identify priority acquisitions of their fractionated trust lands.

Agua Caliente Band Seeks to Enforce BIA Regulations Preempting State Taxation

Almost a year to the day after new Bureau of Indian Affairs (BIA) residential and commercial leasing regulations became effective, the Agua Caliente Band of the Cahuilla Indians has decided to press enforcement of these regulations. The regulations, which became effective on January 4, 2013, added a new section, 25 CFR section 162.017, asserting that states may not impose any fee, tax assessment, levy or other charge on permanent improvements installed on, on activities conducted under, or on leasehold or possessory interests created by leases issued under Part 162. In July, the Ninth Circuit Court of Appeals in Confederated Tribes of Chehalis v. Thurston County Board of Equalization ratified at least a component of the new BIA leasing regulations, holding that state imposition of taxes on permanent improvements was preempted by federal law. Now, the Agua Caliente Band of the Cahuilla Indians has recently filed suit seeking to invalidate Riverside County’s possessory interest taxes and permanent improvement taxes imposed on lessees of reservation lands. The Tribe claims that the tax revenues collected by Riverside County do not directly benefit services on the reservation, and that the Tribe would seek to impose taxes to provide needed services. They rely, in part, on the BIA leasing regulations to support their federal law preemption claim to invalidate the County’s tax and to enjoin any further possessory interest taxation by the County on the reservation. The outcome of this case may provide further clarity on the scope of the BIA leasing regulation and federal preemption.

Two Federal Appellate Courts Will Soon Consider NLRB Jurisdiction over Tribal Casinos

The Tenth Circuit Court of Appeals and the Sixth Circuit Court of Appeals will soon consider whether the National Labor Relations Board (NLRB) has jurisdiction over tribal casino operations.  In 2013, the NLRB issued two decisions—one with respect to the Chickasaw Nation’s WinStar World Casino and one with respect to the Saginaw Chippewa Indian Tribe’s Soaring Eagle Casino and Resort—in which it considered whether the NLRB had jurisdiction over casinos wholly owned by tribes.  In both cases the NLRB asserted jurisdiction over the tribes after determining that the National Labor Relations Act (NLRA) applies to the commercial activities of tribes.  In reaching its conclusion, the NLRB relied heavily on its earlier decision in San Manual Indian Bingo & Casino, 341 N.L.R.B. 1055 (2004), aff’d, 475 F.3d 1306 (D.C. Cir. 2007).

The tribes appealed the NLRB decisions to their respective federal appellate courts, arguing that the NLRA does not apply to their gaming operations because it is a federal law that does not expressly address its application to tribes, and because exclusion of tribes would be consistent with the NLRA’s general exclusion of government employers.  The tribes both argue that the operation of their casinos is a governmental function, and that application of the NLRA to their casino operations would infringe upon the tribes’ ability to govern themselves and would negate their sovereign power of exclusion.  Read the Chickasaw Nation’s opening brief and the Saginaw Chippewa Indian Tribe’s opening brief.  Opening briefs, including several amici briefs from other tribes, Indian law scholars, and the National Congress of American Indians, were filed in the federal appellate courts in December.  The NLRB’s response briefs are due in February in the Sixth Circuit and in March in the Tenth Circuit.

If the tribes’ appeals are unsuccessful, tribes (at least those within the jurisdictions of the Tenth Circuit and the Sixth Circuit) will need to ensure that they comply with the NLRA when conducting commercial activities such as operating a casino.  The NLRA was enacted by Congress in 1935 to allow most private sector employees to organize into trade unions, engage in collective bargaining for better terms and conditions at work, and to take collective action, including strike, if necessary.  The NLRA also defines a set of unfair labor practices, which are prohibited actions by employers, employees, and unions.  In recent years the NLRB has actively enforced the provisions of the NLRA protecting concerted activities by employees, so tribes would need to ensure that their commercial activities comply with those provisions as well.

Ninth Circuit Decision in Chehalis Tribes v. Thurston County is Final

On July 30, 2013, a three judge panel of the U.S. Ninth Circuit Court of Appeals issued a decision in Confederated Tribes of the Chehalis Reservation v. Thurston County Board of Equalization, in which it held that the exemption of trust lands from state and local taxation under 25 U.S.C. § 465 extends to permanent improvements on trust lands regardless of the particular form in which the tribe chooses to conduct its business (here, a limited liability company majority owned by the tribe).  As a result of this decision, Thurston County was foreclosed from taxing the Great Wolf Lodge, which is located on land held in trust for the Chehalis Tribe.  Thurston County petitioned the Ninth Circuit for rehearing by the full court, which the court denied on September 23, 2013.  Thurston County did not file a request to hear an appeal of the case with the United States Supreme Court within the required 90 day period.  Thus, the Ninth Circuit’s decision is now final and binding within its jurisdiction.  This decision has major implications for tribal economic development, as it will enable tribes to attract business partners to work with tribes to build improvements and locate businesses on trust lands.

Read additional analysis on the case here.

FAA Unmanned Aircraft Systems Program Creates Opportunity in Central Oregon

On Monday, December 30, 2013, the Federal Aviation Administration announced its selection of six operators of unmanned aircraft system (UAS) research and test sites: Alaska, Nevada, New York, North Dakota, Texas and Virginia. This selection comes after a rigorous 10 month process involving 25 proposals from 24 states. These research and test sites are intended to facilitate the integration of UAS into the National Airspace System, meaning they hope to develop UAS technologies that can fly safely in the same airspace as commercial planes. These UAS technologies have the potential for hundreds of civil applications, such as wildfire or timber stand monitoring, wind turbine inspection, or weather data collection. Each of these test sites contain multiple test site ranges—the actual location for the research and test flights. The Confederated Tribes of the Warm Springs Reservation of Oregon is included as a test site range in the Alaska test site and is the only Native American tribe to be included in any test site. Their inclusion in the Alaska designation has the potential to create meaningful economic opportunity for the Central Oregon region.

Top 5 Considerations for Working with Native American Nations

If you are a business owner or entrepreneur and you’ve contemplated working with Native American tribes there are some important things that you should consider.

1.  Culture Fit.  Many business persons unfamiliar with Native American tribes may have certain assumptions about the cultural focus of tribes; however, it is important to recognize that economic development is a crucial part of a primary cultural component for most tribal nations—self-governance and self-determination.  For many tribes who lack a local resident tax base, economic development generates needed revenues for tribal government operations and support community development goals.  These are cornerstone to a tribe’s self-governance and self-determination.  Business entrepreneurs therefore should consider that Native American tribes are open for business, but even with that said, not all business concepts may be attractive to a particular tribal nation for other cultural reasons.

2.  Sovereign Nations.  Native American tribes are separate sovereign nations that are not subordinate to state or local governments.  There is no reason to be intimidated by a tribe’s status as a sovereign nation, but to respect it by understanding their governance structure and federal and tribal law infrastructure.  Indeed, a tribal nation’s status can be an attribute for a business relationship because it can facilitate relationships that would be difficult to develop in other contexts.

3.  Varied Nations/Aligned Interests.  Each Native American nation is different.  It may be tempting to assume that an experience working with one tribal nation is representative of working with another tribal nation.  What one should assume, however, is that while each tribal nation is very unique, it is good policy to assume positive responses to aligned interests.  Different nations may have different governance structures, land base considerations, treaty or federal law based organic documents among many other factors.  For business entrepreneurs interested in working with a specific tribe, it is important to be open first to understanding and being responsive to that nation’s unique attributes and goals, and, crucially, to crafting relationships that align interests.  No snake oil dealers wanted, but business partners are likely welcome.

4.  Tax Benefits.  Some business entrepreneurs may shy away from development in Indian country because of their unfamiliarity with the tax structure on tribal land.  There are some potential tax risks working in Indian country—such as the threat of double taxation.  Recent developments in federal law may help to remove uncertainty that leads to some of the tax risks and, often, such risks can be managed contractually.  But, importantly, there is also the potential for tax benefits that come from working within Indian country or partnering with tribal nations—such as utilizing a tribe’s tax exempt status or claiming available tax credits.  Focus on crafting a business relationship that can capitalize on attributes and align interests can maximize the win-win for the business entrepreneur and the tribe.

5.  Permitting.  It is important to know if the project area is on federally-restricted “trust” land—land owned by the federal government in trust for a tribe or individual Indian, or on land not subject to federal jurisdiction (“fee land”).  Knowing the status of the land will determine the permitting process and requirements.  Even though there is federal oversight, there may be benefits to siting on trust land because local land use restrictions will not apply (and because there may be tax benefits too!).  In this instance, it is important to understand the tribal law requirements and how those, often, coordinate with federal law requirements and understand the comparative requirements on fee-land.

Decision Issued: Evans v. Shosone-Bannock Land Use Policy Commission

Last Thursday, the Ninth Circuit Court of Appeals issued a decision in Evans v. Shoshone-Bannock Land Use Policy Commission, in which the court continued the trend of the Supreme Court in limiting tribal jurisdiction over non-Indian on-reservation activities.  In particular, the court interpreted the second exception to the general rule announced in Montana v. United States, 450 U.S. 544, 565 (1981).  The general rule states that tribes lack civil jurisdiction over non-Indians on non-Indian fee lands within reservation borders.  The exception to the Montana rule that the court considered provides that tribes may regulate nonmember activity that directly affects the tribe’s political integrity, economic security, health, or welfare.  Strate v.A-1 Contractors, 520 U.S. 438, 446 (1997).  Following recent Supreme Court decisions, the court gave a narrow reading to this exception, requiring a fact-specific evaluation of impacts to the tribe’s political integrity, economic security, health, or welfare.

The case involved David Evans, a non-Indian, who owns land in fee simple within the borders of the Fort Hall Reservation, the home of the Shoshone-Bannock Tribes.  In 2012 Evans began constructing a single-family residence on his property after receiving a building permit from the surrounding county.  Evans refused to obtain tribal permits. The Tribes took enforcement action against Evans for violating the Tribes’ Land Use Policy Ordinance.  Shortly thereafter, Evans and his contractor brought suit in the United States District Court for the District of Idaho seeking a declaration that the tribal court lacked jurisdiction.  The district court granted the Tribes’ motion to dismiss, concluding that Evans’ federal suit was premature because he failed to exhaust tribal remedies.  The district court reasoned that tribal authority to regulate Evans’ land use was plausible, so the tribal court did not plainly lack jurisdiction.

The Ninth Circuit disagreed with the district court’s analysis, holding that the Tribes lacked the power to regulate the land use of Evans, and thus Evans was not required to exhaust tribal remedies because the tribal court plainly lacked jurisdiction due to the Tribes’ lack of regulatory jurisdiction.  In reaching its conclusion, the court determined that neither the Supreme Court’s 1989 decision in Brendale v.  Yakama Nation (492 U.S. 408), nor the second Montana exception more generally, supports tribal jurisdiction over Evans.  In Brendale, the Supreme Court held that while the Yakama Nation lacked authority to zone nonmembers’ fee land within an area of the Tribe’s reservation open to the general public, it retained the authority to zone fee land in an area of the reservation closed to the general public.  In Evans, the Ninth Circuit emphasized the Supreme Court’s narrow construction of Brendale, noting that under subsequent cases the Tribe can only zone nonmember fee land isolated “in the heart of a closed portion of the reservation” where the proposed use would threaten the Tribes’ overall plan to preserve the character of a unique (and largely undeveloped) resource.

The Ninth Circuit conducted a highly fact specific inquiry to determine whether Brendale would support tribal regulatory jurisdiction in Evans. The court looked to the character of the area in which Evans’ project is located and the nature of his project, in an effort to determine whether (1) the area was similar to the “closed” portion of the reservation in Brendale, and (2) whether the intended use of the land would place the character of the surrounding area “in jeopardy.”  The court determined that Brendale would not support tribal jurisdiction because the Evans’ project was located in an area where many nonmember owned residential properties, and his proposed use is similar to other uses in the area.

The Ninth Circuit also rejected the Tribes’ arguments that the second Montana exception applies more generally because it could create environmental harms—including groundwater contamination, improper disposal of construction debris, and increased fire risk—that would threaten the health and welfare of the Tribes.  The court concluded that the Tribes’ concerns with respect to Evans’ project are speculative and do not pose “catastrophic risks” to tribal self-government so as to invoke the second Montana exception.  The court also noted that no other federal authorities, including the Tribes’ treaty, give the Tribe the authority to regulate Evans’ activities on fee land.

Although the Ninth Circuit narrowly construed the second Montana exception consistent with recent United States Supreme Court precedent, the Court’s analysis suggests that the application of the exception remains a highly fact specific inquiry.  In order to defeat a challenge to exertion of regulatory jurisdiction over reservation fee lands owned by non-Indians, tribes must meet the burden of proof by creating a robust evidentiary record detailing the likely harms to tribal self-governance that would result from the tribe’s inability to exert regulatory jurisdiction over the fee land at issue.

Who We Are: Federal Indian Law

For over sixty years, we have represented the Confederated Tribes of the Warm Springs Reservation of Oregon, providing both general and special counsel services. During that time, we have gained substantial experience and expertise in a multitude of practice areas affecting Indian tribes, including: business and economic development; child welfare; employment issues; environmental and natural resource issues; energy project development and operation; gaming; Indian Health Service issues; treaty protected hunting and fishing rights; jurisdictional and sovereignty issues; self-determination and self-governance; tax issues; development of tribal codes; trust land acquisition; water rights; and breach of trust litigation against the United States.

While mindful that each tribe is unique, we believe that our experience puts us in a position to provide valuable legal representation to Indian tribes across the U.S.