Pot Capitas: Distributing The Fruits Of Tribal Land

By Anthony Broadman

Assuming the bottom does not drop out of the legal weed market, and that Tribes are able to begin regulating and selling marijuana within their jurisdictions, how will pot farming revenue be spent? If marijuana is a viable business for Tribes, Tribal governments can expect calls for profits to be “per capped” through per-member distributions. Whether per capitas are good governance is a question for Tribes and their constituents.  But the particular treatment of pot per capitas raises new questions about federal trust assets, federal taxation, and whether distributions can provide a new non-taxable trust resource for Tribes and their members.

A profitable tribal pot economy requires several leaps of faith and what would formerly have been some wild assumptions. But presuming the reservation market takes shape, Tribes will likely use the revenue from pot cultivation, like all economic development initiatives, to provide essential governmental services to their members. We should expect tribal pot revenue to offset the burdens of legal pot, to be allocated to education, law enforcement, marijuana regulation, anti-drug initiatives, public health efforts, and the other sorts of programs Tribes have long provided within and beyond their territory. But with profits often come calls for per capita distributions.

The general rule is that every cent of your wealth, whether you are a member of an Indian tribe or not, is taxable by the United States. Section 61(a) of the Internal Revenue Code provides that, except as otherwise provided by law, gross income means all income from whatever source derived.  Under Section 61, Congress is allowed to tax every “accession[] to wealth.”   Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955). Indians are citizens subject to the payment of these income taxes. Squire v. Capoeman, 351 U.S. 1, 6 (1956).

One narrow exception to this rule is that per capita distributions made from funds the Secretary of the Interior holds in a Trust Account for the benefit of a tribe are generally excluded from the gross income of the members receiving the distributions.

Practically, proceeds from trust assets or trust resources are deposited into a tribal Trust Account for a tribe and that tribe subsequently makes a per capita distribution using funds from that Trust Account. Again, those payments are generally not taxable to members. This is different than the treatment of gaming per capitas. The per capita distribution of gaming revenue is taxable to each recipient.

Could trust assets or resources include marijuana grown by a Tribe on Tribal land? Trust resources means any element or matter directly derived from Indian trust property. 25 C.F.R. § 115.002. In fact, it may not be optional for the United States to accept the revenue from tribal pot cultivation into trust. According to federal trust regulations, the Secretary of the Interior “must accept proceed on behalf of tribes or individuals from the following sources . . . [m]oney directly derived from the . . . use of trust lands.” 25 C.F.R. § 115.702. The IRS has wavered on whether trust per capitas are taxable in the last few years. But after Tribal resistance, provided clarity last year in Notice 2014-17.

The IRS often rejects as trust resources that revenue which may be derived from land but is really mischaracterized business profits. But as for marijuana grown on tribal trust land, which is then harvested and sold by the Tribe in the first instance, the resulting revenue is almost certainly money directly derived from the use of tribal trust land. Indeed, there is no difference between pot and timber except that pot is an illegal schedule I controlled substance.

Whether the Secretary can or would accept proceeds from the sale of marijuana grown on Tribal lands – like it does timber – into trust is a different question. Marijuana remains illegal under federal law and even though the DOJ may not be enforcing marijuana laws, participating in what would effectively be the banking of illegal drug revenue feels like a bridge too far. After all, if they won’t let banks easily accept pot profits, how could the feds themselves deposit such funds? Still, the potential for distribution of pot profits could provide tribes with a new source of non-taxable distribution income for members. That, given the stagnating gaming per capita landscape, is a potential novel benefit as Tribes balance the harms and benefits of the marijuana economy.

Anthony Broadman is a partner at Galanda Broadman PLLC. He can be reached at 206.321.2672, anthony@galandabroadman.com, or via www.galandabroadman.com. Marijuana is illegal under federal law.

Franchising With Tribes/In Indian Country

Fueled by the $26 billion Indian gaming industry, the country’s most famous restaurant franchises are moving to tribal lands like never before.   Subway, Burger King, Sonic, Arby’s—you name ‘em.

Franchise lawyers need to appreciate that lawyering a franchise deal in Indian Country is akin to doing so in a foreign country.  A form franchise agreement is likely a square peg, in tribal reservation deals.  To illustrate:

Do federal franchise laws apply to the reservation franchisor?  Probably.  See Federal Power Comm’n v. Tuscarora Indian Nation, 362 U.S. 99, 116 (1960).

Do they apply to a tribal franchisee?   Probably not.  Cf. Multimedia Games, Inc. v. WLGC Acquisition Corp., 214 F. Supp. 2d 1131, 1131 (N.D. Okla. 2001).

Do state franchise laws apply to either party?  Nope.  Worcester v. Georgia, 31 U.S. 515, 559 (1832).

Do tribal laws apply to the franchisor?  Yep.  See e.g. Water Wheel Camp Recreational Area, Inc. v. LaRance, 642 F.3d 802 (9th Cir. 2011).

Does the United States need to approve the franchise agreement?  Maybe.  See 25 U.S.C. § 81.

Can the tribe tax the franchisor vis-à-vis its on-reservation activities?  Yep.  Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134 (1980).

Can the state?  Maybe.  White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980).

The list of unique federal Indian and tribal legal issues goes on and on.  In all, franchisor beware—especially franchise counsel.

Gabriel “Gabe” Galanda is the Managing Partner at Galanda Broadman. He is a citizen of the Round Valley Indian Tribes. Gabe can be reached at 206.300.7801 or gabe@galandabroadman.com.

Disenrolling the Dead

Your dead cease to love you and the land of their nativity as soon as they pass the portals of the tomb and wander away beyond the stars. They are soon forgotten and never return. Our dead never forget this beautiful world that gave them being. They still . . . yearn in tender fond affection over the lonely hearted living, and often return from the happy hunting ground to visit, guide, console, and comfort them. -- Chief Seattle

There is perhaps nothing more reviling about disenrollment, than the disenrollment of ancestors, or what offending tribes call "posthumous disenrollment."

It has happened at Saginaw Chippewa, at Las Vegas Paiute, at Robinson Rancheria, and most recently, at Grand Ronde. And it could happen to your ancestors, and to you.

The reason the offending tribes--or more precisely, their lawyers--or even more precisely, their non-Indian lawyers--disenroll the dead is because many IRA tribal constitutions include language that says if you descend from an enrolled tribal member (and satisfy other requirements, like blood quantum), you are entitled to tribal membership too.

As such, in order to disenroll large swaths of tribal members, as is happening at now epidemic levels, an offending tribe must go back multiple generations on a family's tree, to disenroll not only the living, but the dead.

Beyond rightful moral outrage to so disturbing and dishonoring the ancestors, the maneuver raises due process questions, especially insofar as an offending tribe does not give even the ancestors' living descendants notice or opportunity to be heard.

To some tribes death is so sacred that the community can never again utter an ancestor's name; they are to be left in peace.

To other tribes, nothing is sacred.

Gabriel “Gabe” Galanda is the Managing Partner at Galanda Broadman. He is a citizen of the Round Valley Indian Tribes. Gabe can be reached at 206.300.7801 or gabe@galandabroadman.com.

Another State Tax Man Smackdown; Tribal Property Tax Win

Today, the Second Circuit Court of Appeals smacked down a New York county assessor's attempt to foreclose upon Cayuga-owned fee lands in a desperate attempt to recover state ad valorem property taxes from the Tribe. Cayuga was a benefactor of both the Oneida Nation's genius mooting of Oneida Indian Nation of N.Y. v. Madison County, before the U.S. Supreme Court, as well as the Bay Mills Tribe's lucky win before the Supreme Court in Michigan v. Bay Mills Indian Community.  Bay Mills should have been mooted too.

The Cayuga decision represents another win in a surprising run for tribes in state property tax or fee assessment disputes before federal circuit courts of appeals.

Last year, the Ninth Circuit struck down property taxes on permanent improvement to Chehalis tribal trust lands in Confederated Tribes of Chehalis Reservation v. Thurston County Bd. of Equalization; and the Seventh Circuit struck down a local assessment of stormwater "fees" against Oneida trust lands in Oneida Tribe of Wisc. Indians v. City of Hobart.

Amidst serial federal court losses in other state-tribal tax contexts (i.e. sales and excise taxation), it seems that Indian property tax or tax-related cases are still winnable.  See also Crow Tribe of Indians v. Montana (9th Cir. 1987).  Granted, Cayuga was a sovereign immunity, not Bracker, case but the county's suggested in rem exception to tribal immunity would have catalyzed state taxation of Indian property nationwide.

In any event, Richard Guest of NARF's advice remains sound:

Stay out of the courts! The federal courts are not your friends anymore.  The majority of judges sitting on the lower federal courts were appointed by Bush II – very conservative, have no understanding of Indian country at all. No interest in your issues. And that can be said of the Roberts court as well. It’s a very difficult place for tribes to secure victories.

Difficult, but thankfully not impossible, at least in the Indian property tax context.

Gabriel “Gabe” Galanda is the Managing Partner at Galanda Broadman, which handled various Indian tax controversies. He is a citizen of the Round Valley Indian Tribes. Gabe can be reached at 206.300.7801 or gabe@galandabroadman.com.

Tribal Police: “We Don’t Need No Stinkin’ State Badges!”

By Joe Sexton

Recently, in State of New Mexico v. Sanchez, the New Mexico State Court of Appeals upheld the DUI conviction of a non-tribal defendant arrested by a tribal police officer on Indian lands in New Mexico. The defendant, on appeal, had challenged the authority of the tribal police officer to arrest him.  At first blush, this seems to be a win for Indian Country and tribal sovereignty in general.  Of course the end result is better than a ruling further eroding the minimal authority Tribal police presently retain in Indian Country after a disastrous line of federal court decisions, including the Supreme Court’s disastrous holding in Oliphant v. Suquamish Indian Tribe roughly 36 years ago.

But if you dig into the New Mexico court’s decision enough to understand the reasoning underpinning its holding, the illusory nature of tribes’ sovereign power to police their own lands is revealed.  The only reason preventing the New Mexico court from finding that the tribal police officer lacked the authority to arrest an impaired driver on Indian lands is the fact that the tribal officer had been deputized by the non-tribal county government.  In other words, only through the permission of non-tribal entities—many of which are often openly hostile to tribal authority and jurisdiction—is a tribal police officer allowed to arrest a non-tribal person committing a crime in Indian Country.  One line from the court of appeals’ opinion in particular reveals the hollow nature of the tribal police officer’s authority with respect to non-tribal criminal actors on Indian lands:

“The scope of Officer Vigil’s [the tribal police officer] authority depends on the authority given to him by the Santa Fe County Sheriff.”

When you combine the deep-seated racism and anti-tribal sentiment that has festered for generations in and around Indian Country and has infected non-tribal law enforcement, with the often rural nature of Indian reservations, and the court decisions crippling tribal law enforcement’s ability to protect communities situated in Indian Country, this recipe for calamity generally creates lawless havens for criminals and leads to problems of epidemic proportions.

The movement to stem violence against tribal women makes this painfully clear.  According to Lynn Rosenthal, the White House Advisor on Violence Against Women, “Native American women suffer from violent crime at some of the highest rates in the United States.”    Ms. Rosenthal notes that non-Indians constitute “more than 76 percent of the overall population living on reservations and other Indian lands” and, consequently, many of the “abusers of Native American women are non-Indian men.   Thus, “non-Indian men who batter their Indian wives and girlfriends go unpunished” because of the jurisdictional limitations of tribal courts and law enforcement.

Even though Congress recently debated an “Oliphant fix” with respect to violence against women in particular, legislation regarding this problem should not be necessary, and violence against Native American women is not the only malignancy caused by Oliphant and its progeny.  If sovereignty means anything, it means the inherent authority to protect the communities situated within a sovereign’s territory.  But this authority has been stripped away, leaving Tribal law enforcement at the mercy of local jurisdictions if they want any authority to protect their communities from non-tribal criminals.  As Justice Thurgood Marshall noted in his dissent to the Oliphant majority opinion:

"I agree with the court below that the ‘power to preserve order on the reservation . . . is a sine qua non of the sovereignty that the Suquamish originally possessed.’ . . . In the absence of affirmative withdrawal by treaty or statute, I am of the view that Indian tribes enjoy, as a necessary aspect of their retained sovereignty, the right to try and punish all persons who commit offenses against tribal law within the reservation.”

Put another way, the authority of sovereign Indian tribes to arrest and prosecute non-Indians who decide to commit crimes on Indian lands is inherent, and absent legislation or a Treaty to the contrary, no court has the legitimate authority under our system of law to simply erase that inherent authority.  So in the end, it’s a good thing that the New Mexico Court of Appeals did not expand upon Oliphant and further hamstring tribal law enforcement operating within New Mexico.  But Officer Vigil’s authority on tribal lands does not, and should not, depend on whether Santa Fe County decides to cross-deputize him or not.

Joe Sexton is Of Counsel with Galanda Broadman, PLLC, and practices out of Yakima, Washington.  Joe’s practice focuses on tribal sovereignty issues, including land and environmental issues, economic development matters, and complex Indian Country litigation.

Reframing "The Debate Over Disenrollment"

It is with great admiration for my colleague Professor Duane Champagne that I must disagree with some of the underpinnings to his recent column, “The Debate Over Disenrollment.”  Here, I hope to help reframe that “debate." Professor Champagne suggests, like legions of others, that the 1978 Santa Clara v. Martinez bestows upon tribal governments some form of absolute power to disenroll Indians.  Most notably the U.S. Department of Interior has proclaimed, time and again, that Santa Clara requires “‘a proper respect’ for tribal sovereignty” and “‘cautions’ that [the Fed] tread lightly” in the realm of disenrollment, even in the face of related federal illegality.  Reliance on Santa Clara is outdated, and frankly, unhelpful in the face of what Professor David Wilkins rightly calls a “disenrollment epidemic.”

Although Professor Champagne is correct that federal courts generally “do not have jurisdiction over tribal membership rules,” they do have jurisdiction over various Tribal disenrollment-related actions that implicate federal law and thus raise federal questions under 28 U.S.C. 1331.  For example, the trend of faction-driven Secretarial elections that further the targeted disenrollment of Indians under the guise of the federal Indian Reorganization Act, implicates the federal judiciary’s jurisdiction.  Likewise, the trend of denying proposed disenrollees tribally and federally guaranteed equal rights, such as gaming per capita distributions, implicates the federal Indian Gaming Regulatory Act.

It is only a matter of time before federal judges, in the spirit of judicial realism, begin to tackle disenrollment on the merits.  A recent Ninth Circuit Court of Appeals panel recently commented that “membership disputes have been proliferating in recent years, largely driven by the advent of Indian gaming, the revenues from which are distributed among tribal members.”  Alto v. Black (9th Cir. 2013).  Reading between the lines: the federal courts are tired of per capita-driven mass disenrollment disputes.  The United States' judges will eventually intercede to help put a stop to those disputes' proliferation, with the judges' hook being the rampant federal civil rights violations that accompany any mass Indian disenrollment.

Professor Champagne suggests that “[o]ften Indian disenrollment debates focus on specific membership rules particular to a given tribe, such as their traditional kinship system[s].”  The reality, though, is that trending mass tribal disenrollment efforts have little to do with tribal tradition-based membership requirements.  They instead involve artificial, federal membership constructs, like U.S. censuses and rolls, which can be “traced to the United States’ paternalistic assimilation policies of the 1930s.”  As Dr. Jay Miller observes, “no census was fully effective and portions of tribes were always missing both by accident and by malicious intent of U.S. or tribal officials.”

Disenrollments rooted in such non-indigenous constructs really do not “require deep understanding of tribal community, history, culture, and identity” as the professor suggests.  In fact, disenrollment typically has little to nothing to do with such Indian ideals.  Disenrollment is “predominately about race, and money.”  Even if a particular disenrollment dispute is not driven by those non-indigenous values—I do not know of one mass disenrollment that is not—“non-Indians may view such controversies as indicators of greed and corruption.”  And of course perception is reality, especially for Indians.

Indeed, Professor Champagne’s main argument seems to be that “the whole of Indian tribal membership issues should not be brought into question because of the perceived actions of some.”  Yet as Jared Miller correctly observes, “tribal governments abandoning members en masse . . . harm their own bottom line by engendering negative media and investor perceptions. More critically, they threaten the bottom line of Indian businesses everywhere.”  Those tribes also threaten tribal self-governance, giving Indian sovereignty skeptics good reason to believe that tribal governments cannot properly handle membership without outside involvement.

In other words, the disenrollment actions of some nations do affect all tribal nations.  Among much other negativity, “there is a real risk that Congress or the U.S. Supreme Court might one day make new law in the area of tribal citizenship”—a risk that we can ill afford to take.  As such, Native America should make the whole of Indian tribal membership issues our collective business. “Too much is at stake to remain silent.”

Gabriel “Gabe” Galanda is the Managing Partner at Galanda Broadman. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California. Gabe can be reached at 206.300.7801 or gabe@galandabroadman.com.

Galanda and Broadman Each Receive SuperLawyers Honor

Tribal lawyers Gabe Galanda and Anthony Broadman were each honored by Super Lawyers magazine for 2014; Gabe as a Washington “Super Lawyer” and Anthony as a “Rising Star.”

The award follows several recent honors for Galanda Broadman and its founding partners.  Galanda Broadman has received a prestigious Tier 1 ranking from U.S. News – Best Lawyers “Best Law Firms,” in the arena of Native American Law.

Gabe has also been named to The Best Lawyers in America in the practice areas of both Gaming Law and Native American Law, in 2014 and for the prior seven consecutive years. He was recently named a “Difference Maker” by the American Bar Association, too, with Anthony having been honored for his outstanding service by the Washington State Bar Association.

Galanda Broadman, “An Indian Country Law Firm,” is dedicated to advancing tribal legal rights and Indian business interests.  The firm, with six lawyers and offices in Seattle, Washington and Bend, Oregon, represents tribal governments, businesses and members in critical litigation, business and regulatory matters, especially in matters of Indian Treaty rights, tribal sovereignty and taxation.

Gabe is an enrolled member of the Round Valley Indian Tribes of California. He currently sits on the National Native American Bar Association (NNABA) Board of Directors, and is a past President of the Northwest Indian Bar Association and past Chair of the Washington State Bar Association (WSBA) Indian Law Section.

Anthony  is a past Chair of the WSBA Administrative Law Section, and author of “Administrative Law in Washington Indian Country.”  He is a former Trustee of the WSBA Indian Law Section, and also serves as Editor-in-Chief of the Section’s Indian Law Newsletter.

Gabe Galanda Featured Law360 Commentator Re Bay Mills Decision

After the Supreme Court's shocking decision in favor of the Bay Mills Indian Country, leading law blog, Law360, quoted Gabe Galanda at length about the decision, in "Bay Mills Ruling To Fuel New Fights Over Tribal Immunity."

“Bay Mills is the most significant Supreme Court win for Native America in the last 25 years, maybe ever," Gabriel S. Galanda 
of Galanda Broadman PLLC told Law360. "It categorically affirms not only tribal sovereign immunity from state action, but also tribal sovereignty and Indian gaming in general. ... Still, tribal governments are nowhere near out of the woods.” 

For one thing, both Justice Elena Kagan, in a footnote to the majority opinion, and Justice Clarence Thomas in his dissent, alluded to an open question that remains: Does tribal sovereign immunity extend to an off-reservation tort, like an automobile accident caused by a drunk driver or casino patron? . . .

Lower courts could take the Supreme Court opinion as a cue to abandon sovereign immunity precedent if there's “special justification,” such as if a claimant were unable to secure some form of remedy otherwise, experts say.

“That passage [in the majority opinion] can be read by lower court judges as a signal to develop a remedy for a tort claimant, especially off-reservation, and allow the federal appellate process to go from there,” Galanda said.

Gabe and his partner Anthony Broadman were previously very critical of those federal powers that be, in particular, who did not moot the case before it reached the typically anti-Indian High Court (see here, and here.)

Gabriel “Gabe” Galanda is the Managing Partner at Galanda Broadman. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California. Gabe can be reached at 206.300.7801 or gabe@galandabroadman.com.

Gabe Galanda Publishes Re: Local/Global Native Prisoners' Religious Rights Movement

Gabriel Galanda published “To Geneva With Love: Native Prisoners’ Religious Rights Movement Goes Global.” The article appears in the May edition of King County’s Bar Bulletin, which is themed “Curtain.” The article begins with a citation to a famous U.S. Supreme Court prisoners’ rights case:

There is no iron curtain drawn be- tween the Constitution and the prisons of this country.” Nor is there an iron curtain drawn between international human rights norms and American prisons, especially insofar as Native American prisoners — or internationally speaking, American indigenous prisoners — are concerned.

Gabe goes on to explain how a local, grassroots, Native prisoners’ religious rights advocacy movement has ascended to national and international heights. He details various local, national and international legal and political interventions by the Native prisoners’ rights non-profit, Huy, and its allies, focusing on its advocacy via the United Nations:

By 2013, Huy aligned with longtime Native religious rights warriors, the Native American Rights Fund in Denver and the American Civil Liberties Union’s national and local chapters, to grieve the religious plight of Native inmates in state prisons throughout the United States to even higher powers. That coalition filed letters of allegation with the United Nations Office of the High Commissioner for Human Rights’ Special Rapporteur on the Rights of Indigenous Peoples, as well as the U.N. Human Rights Committee . . .

In June 2013, the Special Rapporteur on the Rights of Indigenous Peoples, joined by the U.N. Special Rapporteur on Freedom of Religion or Belief, wrote the U.S. State Department, requesting that within 60 days the government respond to the Huy coalition’s allegations and “provide any additional information it deems relevant to the situation.” The special rapporteurs posed a series of questions, including:

What measures exist to ensure the protection of the religious freedoms of Native American prisoners in state and local prisons? Specifically, what legal, policy or programmatic actions, if any, have federal and state Government authorities taken to ensure that Native American prisoners are able to engage in religious ceremonies and traditional practices as well as have access to religious items in state and local prisons?

Almost a year later, the State Department has yet to respond in any way to the U.N. special rapporteurs.

The United States’ continued silence is indicative of its and other nations’ failure to respect the right of American indigenous prisoners to freely exercise their religion, and to afford those prisoners with effective remedies when state correctional agencies and officers violate their rights.

Gabriel “Gabe” Galanda is the Managing Partner at Galanda Broadman. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California, and the founder of Huy (www.huycares.org) and Chairman of the Huy Board of Advisors. Gabe can be reached at 206.300.7801 or gabe@galandabroadman.com.

Dreveskracht, Galanda Publish ABA Tribal Court Litigation Guide

The American Bar Association Business Law Section just published the 2014 edition of Annual Review of Developments in Business and Corporate Litigation, which includes a 41-page Tribal Court Litigation chapter co-authored by Indian litigators Ryan Dreveskracht and Gabe Galanda of Galanda Broadman. An excerpt from the chapter's introduction:

“Indian law,” a body of tribal, state, and federal law, is the foundation for every transaction arising in or from Indian Country.  Almost every arena of commercial practice now intersects with Indian law, including tax, finance, merger and acquisition, antitrust, debt collection, real estate, environmental, energy, land use, employment, and litigation.  Therefore, virtually every business lawyer or litigator needs to have some working knowledge of Indian law.  This chapter seeks to provide that basic understanding.

Gabe served as the Editor-in-Chief of Annual Review for the 2007 through 2010 editions, and has co-authored the Tribal Court Litigation chapter each year since 2006. This is Ryan’s third year co-authoring the chapter, and his first year as its lead author.