Fiscal Cliff Bill Affords Indian Country Tax Relief, Suprisingly

As Indianz.com reports, the "fiscal cliff" bill includes several provisions that are designed to stimulate employment and economic opportunities in Indian Country. The Indian Employment Tax Credit, which encourages businesses to hire tribal members and their spouses, expired in December 2011 but is now retroactivated to 2012 and extended until the end of 2013.

The Accelerated Depreciation Incentive, which helps businesses locate on Indian lands, also expired in December 2011 but also received a two-year extension, until the end of 2013.

A production credit for coal facilities that were placed in service in Indian Country before 2009 was also extended until January 2014.

The New Market Tax Credit Program was extended through the end of 2013, with $3.5 billion in tax credits allocated for each year.

At the original request of the U.S. Department of the Interior’s Office of Indian Energy and Economic Development, Gabe Galanda has written a paper that explains the interplay of all of these and other tax advantages in Indian Country, titled, "The Business Case for Private Investment and Development in Indian Country." It is available here.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe assists tribal governments and businesses in all matters of tribal economic development and diversification, including entity formation and related tax strategy. He also helps tribes and tribal businesses and joint ventures withstand attack from federal, state and local government. Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

Puff, Puff, Tax: I-502 and Washington Indian Country

Washington state’s legalization and regulation of marijuana will be hazy for some time. But the effects of Initiative 502 in Washington Indian Country promises to be cloudier than throughout the rest of the state. Setting aside the social issues that all of Washington will be dealing with as pot becomes a mainstream recreational drug à la tobacco and alcohol, the taxation of pot in Indian country, if it can even be sold on Reservations, promises a host of issues that we’ll be working through well into the next election cycle. Issue No. 1: Tribal Prohibition

Tribes can and increasingly do prohibit marijuana on their reservations. While tribes lack criminal jurisdiction over non-Indians, through their civil authority, tribes could attempt to regulate pot traffic and use because it “threatens or has some direct effect on the political integrity, economic security, or the health and welfare of the tribe.” Montana v. United States, 450 U.S. 544, 566 (1981). If tribes do so, and if the Liquor Control Board’s forthcoming pot-licensing regulations mirror liquor regulations (where local governments can object to licenses), many of these taxation issues will be academic.

Issue No. 2: Federal Law

If Washington tribes follow the state’s lead and decriminalize pot within their jurisdictions, federal interference remains likely. In recent years, tribal flirtation with medical marijuana has garnered unintelligible but angry responses from the Department of Justice. Marijuana remains a controlled substance under federal law, everywhere. But the fact that Indian reservations comprise often largely federal land makes them awkward places to sell drugs that are legal under state law (which doesn’t apply) and illegal under federal law (which is often unenforced).

Issue No. 3: Reservation-based Value

In Washington, as throughout Indian Country, federal law generally bars taxes on products that incorporate “value generated on the reservation,” sold to Indians or non-Indians. See WAC 458-20-192(c). This means that food harvested from Indian lands or prepared at a tribal facility and sold to nonmembers would be untaxed. Id. at (a)(i); cf. Agua Caliente Band of Cahuilla Indians v. Hardin, 223 F.3d 1041, 1044 (9th Cir. 2000) (dicta); California v. Cabazon Band of Mission Indians, 480 U.S. 202, 220 (1987); Indian Country, U.S.A., Inc. v. Oklahoma, 829 F.2d 967, 986 (10th Cir. 1987); Conn. Legal Ruling No 2002-3 (May 29, 2002).

In other words, if a Tribe adds value to a product and sells it on the Reservation, it shouldn’t be taxed. In a vacuum this means that tribally or tribal-member grown pot sold on the Reservation will not be subject to state taxes. If state-regulated pot is actually a feasible business endeavor and not irrelevant because of the black market, untaxed on-Reservation sales could severely undercut off-Reservation sales, which will carry a 25% tax.

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Whatever form Washington Liquor Control Board pot regulations take when they are published, Washington Indian Country should remain vigilant to ensure that its interests are taken into account – whether tribes wish to fight pot on the reservation, or to regulate and tax it.

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.

Washington State Indian Lawyer Gabe Galanda Quoted Re: AUTO v. State Decision

Gabe Galanda was quoted in a WSBA Bar News article, "In Good Conscience: Analyzing the Automotive United Trades Org. v. State of Washington."

The Court’s decision, according to Gabriel Galanda, an enrolled member of the Round Valley Indian Tribes of Mendocino County, California and Seattle Indian law attorney, spells fallout for burgeoning state-tribal relations. “Currently, there are over 200 statetribal tax agreements in effect nationwide, resolving ex ante a variety of potential tax disputes. And Washington state and its tribes are just starting to smooth out the edges of their tax disputes using compacts,” said Galanda. “But now,” he explains, “the Court’s decision permits suits against tribes, essentially, in absentia.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe assists tribal governments and businesses in all matters of tribal economic development and diversification, including entity formation and related tax strategy. Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

Tribal Tax Litigation Update

Anthony Broadman's materials from the 2nd Annual Tribal Tax & Business Development Conference held yesterday in Portland are available. It has been an up and down year for tax controversy, including some bad losses (Ute Mountain Ute Tribe v. Rodridguez) and good wins (Mashantucket Pequot Tribe v. Town of Ledyard). As always, New York has provided a wealth of tobacco tax cases in which the state generally prevails and property tax cases in which tribal interests triumph.

Ryan Dreveskracht Warns Indian Country About the STOP Act

Today, Ryan Dreveskracht spoke about the disastrous implications for Indian Country associated with the STOP Act, at the "Knowledge is Power! 2012 Tribal Tobacco Tax Training and Seminar" sponsored by HCI Distribution at WinnaVegas Casino Resort located in Sloan, Iowa. His PowerPoint slides can be downloaded here.

Ryan Dreveskracht is an Associate at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm. His practice focuses on representing businesses and tribal governments in public affairs, energy, gaming, taxation, and general economic development. He can be reached at 206.909.3842 or ryan@galandabroadman.com.

Federal Indian Country Tax Incentives Expire

Amidst partisan gridlock in the Beltway over national tax policy, Congress has allowed several tax incentives designed to attract private development and jobs to Indian Country, to expire. Others will expire unless Congress acts. Indeed, amidst much election-year debate about the American small business sector and middle class, Indian Country's private sector and hope for a robust middle class has been forgotten by Congress.

-- The accelerated depreciation program, which allows manufacturers with facilities in Indian Country to use shorter recovery periods when calculating depreciation deductions for production equipment, has been unavailable since January 1, 2012. Legislation has been introduced that would reauthorize the provision until 2014. S. 3521, 112th Cong. § 211 (2012); H.R. 6240, 112th Cong. § 201 (2012).

-- The Indian Employment Tax Credit, which provides businesses with an incentive to hire individuals who are enrolled members of an Indian tribe (or the spouse of an enrolled member) and who live on or near an Indian reservation, expired on December 31, 2011. Legislation has been introduced that would retroactively extend the program to December 31, 2013. S. 3521, 112th Cong. § 204 (2012).

-- The Low-Income Housing Tax Credit Program, through which tax credits are available for low-income housing projects on homes that that were constructed, rehabilitated or acquired since 1986, including those in Indian Country, are currently available to until only September 30, 2011. Legislation has been introduced to extend the credits to January 1, 2014. S. 3521, 112th Cong. § 203 (2012).

-- The Work Opportunity Tax Credit, a federal tax credit incentive for private-sector businesses that hire individuals from twelve target groups who have consistently faced significant barriers to employment, including certain Indians, expired in 2011. Legislation has been introduced that would extend the WOTC to December 31, 2013. S. 3521, 112th Cong. § 209 (2012).

Indian Country must urge that these tax incentives be extended so that tribal governments can continue to attract private capital and create new jobs for tribal members and neighboring communities. Between now and November any calls to Capitol Hill will likely fall on deaf ears. But come after the election, tribal constituents should call their Delegation to urge that Indian Country's tax and job needs not be forgotten.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe assists tribal governments and businesses in all matters of tribal economic development and diversification, including entity formation and related tax strategy. Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

Indian Country Today Publishes Anthony Broadman's "Roundup" of Recent 9th Circuit Tribal Cases

Anthony Broadman has published a roundup of court cases relevant to Indian country that wer recently decided in the Ninth Circuit.

Tribal Exhaustion Compelled, but Montana Exception Further Questioned: "[I}n Rincon Mushroom Corp. v. Mazzetti, No. 10-56521, 2012 WL 2928605 (9th Cir. July 19, 2012), a non-Indian owner of a fee simple parcel of land located on the Rincon Band of Luiseno Mission Indians’ reservation is challenging the tribe’s regulatory and adjudicatory authority to protect the reservation natural environment...."

Not All Unstamped Cigarettes are Contraband: "In United States v. Wilbur, 674 F.3d 1160 (9th Cir. 2012), the Ninth Circuit held that cigarettes sold by a tribally licensed retailer and pursuant to a state-tribe cigarette agreement are not contraband for purposes of the federal Contraband Cigarette Trafficking Act (CCTA) – even if they are contraband under state law...."

Save the Peaks Attorney Personally Sanctioned: "Last February, the Ninth Circuit held, in Save the Peaks Coalition v. U.S. Forest Service, 669 F.3d 1025 (9th Cir. 2012), that the U.S. Forest Service had complied with the requisite environmental regulations in issuing a special use permit...."

Alaskan Native Fishing Dispute Hinges On Historic “Exclusive Use”: "In a tense en banc decision, the Ninth Circuit held last month that although Chugach people continuously used and occupied part of the Gulf of Alaska, they do not now have aboriginal rights to hunt and fish the area because their historic use was not 'exclusive'..."

Anthony Broadman is a partner with Galanda Broadman in Seattle. His practice focuses on matters critical to Indian Country. He can be reached at anthony@galandabroadman.com.

Tribal Regulation Immunizes Certain Tobacco Sales from Federal-State Interference

Cigarettes sold by a tribally licensed retailer and pursuant to a state-tribe cigarette agreement are not contraband for purposes of the federal Contraband Cigarette Trafficking Act (CCTA) – even if they are contraband under state law. United States v. Wilbur, 10-30185, 2012 WL 1139078 (9th Cir. Apr. 6, 2012). The Ninth Circuit ruled last week in Wilbur that even if cigarettes are transported in violation of state law, the CCTA only makes cigarettes “contraband” in this context if they “bear no evidence of the payment of applicable State or local cigarette taxes in the State or locality where such cigarettes are found.” 18 U.S.C. § 2341(2). The cigarettes at issue during one period of the Wilbur case were unstamped. But the defendants qualified as an Indian retailer under Washington state law, came partially within the constraints of a tribal tobacco tax compact, and therefore were not subject to state taxes – even though they were allegedly illegal under state cigarette transportation laws and were out of compliance with some tribal regulations.

At its core, for the period in which convictions were overturned, the decision implicitly recognized the legitimacy of tribal tobacco regulation. This could, by analogy or otherwise, undercut the interpretation of the PACT Act by federal agencies that suggests tribal tobacco entities must be licensed by the state to be considered “lawfully operating” under that federal law.

The Wilbur defendants’ convictions were upheld for other periods of the alleged conspiracy. And of more concern is the appearance of state officers acting in federal clothing. As the opinion observed, “a Lieutenant with the Washington State Liquor Control Board who was deputized as a Special Deputy U.S. Marshall, led the search” of the defendants’ retail facility. Although tribal law enforcement also participated in the raids, it is nonetheless noteworthy that reliance by federal statute on state law predicates is problematic in the face of “the right of reservation Indians to make their own laws and be ruled by them.” Williams v. Lee, 358 U.S. 217, 220 (1959).

The apparent ability for state officers to don federal clothing and enforce the state-federal hybrid criminal frameworks on reservations is an even more profound threat to that right. As explicitly contemplated by the Tribal Law and Order Act, if federally deputized non-federal officers are enforcing laws on the Reservation, it should be federally deputized tribal officers doing so. This concern is of course nothing new, as Indian Country braces for and resists the STOP Act, which would essentially import state and big-tobacco interests into Reservation economies under color of federal law. Wolves in sheep’s clothing; Trojan horse; pick your cliché.

Besides the clarity provided by Wilbur, and its limitation on the reach of the CCTA, in the end, a state was still able to enforce its laws on the Reservation, against Reservation Indians.

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.

Connecticut District Court Resucsitates Bracker Balancing and Tax-Free Native-to-Native Commerce

On March 27, 2012, the U.S. District Court for the District of Connecticut ruled that a local government could not assess personal property taxes against Class III slot machines. The decision in Mashantucket Pequot Tribe v. Town of Leydard is here and related news coverage quoting Gabe Galanda is here. Beyond the court's specific holding, which represents a scarce tax win for Indian Country of late, the decision stands to rebuff an increasingly common arguments by states in justification of state taxation of Native-to-Native or Reservation-to-Reservation commerce. Due to Congress' preemption of the Indian gaming field and clear prohibition on state taxation of Indian gaming, per IGRA, the decision affirmed what was widely believed to be the law: that is, that states and local governments cannot assess personal property taxes against Class II or III gaming devices. Of broader significance, the Connecticut District Court's decision in Leydard stands to defeat arguments increasingly advanced by state tax assessors that to the extent Indians traverse state-funded highways in trading goods or engaging in commerce from Reservation to Reservation, states can tax those activities.

Last year, the Tenth Circuit Court of Appeals ruled that state roads traversed by non-Indian extraction companies while taking oil and gas to market represented a “substantial” state interest. That interest ultimately tipped the Bracker balancing away from tax preemption, in favor of the state, and gave more state tax collectors even more reason to argue that state roads represent a so-called state burden that justifies state taxation of Reservation-to-Reservation commerce.

But in Leydard, the District Court rejected such an argument on the part of the township:

The maintenance of the roads to the Reservation has some connection to the taxed activity because the leased gaming equipment was brought onto the Reservation by way of the roads and the individuals who use the gaming equipment also use the roads to the Reservation. However, even if the Tribe did not lease the gaming equipment, the Town would need to maintain roads to provide access to the Reservation for individuals living on and off the Reservation. Thus, the State and Town’s interest in taxing the leased equipment fails to justify the economic burden on the Tribe that compromises substantial federal and Tribal interests in tribal self-determination and self-government pursuant to comprehensive federal regulation. The tax is preempted pursuant to Bracker balancing.

In all, the Leydard decision helps tip the Bracker scale back in favor of Indian Country, especially as to tax-free Native-to-Native or Reservation-to-Reservation commerce.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe helps tribes and Indian small businesses with economic diversification efforts, with an emphasis on minimizing state interference or taxation. Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

Seattle Tribal Lawyer Anthony Broadman Publishes Local Taxation in Indian Country Article

Anthony Broadman has published a paper, "Know Your Enemy: Local Taxation and Tax Agreements in Indian Country," has been published in the inaugural edition of Seattle University's American Indian Law Journal.

Intergovernmental disputes between tribes and their neighbors have educated states about tribal sovereignty. What many state governments have learned, through litigation, political battle, and intergovernmental dispute, is that even when states have “won” tax disputes, they have lost. This dependably pyrrhic result has driven rational state actors—state taxing authorities acting consistently with their own best fiscal interests—to pursue negotiated agreements. Today, state-tribal tax compacts, while often controversial, are commonplace.

Counties and cities, on the other hand, with some admirable exceptions, have yet to learn, or heed, lessons from inter-local tax disputes. As it stands, tribes must be prepared for future battles over local taxation in Indian Country, particularly in regard to real or personal property owned by tribes. But as counties and municipal governments slowly learn the lessons already learned by the states, tribes should also be ready to negotiate intergovernmental solutions to inter-local tax disputes.

Anthony Broadman is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  His practice focuses on company-critical business litigation and representing tribal governments, especially in federal, state and local tax controversy. He can be reached at 206.691.3631 or anthony@galandabroadman.com, or or via galandabroadman.com.