In line with business advice delivered by Gabe Galanda at RES 2011, about why tribes should diversify their economies, and precisely how they can attract private developers and investors to tribal lands, the Coquille Tribe of Oregon has attracted a Perpetua Power Source Technologies manufacturing facility to its reservation. Read the story: "Tribal money fuels Perpetua expansion." Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California. He can be reached at 206.691.3631 or gabe@galandabroadman.com, or via galandabroadman.com.
Setting the Record Straight on Indian Taxation in Washington
Late this week, Washington State Republicans introduced three bills, seeking to balance the state's budget on the backs of Washington's 29 tribal governments. A legal and economic reality check is in order. Those bills are:
HB 2044 Concerning equity and fairness through the creation and regulation of electronic scratch ticket machines for nontribal gambling establishments.
HB 2045 Providing for fairness, equity, and transparency of tax preferences for federally recognized Indian tribes.
HB 2046 Concerning legislative involvement with compacts and compact amendments.
In support of those bills, Republican House members argue for "closing tribal tax loopholes." Here are some of the facts the Republicans either (a) do not understand, (b) do not care to understand, or (c) understand but do not care to help the public understand.
1. State taxation of Indian gaming revenues has been per se barred by Congress via the Indian Gaming Regulatory Act of 1988. Period. Still, local Republicans aspire to require "the non-taxpaying tribal mega casinos to pay a tax on the profits they make from the exclusive games they operate." Until they can figure out a way to do that (they can't), they hope to allow the largest expansion of gaming in the state's history, over-promising new state tax revenues. Indeed, according to a commercial gaming industry expert, the proposal "would cut into sales tax revenues in other segments of the state economy."
2. Governments don't tax other governments. Instead, governments -- be they state, local or tribal -- work with each other to devise accords that reflect the needs of each government in relation to the services they provide the public. That is why, according to one study, “[n]early every state that has Indian lands within its borders has reached some type of tax agreement with the tribes” -- including Washington.
3. State and local governments are already adequately compensated for the services they provide to tribal members. Under the economics of “tax exporting,” it is frequently tribal governments – not state or local governments –- who bear a disproportionate financial burden associated with the services they provide.
4. Washington State cannot legally enforce its fuel and tobacco excise tax regime on Indian reservations, according to the U.S. Supreme Court. Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134, 162 (1980); Oklahoma Tax Commission v. Potawatomi Tribe, 498 U.S. 505, 514 (1991). Therefore, heeding advice from the High Court, the state has entered into fuel and tobacco tax compacts with tribes, in part so it can collect something from reservation-based fuel and tobacco sales, instead of engaging zero-sum litigation and enforcement activities.
5. Ten years ago, researchers at the Evergreen State College opined that Washington tribal governments contributed an estimated $140 million annually to the state and local tax structure. Today tribal tax contributions to the state are likely far greater, due in large part to the diversification of Washington tribal economies beyond gaming and tobacco commerce. Tribes are already contributing their so-called fair share of taxes.
One can only hope that the facts will enter the legislative discourse about HB 2044, 2045 and 2046.
Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California. Gabe co-authored "Taxing Times in Native America," Washington State Bar News, January 2011. He can be reached at 206.691.3631 or gabe@galandabroadman.com, or via galandabroadman.com.
The Business Case for Private Investment and Development in Indian Country
On Wednesday, at RES 2011 in Las Vegas, Gabe Galanda presented a paper titled, "The Business Case for Private Investment and Development in Indian Country" (updated March 31, 2011). The paper was commissioned by the U.S. Interior Department's Office of Indian Energy and Economic Development, for presentation to representatives of Corporate America in attendance at RES.
There has never before been a better time to develop businesses on Indian lands or otherwise in partnership with tribal governments. The Great Recession has taken a disastrous toll on state and local governments. State tax revenues have plummeted, causing state and local governments to cut programs and reduce workforces. Local development impact fees have spiked. Tax assessors are assessing property and excise taxes with reckless abandon, as many state legislatures having withdrawn various tax exemptions and incentives that were designed to catalyze local business development and job creation. Obtaining building permits now takes even longer. It is getting more and more difficult, if not impossible in some jurisdictions, to develop new businesses in traditional commercial sectors.
But while state and local governments struggle to make ends meet, tribal governments have largely avoided economic catastrophe. Fueled by the $26.4 billion Indian gaming industry, Indian Country is generally faring much better than neighboring local economies since the recession took hold in 2008. Ironically, not having property tax bases to begin with, most tribal governmental revenues have remained stable. But tribes are not getting complacent; they recognize that the Indian gaming industry will not sustain its exponential growth over the last decade. The inevitable legalization of Internet gaming and, in some jurisdictions, commercial land-based gaming, will eventually put a major dent in Indian Country’s bottom line. As such, tribal governments are more than ever looking to diversify their economies.
Where tribes bring a staggering array tangibles like land and location, and intangibles like sovereignty, relaxed red tape and tax exemption, their corporate business partners bring proven industry expertise and new capital to the reservation. Whether through a joint venture between a tribe and a non-Indian business, a tribal land lease to a non-tribal company, or a tax credit investment – all of which are contemplated below – there are an abundance of very advantageous reservation development deals for Corporate America to symbiotically explore with tribes at this time in our nation’s history.
Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm. He is an enrolled member of the Round Valley Indian Tribes of Covelo, California. He can be reached at 206.691.3631 or gabe@galandabroadman.com, or via galandabroadman.com.
