July 8, 1985
(July 08, 1985)
Opinion 85111
SUBJECT: Indians; Tax Assessments
REQUESTED BY: Stuart B. Mills, Thurston County
Attorney
OPINION BY: Robert M. Spire, Attorney
General L. Jay Barrel, Assistant Attorney General
QUESTION:
Is the tangible personal
property of a corporation incorporated under Indian tribal law
subject to taxation pursuant to Neb. Rev. Stat. §77-1201
(Reissue 198])?
CONCLUSION: No,
provided the tribally-chartered corporation is doing business
upon an Indian land or reservation, and the majority of the
corporation's stock is owned by Indians.
You
have requested our opinion on the question of whether the
tangible personal property of a corporation incorporated under
Indian tribal law is subject to taxation pursuant to Neb. Rev.
Stat. ~77-120] (Reissue 1981). The corporation is chartered
under the authority of the Corporate Charter, Constitution,
and Bylaws of the Winnebago Tribe of Nebraska. The President
and Chairman of the Board of Directors of the corporation is
an enrolled member of a Native American Indian tribe.
Generally, "The federal purposes implicit in setting
aside Indian country for the residents of a tribe -
self-government and economic support - pre-empt state
jurisdiction to tax Indians and tribes therein, unless
Congress authorizes the tax." F. Cohen, Handbook of Federal
Indian Law, 406 (1982 ed.). In several recent cases, the
United States Supreme Court has relied on the doctrine of
federal pre-emption to shield Indians and their businesses, on
the reservation from various forms of state and local
taxation. E.g., McClanahan v. Arizona State Tax Commission,
41] U.S. 164 (]973) (state net income tax); Bryan v. Itasca
County, 426 U.S. 373 (1976) (personal property tax).
In Bryan v. Itasca County, supra, the Court set
out the standards for determining whether congressional
authorization existed to permit state taxation of Indian
activities in Indian country. The Court in Bryan held that
statutory authorization for states to tax reservation Indians
would be found only where "Congress has manifested a clear
purpose" to allow taxation. 426 U.S. at 392 (quoting Oklahoma
Tax Commission v. United States, 319 U.S. 598, 613-14 (1943)
(Murphy, J., dissenting)). The Court concluded the grant of
civil jurisdiction to the states contained in 28 U.S.C. §1360
was not a congressional grant of authority to tax reservation
Indians. 426 U.S. at 392-93.
The question of whether
an Indian-owned corporation should have the same immunity from
taxation accorded to Indians has apparently not been
authoritatively determined. In Eastern Navajo Industries, Inc.
v. Bureau of Revenue, 89 N.M. 805, 552 P.2d 805 (N.M. Ct.
App.), cert. denied, 90 N.M. 7, 558 P.2d 619 (1976), cert.
denied, 430 U.S. 459 (1977), the New Mexico Court of Appeals
held a state-chartered corporation which was fifty-one per
cent Indian owned should be treated the same as an Indian for
purposes of determining the state's taxing jurisdiction over
activities conducted on the reservation. The Court in Eastern
Navaho Industries stated:
We must look beyond the
taxpayer's corporate form to the fact that 51% of its stock is
owned by individual Navajo Indians. Consequently, there is no
alternative but to view the assessment by the Bureau of
Revenue as a tax upon Indians doing business upon an Indian
land or reservation.
Eastern Navajo Industries is an
Indian entity, according to federal definitions, so that the
imposition of the gross receipts tax on this taxpayer
constitutes an interference with Indian
self-government. 552 P.2d at 809-10.
In Makah
Indian Tribe v. Clallam County, 73 Wash.2d 677, 440 P.2d 442
(1968), the Washington Supreme Court held a county could not
impose a tax on personal property located on a reservation and
owned by an Indian and her non-Indian spouse. In reaching this
conclusion, the court emphasized the interference with federal
Indian policy created by virtue of the tax, stating:
The reasons for such a ruling lie almost
exclusively in the discernible federal policy of encouraging
Indians to become economically self-sufficient on their
reservations. In some instances, the government even augments
the policy by supplying the means. We are simply adapting this
policy of encouragement to property acquired by the Indians as
the fruits of their own work, labor and enterprise as well as
to the property given by the United States in aid of tribal
Indians. 440 P.2d at 447.
The court reasoned that
property used in business should be exempt based on the
government's purpose of fostering the successful development
by Indians of business enterprises on reservations. Id. at ,
440 P.2d at 447.
We have been unable to find any cases
dealing directly with the tax status of corporations chartered
under tribal law. It has been suggested the tax status of such
corporations may depend on ~heir ownership and purposes. F.
Cohen, Handbook of Federal Indian Law, 439 (1982 ed.). With
regard to the taxability of personal property located on
Indian land, one commentator has stated the following:
The personality’s location on protected Indian land
should also be a sufficient condition for the exemption,
because to tax such property directly frustrates federal
policy both by decreasing the land's rental value and by
impairing its usefulness to Indian owners who choose to use
the land themselves. Maximum utilization of land frequently
requires either the erection of costly improvements or the use
of expensive machinery on the land, and the Indians' ability
to afford either would be greatly reduced by a tax burden on
personal property. This is especially true in the case of an
ad valorem tax, which further discourages the use of costly
property.
Based on the foregoing, we believe the
personal property of the tribally chartered corporation
referred to in your question would not be subject to taxation
under Neb. Rev. Stat. S77-1201 (Reissue 1981). There appears
to be no clear authorization by Congress to impose such a tax,
as required by the Supreme Court's decision in Bryan v. Itasca
County. Furthermore, assuming the majority of the
corporation's stock is held by Indians, the Eastern Navajo
Industries case indicates an Indian-owned corporation doing
business upon an Indian land or reservation is immune from
taxation. The fact that this corporation is not a
state-chartered corporation, but one incorporated under tribal
law, would seem to strengthen the argument for immunity.
Finally, we believe our position is consistent with the
federal policy of encouraging successful Indian business
enterprises on reservations to foster the tribe's economic
development.
It is therefore our opinion that the
personal property of a tribally chartered corporation doing
business upon an Indian land or reservation, where the
majority of the corporation's stock is owned by Indians, is
immune from the tax imposed under §77-1201.
Very truly
yours,
ROBERT M. SPIRE Attorney General
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