Tribal Land Corporations: Using Incorporation to Combat Fractionation

• Jurisdiction: United States,Federal
• Citation: Vol. 88
• Publication year: 2021

88 Nebraska L. Rev. 385. Tribal Land Corporations: Using Incorporation to Combat Fractionation

Tribal Land Corporations: Using Incorporation to Combat Fractionation

Brian Sawers(fn*)

TABLE OF CONTENTS

I. Introduction.......................................... 385

II. Indian Land and the History of Allotment............. 387
A. Allotment......................................... 388
B. The Effects of Allotment........................... 393

III. Congressional Legislation............................. 399
A. Indian Land Consolidation Act .................... 399
B. Amendments to the ILCA......................... 401
C. Federal Purchase of Fractionated Interests ........ 402
D. American Indian Probate Reform Act.............. 404

IV. Proposals from the Literature on Fractionation........ 405

V. Tribal Land Corporations............................. 408
A. Incorporation...................................... 409
B. Two Caveats...................................... 410
C. The Rosebud Tribal Land Enterprise .............. 413
D. Evaluating the Rosebud Tribal Land Enterprise___ 419

VI. Eminent Domain...................................... 421

VII. Economic Rationales for the TLC...................... 426

VIII. Conclusion............................................ 431

I. INTRODUCTION

Until 1887, almost all reservation lands were held in common for the benefit of all tribal members. The Dawes Act of 1887 inaugurated a process of privatizing the reservations by distributing the land to individual Indians. Between 1887 and the end of allotment in 1934, 118 reservations were allotted.(fn1) While many parcels were sold,

1

roughly ten million acres remain in allotted trust status today.(fn2) For most Indians, alienation was prohibited, first for twenty-five years and then indefinitely.

Few Indians made wills (many were not permitted to do so) and therefore ownership interests descended under state law. In 1984, three-quarters of allotted land had more than one undivided interest, i.e. at least two Indians owned the parcel as tenants in common.(fn3) The extent of fractionation is rapidly increasing: 350,000 interests in 1984 grew to 1.5 million in 1994.(fn4) By July 2001, the number had increased to 3.15 million.(fn5) Fractionation is skewed: a majority of the interests reflects ownership in a minority of the land. Indians own 1.4 million interests of less than 2% of a parcel, affecting 58,000 tracts.(fn6) "Economically and administratively, allotment is unworkable."(fn7) The administrative burden of maintaining over three million records is significant; the cost was estimated to be at least $17 million per year in 1999.(fn8) The paperwork required to use allotted lands deters leasing and other economic uses, depressing returns for individual Indian owners.

Although the allotment of Indian-owned land is the apotheosis of fractionation, fractionation undermines land tenure elsewhere. Forty-one percent of black-owned land in the Southeast United States is fractionated to some degree.(fn9) The willingness of courts to partition land in the Southeast has limited the degree of fractionation (federal law discourages partition). Partition is frequently combined with sale, contributing to the loss of black-owned land. Heirship property on the island of St. Lucia is called "family land" and partition requires consent from all the owners, which encourages fractionation of heirship

2

property like in Indian country. Similarly, family land is underutilized because ownership is split between so many individuals.(fn10)

While fractionation is a significant problem affecting allotted land, the burden is very unequal. One-third of all allotted parcels have a single owner, i.e. no fractionation. Even within fractionated parcels, the extent of fractionation is skewed. One-quarter of parcels represent 81% of interests. Relatively few parcels are extremely fractionated since only 1300 parcels have more than 200 owners.(fn11) Even where fractionation is limited, it imposes economic costs. Where fractionation is extreme, the administrative costs sometimes mean that land remains unused. While fractionation is a significant obstacle to Indian prosperity, it is not the only impediment to economic development. For example, the Presidential Commission on Indian Reservation Economies identified 2320 individual obstacles in forty major categories.(fn12) Among the most frequently cited impediments to economic development are the remoteness of most reservations, few resources/poor land, burdensome federal regulations, and tribal politics.

This Article proposes using the corporate form to solve the problem of fractionation. Part II provides a short summary of allotment and its effect on Indian land tenure. Part III describes attempts by Congress to reduce fractionation, despite resistance from the courts. Partr V discusses proposals from the literature on fractionation. Part V describes the role for tribal land corporations ("TLC") in responding to fractionation. Part VT analyzes the implications of using eminent domain by TLCs. Part VII advances economic arguments in favor of the TLC. Part VIII concludes.

II. INDIAN LAND AND THE HISTORY OF ALLOTMENT

As early as 1633, non-Indians proposed granting or imposing individual ownership of land on Indians.(fn13) Jefferson saw a role for private property in civilizing and assimilating Indians.(fn14) Between 1830 and 1880, sixty-seven different tribes were given the opportunity to receive allotted lands, yet fewer than 5% chose to accept allotment of their reservations.(fn15) In addition, Indians were offered individual land ten-

3

ure off-reservation. In 1875, the Indian Homestead Act offered all the benefits of the 1862 Act without forfeiting any share of tribal funds.(fn16) Few Indians took advantage of homesteading.(fn17) Although cultural norms certainly played a role, much of the land set aside as reservations was inappropriate for small-scale agriculture or ranching. Ninety percent of the Sioux were reported to oppose allotment because their land was useless for agriculture and running livestock over a large range was the only economic use.(fn18) Many Sioux reservations are concentrated in western South Dakota-a dry region with poor soils, where even subsistence gardens fail in many years.(fn19)

A. Allotment

The General Allotment Act of 1887, also called the Dawes Act,(fn20) authorized the President to distribute tribal land held in common to tribal members individually.(fn21) Each tribal member received between 40 and 160 acres (later expanded to 320 acres), depending on age and sex. (No accommodation was made for future population growth.) Any land not allotted was declared surplus, removed from trust status and opened to non-Indian settlement.(fn22) To encourage assimilation, allotted land was often checkerboarded with surplus land.(fn23) Although tribes ceding surplus land were supposed to benefit from its sale, often the land was sold on the cheap.(fn24) Most surplus land was sold for

4

$1.25 per acre.(fn25) Even when the federal government paid more, Indians still received a fraction of the value. In 1901, surplus land on the Devils Lake Sioux Reservation was ceded to the United States for $3.32 per acre, but resold for $4.50 per acre. At the time, prairie farmland averaged over $7 per acre.(fn26) While some of the proceeds were distributed pro rata among tribal members, some were retained by the Office of Indian Affairs ("OLA") to offset agency appropriations.(fn27) The direct administration cost of allotment was $900 million, roughly $10 for each acre transferred to non-Indians.(fn28)

Fearing that non-Indians could quickly come to possess much of the allotted land,(fn29) the Act prohibited any conveyance for twenty-five years, including by devise.(fn30) The trust period was judged sufficient time for the Indians to "acquire more provident habits . . . and to learn how to take care of themselves."(fn31) Under Section 5 of the Act,(fn32) ownership of allotment lands descended according to the laws of the state (or territory) in which reservation was located. Although state and territorial laws varied in their details, the heirs of intestate estates were tenants in common of an undivided parcel everywhere reservations were allotted.(fn33)

Scholars have identified six goals for allotment: weakening the tribe as a social unit, promoting individual Indian initiative, encouraging Indian agriculture, retaining a portion of the reservation as Indian land, opening the remainder to non-Indian settlement, and

5

reducing the cost of Indian administration.(fn34) The legislative success of allotment depended on a coalition of Western agricultural interests eager for more land and well-meaning Easterners, who thought that assimilation would civilize Indians and improve their social and economic condition. In this view, Indians were held back by both the continued vitality of tribal social structures and the absence of private land ownership on reservations.

Both opponents and proponents of allotment believed that Indians had no private rights in property(fn35) and thus Indians had no incentive to improve the land. The common prohibition on alienation outside the tribe or group is often characterized as evidence against private ownership. Yet, most countries do not permit non-citizens to own land. The United States...