ninth circuit court of appeals the indian gaming regulatory act does not comprehensively regulate construction contractors additionally the flanders stand to sue tribe has failed to show that the remaining federal and tribal interests justify preemption of the state tax here and this construction project at issue includes a ninety twenty one or twenty four million dollars expansion and renovation of the kids you know and it's ancillary businesses such as a hotel restaurant bar administration building v i p lounge casino floor the tribe entered into a contract with an out of town contractor to perform these constructs and services and agreed to pay the contractor for illegally impose taxes the legal incidents of the contractors excise tax is on the contractor and essentially there are no exemptions that means for construction work done on an indian reservation for the federal government the contractor in that case is still subject to the contractors now there's a reference in in the brief to an exemption from the contract or excise tax for work on the tribe which apparently is a tie end of other federal regulations that i'm not familiar with what just explain what are the other federal regulations and what do they permit and so forth so the provision of the didn't exist and this contractor wanted that exemption what would have to be shown and where would what would the remedy be for if it was the man so the state looks but if contractors doing work for an indian tribe on the reservation they submit a contract right indian country requests for exemption in that case the state under bracher looks at each of these under a case by case basis to term for instance whether there is comprehensive and federal regulation of the tax activity the department has made the determination that the sigs regarding tribal hospitals tribal housing projects in tribal schools under the rama case if there is the state exclusively stated minister what would prevent that what would what would what in the where in the federal regs with the state we were acquired to granted exemption we believe we have we have to look to brac or if the brecker judicial i mean it was are there are there b s a or dia r d o i regulations that address this issue not to my knowledge your honor ok so this is a state applying federal federal judicial correct your honor and while the state caused an exemption it's not really an exemption under state law it's the state trying to make a system to apply the federal law in that you look at it you look at federal regulations that govern the subject the comprehensive then pervasive federal regulation the state would also look to whether there's tribal interests involved and in that instance the state has in the past exempted tribal government buildings because the state used those as  buildings that affect troubles right to govern itself and make their laws and leave the new any written opinion when it makes this determination or is just a yes or no conclusion it's a yes or no conclusion your honor so only time you explain it is in litigation like this apparently there's no opinion letter for example from know your honor fishel no your honor state tax on the contractor because it comprehensively regulates indian gaming and there is no room for the state tax but it grow again is only aimed at the gaming it is not comprehensive regulation of the construction of the casino building structures hotels and restaurants again keep in mind the specific terror transaction the state is taxing the contractors construction services doesn't matter what they're constructing based on the discussion you've had about the way the exemption it seems like in theory you could have a different answer if they were just constructing the casino where the gaming is versus other buildings is that a distinction that the state would ma not in the context of the casino here because a great does not regulate that activity now that does come into play and again in the the topics i mentioned such as a school where the there's a regulation of the actual construction contractors work so this and remind me this construction was of the you said the casino floor but also other amenities so it's sort of a conglomeration is it would what if they had carved out but if they've carved out just the casino floor part is that a stronger argument for the exemption than given the examples and it's just the amenities that are added into the construction plan i don't think it's a stronger argument by any means because we still have to look at the federal regulations of that activity and here there is none the lower court's decision actually highlights this it's actually evident through the lower court's decision because as cited by the lower court requires that the tribe enact an ordinance regarding constructing and make the construction and maintenance of the facility that it's done in a manner that adequately protect protects the public if work is going on in  it's the tribe that has to protect its patrons from that ongoing construction also while there's federal regulations those federal regulations require the tribe to submit a felicity facility licensed here neither of these actually impose any regulations or restrictions on the on the contractor rights work those are aimed at the tribe is there is any litigation i'm back to this federal regulation sounds to me like the contractor ear could have sued for the denial of an exemption over a state court decision denying the exemption so there it looks to me like there's an exhaustion of remedies problem here yes there are i mean the tribe jumps in  and suze when you say that and i think the tribe that's the incident says it's on the contract yes you're on track to pursued remedies and then rather than pursue them to the u s supreme court the tribe jumped in the federal district court honor here again you highlight that it is the gambling regulation statute not a code governing construction contractors and bracher you had if you had regulations imposed on the taxpayer in that case you had federal regulations such as the taxpayer was required to repair maintain and build roads there were a lot of load restrictions imposed on the taxpayer in mandatory contract terms on the taxpayer  rama there the federal regulations were imposed on the taxpayer the federal regulations included wage requirements on the contractor and contract requirements on the contractor now there is a type of contract that aggro extensively regulates management compaq's management where a vendor's ownership of a slot machine located in a tribal casino did not qualify as gaming and taxing that slot machine did not interfere with the tribes governance of gaming you can also consider it a criminal context it recovers crimes related to gaming it doesn't cover all crimes just because they occurred in a in a casino lower courts a broad interpretation of the catch all provision must be rejected because it extends the catch all provision past this court's recognized scope of acreage which is the tribal governance of gaming this overextension is especially evident in the contractor's work on the net individuals can't be in the hotel or restaurant the ancillary businesses here these businesses can't be considered premises where the gaming is conducted again the but for test the court held that the but for test applied and that but for the casino the project would not exist and conversed lee but for the project the casino could not operate for reasons articulated in the gerlach oral argument the little car erred in applying this test it would also require the state to determine that at what point the construction is necessary or unnecessary for a casino to continue operating this goes against the supreme court's principle noted in chickasaw which is that tax administrati requires predictability color primarily relied upon a general federal and tribal interest in tribal economic development but this again conflicts with the on appeal portion of the that could be said for any tribal venture by a tribal government a government that you don't think that it that the fact that it's because you know and it's because you know operation and it is the key source of revenue that that's that's a in any way of a part or different from another type of revenue generating business no your honor i do not believe it sets it apart here this is again the tax on the contractor and it's comparable to cotton petroleum where which stated that through the enactment of certain federal legislation congress sought to provide tribes with a profitable source of revenue but there is no evidence for further supposition that congress and  intended to remove all barriers to profit maximisation the same can be said about agra the lower court seemed to require some sort of tax manipulation to occur in order for the state to retain its taxation jurisdiction over nonmembers this is not supported by ye you does not state that without the rigging of a tax exemption the federal interest in the tribes economic vitality would defeat an otherwise state legitimate state tax it used the tax manipulation to further diminish the otherwise the federal and tribal interests that were already diminished not to justify preemption on its own plus placing a requirement of tax manipulation would again go against the supreme court's statement in chickasaw that taxon ministration requires predictability states have to be able to administer their their state tax on non indian contractors regarding the state's interest in the back or balancing test the lower court arrogant discounting the state services because of the lack of nexus between the contractor and the state services or in those states services just general states or reserves that were not necessarily linked to this activity and i believe that's where the lower court went in saying that there was not that link but this nexus requirement conflicts with the the lower court or the girl at courts on appeal decision which did not require that nexus in that case the girl at court recognized that south korea residents generally benefit from the state services and noted that the relevant services include both services on and off reservation this is especially appropriate given the contractor shop in this case is located in sioux falls south dakota which is approximately thirty five miles away from the project site state services provided to employees as they travel between the shop and the projects that are certainly appropriate to consider here it is not necessary to quantify the services actually provided requiring a qualification would be inappropriate as it would fail to recognize that tomorrow a contractor and its employees could use the services tomorrow an employee could sue the contractor in state court for not paying him the wages from the construction project tomorrow an employee could get hurt at this project the legal incidents of the tax is on the contract or the lower court's decision conflicts with the that construction contractors fall outside of preemptive scope if you have no further questions i would reserve my remaining time for about  self sufficiency and strong tribal governments and in doing so ensures that the indian tribe is the primary beneficiary of the gaming operation this is a new rated the legislative history of the act and in the actual language  itself the state attempted imposition of contractors excise tax in this matter is preempted by indra and allowing such a position frustrates the intent of egress passage and causes harm to the tribe there are two barriers that stand in the way of the state exercising its taxing authority on the non indian contractor in the situation and the first being preemption and the second is whether or not the unfriend to infringe on the right of the reservation indians to make their laws and to be raise all these federal issues in this instance the tribe after that if there was denied the certification it exercised its authority under ex parte or not excuse me not authority but its rights under ex parte young and went straight to the federal courts to have this matter result in a dorsey in witney it determines what is standing the standing for the tribe and it's an indirect revenue impact why the tribe as was not a party to the to  the the tax well it mean it would it was indirectly a party because it agreed to pick up the tab for that and even if even if that if that gives the tribe standing why is why doesn't the why isn't the proper why isn't exhaustion of the of the tax exemption process required you know in this situation we believe that both could have been could have excused it could happen if we go and look at rama which is a very controlling case in this matter in that instance it was the school board who actually brought the case against the state and in that instance the school board was fighting a a gas tax that was being or excuse me  a contractor's excise tax on gross receipts on the construction of that project and in doing so they determine the court that there was a tire leave federally preemptive scope because of the indian self determination and education act and therefore the state was unable to impose  because it did have a direct economic burden on the tribe and would impact the overall programming of that school this is the same situation here whether or not the state imposes the legal incidents on the the contractor to collect the court in our case found that that economic burden falls directly on the tribe and it doing so it has a couple of different instances where directly benefits us the first is that the project itself as less money to operate  and scope of the project was therefore diminished and secondly anything remaining in again the the tribe uses these excess funds to actually fund a round you know foreigner if it was four hundred fifty thousand dollars representing two percent of the overall tax that's about two percent of the overall tribal budget and if it's an able to do it's a large impact on its programming that offers a tribal members and the community again when we look at the overall scope of it is incredibly preemptive in endorsing whitney this circuit held that to be true in that instance or to further that principle because we have to take a step back and look at exactly why egger was passed and in the certain circumstances it was in this instance congress looked at the three governmental bodies and determine exactly what roles and responsibilities each should have in the california versus cabazon that came out right before it the  excuse me the supreme court determined that the state should have no no impact on her no role in the operation of gaming on the indian reservation so congress at that point took a look at that ruling and set aside certain and everything else was dick delegated to the tribe there any hand in carbs on that court was addressing state taxation of nonmember activity not expressly your honor but again it wouldn't be a lie it could be implied because of the says that the entire field was preempted and th impact could not have an impact on the operation of gaming in for the cabazon tribe again if we go beyond just the general overall scope of aggro we find certain instances within the indian gaming regulatory act  that specifically deal with construction and the maintenance of facilities the building standards from the twenty five u s c twenty seven ten b two b regulates the operation of class two gaming and it says specifically that  is conducted in a manner which adequately protects the environment and the public health and safety this again in arse but not the revenue note that would be a different proportion of the statute that actually determines what revenues are can be used for if you look at it as a whole as it pertains to revenue every bit of revenue that comes out of a casino is regulated so for instance if the tribe were to handle it the state brought up a management contract it states that if money from the casino operation is going to another party and they control an overall interest and in the operation of that facility that only a certain amount can be handled and that this d and i do see must approve that  pro bono type manner and those that don't the n i g c signs off on every on every decision it signs off on exactly what it can be spent for your honor not every decision for instance or could be spent on local government so the tribe could elect to give the local government a portion of its funding it could be spent on economic development interest of the tribe it can be spent on government operations it can go to tribal members in the event that a revenue allocation plan is approved by the bureau  affairs and then again those are again show the concept that every bit of money that's coming out of that facility must be regulated in addition to that the tribe is required to file an annual audit c which provides an outside contractor to the audit firm must come in and make sure that all of the books are compliance with the actual financial statements and that is again another instance in which the indian gaming regulatory act and the federal government make sure that every bit of money is accounted for and used in accordance with the act itself to continue although those the first section that i read regarding the maintenance standards of class two operations a go a bit further in the act itself in d one or excuse me twenty seven ten d one a two it clarifies that these same standards must apply to class three facilities as well so again being that there were a casino is a class three facility we would say the same standards are political clickable there if you'd then jump into the actual federal there's the further licensing requirements of the federal government itself in twenty five  excuse me of the sections that was discussed above then i g c then river reserves the right to inspect the property at a time and within that statute if if the tribe fails to meet those maintenance and safety precautions of building standards then the energy c has the ability to find the casino and to shut it down so again because this activity is delegated to the tribe it is preempted by the the attempted imposition of standards by the state is preempted except in the event that they were to utilize the state and tribal compact to institute some bit of building or safety standards which isn't approved one of the seven approved areas  standards of operation of such activity and maintenance of the game in facility so in the event that the state believe that the tribes should follow the most up most up to date building code universal building code if there was a specific situation that needed to be address that hadn't been before that is a matter that could have been brought up in the compact process to go further than section the subsection seven of that same section also states that in any other subject that are directly related to the operation of gaming activities is often referred to as the catch all provision so the catch up provision the test to determine like we discussed before to determine whether the activity is related to gaming comes out of coyote valley to and that's the but for the tribes gaming activities the construction project would not exist and it would have to show that the tribe could not operate its gaming activities without the construction or renovation so in this instance the court build delve right into the overall structure of that but for test in finding that there wasn't another test that was  adopted that standard and they said the first part of that test is clear if no casino existed and then there would not be a need to renovate it that's pretty straight forward in the facts and of the court believe that the second was a bit more nuanced and stated did the environment for the tribe and for patrons to gamble in accordance with the act in this situation the tribe depends on forty percent just because he was forty percent of the tribes overall annual budget which is a large obviously a large percentage of that and it again takes those programmings those barebone federal programs to make them fully functional and operational within our jurisdiction there's also funds of various programming and salaries throughout the entire  tribe itself and it would leave us in a real pinch if we were able to use those gaming revenues to actually facilitate our government operations secondarily and it looks at the actual  contractor's role in the renovation somehow cuts the tribe at risk financially you know it seems to me there's a lot of a lot of hyperbole flying around here it does have a direct economic impact on the project and the tribe itself not only was this project so does the other the other ninety eight percent of what they're paying that contract determine whether or not that project must happen in again when we look at whether or not one thing in the record that if the contractor hadn't if he didn't get the exemption they'd back off the project no not the project as a whole and again  they kind of play that i'm sure they made the decision gotten plaiting that this two percent may be riskier and play yes and at that point the executive committee determined that it would contest those overall in the imposition of those taxes and in doing so would continue to meet the objectives of the indian getting regulatory act to provide for those standards of maintenance and safety this property was built in one thousand nine hundred seven and has not had a substantial renovation its mechanical systems are failing its parking lot needs to be replaced there are various things that are new roof had to be put in in that instance it was a requirement that the tribe do this so in the event that something catastrophic would happen it wouldn't force closure finding and again the forty percent that i was bringing up was just to indicate how important the casinos finances to the tribe are in the overall scheme of the tribal operation so again the court would further and said that again without this construction project the tribe would be unable to operate its facility within of the matter that there was no need to balance but in this instance the judge prior did go into the actual second step of brecker knowledge since determine whether or not this state activity infringed on the operation or on the on the ability of the tribe to make their own laws and to be ruled by them in the court when balancing the interests of the state the federal government and the tribe looked at a variety of issues to determine whether or not the certain exercise of state authority would violate this law and it determined that when again looking at some of the services and other things that are actually provided to the project that the state's interest was and burden ensuring that it actually was providing and deserve this tax had not been and it determined that because that amount was so much higher than the actual benefit the tribe was receiving that the tribe or that the state would not be able to impose that i think it was six million dollars and the operation itself was generating i'm a number far less of vehicles in that situation again the court in the eighth circuit took a look at ramah itself determine that the scope of the indian self determination education act was preemptive in this field and as it pertains to the second part that the state services are being provided to the overall project were not persuasive they stated that they gave them a few roads and things like that and again the state made the same same argument this case that by providing roads to the project again it would benefit the tribe those roads were not built to benefit this project those were roads were built to benefit the general population of the state and again the lower court determined that that was not a persuasive argument the other instances within the contractors excise tax itself that the state that i'd like to bring up is that first the contractors excise tax as a tax on gross or seats the projects location is where the state is exactly where the state the taxes imposed the project location is an indian country at our gaming facility that isn't undisputed fact when we go even further it states that the collected revenue from that matter goes to the general fund and then it's the state further says that some of the services that it provides the project generated from the are not generated from the the general fund itself so when they talk about licensing of engineers lawyers things like that the lower court found that unpersuasive in that all of those all of the licensing requirements of those positions were generally pleasurable to all professions or to those professions across the state and most of those have a few associated with them secondarily when it pertains to all the regulation of his project the tribe is bearing the cost of the project itself and is paying people to come in and geo tech for instance is testing the geotechnical standards for the materials used in the project it has h  secondary engineering company come in and review payment applications it's an architect has been tasked with reviewing construction as it goes and the tribe even goes further to actually provide surveillance security storage and  pulled in that instance an inspection is done the tribe pays for that inspection even if it doesn't pay for directly that comes from payment application which is absolutely borne by the tribe one other thing that i'd like to address is that in this instance the state said that this is a non indian contract or we agree and that the contract documents state that if the contractors are able to utilize that shop and to construct some of the opportunity to construct some of the projects or what it can do it should that's a standard a form document that is intended to benefit the overall project by big market in this instance this is a renovation of an existing facility everything in the record indicates this all of the activities related to construction are done on the reservation at the property you can't renovate of a building by building things within the shop itself again i see that my time is expiring i thank you all for your time today the tribe says you can't renovate the building without being there but you also can't renovate the building without driving from sioux falls in this instance to the construction project now the tribe wants you to look at the economic incidence of the tax trembler were warned against treating economically inevitable pastors the same as legally a legally mandatory pass through the court highlighted the supreme court's ruling in chickasaw nation which  on mandatory legal requirements over economic realities no matter how automatic those realities maybe that's found at page thirteen fifty there's nothing in cabazon regarding the state taxation of nonmembers cabazon related to the impose gambling regulations on a tribe addressed in that scenario absent from the tribes argument are federal regulations that are imposed on the contractor such that would leave no room for the state tax on the contractor the tribe also points to the city of duluth case in that case there was seventy five million dollars in payments going from the tribe to the city and also in that case it was an issue of whether the tribe had a sole proprietary interest in the in the gaming that that case is not what we have here we're not talking about seventy five million dollars in payments to the state  the tribe also talked about marty but in that case the state was trying to impose a tax on the tribe that taxes categorically preempted regardless of any breaker and bracher analysis absent congressional authorization the state could not have imposed that tax state tax on the gaming proceeds a group does not preempt a tax on the construction project here what's more concerning is that those the tribes open in a position that anything that would deflate revenue is preempted interpret in the catch all provision broadly again to an preempt state jurisdiction over the non tribal member contractor in this case would again permit the state to increase its jurisdiction over tribe through the compact and process the state that under advisement