Last Thursday a Southern California federal court handed down an Indian property tax ruling that is of potentially significant negative implication for tribes in the Ninth Circuit.
U.S. District Court Judge Dolly Gee issued a summary judgment decision in favor of Riverside County and against the Agua Caliente Band of Cahuilla Indians, affirming state possessory interest taxes (“PIT”) assessed by the County and imposed on non-Indian lessees who use and occupy Indian trust land within the Agua Caliente Indian Reservation.
A couple things of note:
First, the Court ruled that Section 465's preemption applied only to "lands or rights that were placed in the United States’ name in trust for the Indian’s benefit under the IRA or the Act of July 28, 1955—neither of which are at issue." This is a significant clarification, given that the best, if not only, way to win Indian tax preemption cases these days is under a federal statute or regulation.
Second, the United States, as amicus curiae in the case, contended "that the comprehensiveness of the federal and regulatory scheme governing the leasing of Indian land, coupled with the federal interest in tribal sovereignty, 'weigh heavily against state and local taxation.'” But although finding those federal interests "strong" under Bracker, the Court found that they "must nonetheless yield to . . . state interests." United States intervention--whether as a party or friend of the court--had previously been seen as tipping Bracker balancing in favor of tribes.
Expect that if the decision stands on appeal to the Ninth Circuit Court of Appeals, state revenue agents will have a field day enhancing use taxes like PIT, to circumvent property tax preemption.
Gabriel S. Galanda is the managing lawyer of Galanda Broadman, PLLC, in Seattle. Gabe is a descendant of the Nomlaki and Concow Tribes, belonging to the Round Valley Indian Tribes of Northern California.
