CHAPTER 12 TRIBAL TAXATION OF RESERVATION MINERAL DEVELOPMENT
| Jurisdiction | United States |
(Feb 1989)
TRIBAL TAXATION OF RESERVATION MINERAL DEVELOPMENT
Daniel H. Israel, P.C.
Denver, Colorado
I. INTRODUCTION
This paper will be divided into three parts. Part I will analyze the nature and scope of tribal taxing authority. Part II will analyze from the point of view of a reservation mineral developer the pros and cons of tribal taxation with special emphasis on the economic and political impacts occasioned by that taxation. Part III will focus on the administrative and judicial remedies which a reservation taxpayer has vis-a-vis excessive tribal taxation.
II. NATURE OF TRIBAL TAXING AUTHORITY
Ten years ago very few tribes had developed tribal taxing programs. However, in the last ten years, tribes throughout the country have aggressively expanded their tax base, had their taxing powers upheld by the United States Supreme Court and confirmed by Congress, and have adopted in a variety of forms the administrative and judicial apparatus necessary to both impose taxes and to regulate and enforce those taxes. Unfortunately most of the expansion of tribal taxation powers has occurred during a time of declining Reservation mineral development economic activity. As a result of the simultaneous increase in tribal taxation and decrease in reservation energy development, the adverse economic and political impact of tribal taxation on Reservation mineral operators has threatened to undermine Congress' long standing plan to strengthen Reservation economic development.
An increase in the commitment of private capital to the reservation economies will depend in part upon an increasing level of confidence on the part of mineral developers that tribal taxation will be responsibly established and fairly imposed. Moreover, energy developers need to be confident that the taxes collected will indeed be utilized to enhance the reservations as improving economic locales and to improve the services and responsiveness of tribal government.
The first modern Supreme Court decision considering the power of tribal taxation arose out of the efforts of the Colville Tribes of Washington State to impose their taxes not on reservation mineral development but rather on the retail sale of cigarettes. The Supreme Court affirmed that the power to tax transactions occurring on trust lands and significantly involving a tribe or its members is a fundamental attribute of sovereignty which the Tribes retain unless divested of it by federal law or necessary implication of their dependent status. Washington v. Confederated Tribes, 447 U.S. 134, 152 (1979). The Court confirmed that the United States, acting through the executive and judicial departments, has at least since 1881 recognized that
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Indian Tribes possess broad powers of civil jurisdiction over non-Indians. This power has been acknowledged by the Court to embrace tribal taxation powers over Indian commerce. Buster v. Wright, 135 F. 947, 950 (8th Cir. 1905); Iron Crow v. Ogallala Sioux Tribe, 231 F.2d 89 (8th Cir. 1956). Further, Congress in the Indian Reorganization Act of 1934, 48 Stat. 987, 25 U.S.C. § 476 confirmed that among the existing federal law applicable to tribes in 1934 was the power of taxation. See Powers of Indian Tribes, 55 I.D. 14, 46 (1934).
Two years after the decision in Colville Tribes, the Court in Jicarilla Apache Tribe v. Merrion, 55 U.S. 130 (1982) examined in greater detail the power of the Tribes to tax major mineral development on the reservation. In upholding the Jicarilla's severance tax, the Court ruled that the power to tax arises as a necessary instrument of tribal sovereignty as well as from the Tribes' power to exclude non-Indians from tribal lands. For the first time the Court emphasized the necessary link between tribal taxation and the provision of tribal governmental services:
[I]t derives from the tribe's general authority, as sovereign, to control economic activity within its jurisdiction, and to defray the cost of providing governmental services by requiring contributions from persons or enterprises engaged in economic activities within that jurisdiction.
Merrion, 455 U.S. at 137.
As the Court confirmed, energy developers and other outsiders involved in Indian commerce avail themselves of the "substantial privileges of carrying on business" on the reservations. Accordingly, they benefit from the provision...
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