judgment the district court made an error in interpretating the indian gaming regulatory act and the tax provisions of the indian gaming regulatory act specifically the tax provisions of the indian gaming regulatory act provided that net derived from gaming are subject to taxation and there's a corresponding provision in the end of in the internal revenue code that also discusses taxation of gaming distributions and it uses that term again net revenues derived from gaming it's very specific enigma and it's very specific in the internal revenue code so it's not a coincidence that congress chose the term net revenues well let me let me  a question and then you can try to answer it during the remainder of your acumen tax law generally rejects formalism and looks to the economic reality of transactions right that's occurred by and large and the term net revenues make sense it seems to me if you have a third party operator who's running your gaming so in other words if the  was in contract with a gaming company and the gaming company ran its being go or casino and they had to pay them a certain amount then of course whatever the gaming operation derived you take off the top whatever you had to pay the operator run and whatever's left by and large is net but when the tribe is both the owner and operator of the facility why is the gross receipts tax something you take off the top to get to net revenue because if it is what prevents the tribes from raising the gross receipts to fifty percent or sixty percent or seventy percent so that there's almost no little net revenue really left and you're skimming everything off the top and then you're distributing all of that per capita to tribal members well your honor i   acted in ordinance and it's in the it's in the record in this case and that ordinance imposed a gross receipts tax on all tribal enterprises it didn't matter if it was being operated by a third party outside the tribe it didn't matter if it was an enterprise being operated by the tribe itself but that goes back to one thousand nine hundred four when the first gross receipts tax was enacted by the tribe and so when you when you do the formalism analysis the mere formalism analysis that the government has put in its brief you have to look at those facts and you have to look at why this particular form was chosen and if this form was chosen for valid reasons and not strictly for tax reasons and there's no indication that it was done to avoid or bayed any sort of tax obligation then i think the courts to build the gaming facility and they specifically in that contract waived the application of the gross receipts tax for a brief period of time so that contractor could recoup its investment when it built the gaming facility so it  could not be the case that the tribe in acted this gross receipts taxes to evade tax on gaming revenue they clearly had this tax receipts tax in place well before and long before gaming ever took place and they contemplated it being applied to gaming all along so i think that answers your question your honor so the district court made a fundamental error in not take paying heed to the specific language of the statute the statute says net revenue for gaming is subject to tax and the internal revenue code says net revenue from gaming is subject to tax but what the district court did on summary judgment is is she held that any distribution derived from gaming revenue is clearly taxable income and that impacted the case on a going forward basis and colored this case at the summary judgment stage going forward and the district court did not make any specific findings of fact were guarding the tribes gross receipts tax whether it was entered into for a ballot purpose whether it was entered into for tax avoidance purpose the district court made no findings of fact on that specific issue and that's a very important issue because if it's not revenue from gaming it gets treated very differently under the internal revenue code then if it's something else and there's no dispute that the tribe as a sovereign entity clearly has the authority to impose taxes and levy taxes on businesses that it operates on individuals who come into those businesses or third parties that operate businesses on tribal land this is a legitimate bona fide tax and the revenue from that tax was distributed to tribal members and it's not subject to the tax provisions of ira tax the tax provisions of ira and the internal revenue code are very clear and they apply only to net revenue from gaming so then once if the district court were to make a determination the object or were to look at the facts regarding to tax the tribes gro tax the evidence is very clear that taxes in place long before gaming ever began and at trial dexter laden who is the tribes attorney of the time testified that it was never designed as a scheme to evade or avoid taxes and that the way the tribe was collecting tax revenue and distributing it to its members was fully disclosed to the bureau and indian affairs to the national indian gaming commission and to the internal revenue service that this is not an effort to evade a tax obligation so then we get into the question of if it's not net revenue from gaming and if it's not subject to growth for the internal revenue code provisions then you have to do an analysis of whether the general welfare exclusion act applies and we've we've laid that out in our briefs but the only two points that appear to be in dispute or whether or not this distribution was for the promotion of general welfare and whether or not it was lavish or extravagant can i ask you one question on that yes your honor i know the act was seen by some in congress occasion of earlier i r s practice but ly does it make sense to apply a twenty fourteen piece of legislation to a two thousand and one tax liability well because your honor i believe the provisions of the act the entire of g w react call upon the suspension of audit's while while congress i'm sorry while the i r s and the travel advisory committee are trying to put together  guidelines for what constitutes lavish an extravagant and so on that still hasn't happened right that still has not happened your honor so in two thousand and fourteen when they passed the g d p they specifically contemplated that it would apply to ongoing audience that involved  well i'll just conclude with your honor we believe that this does qualify as general welfare under the general welfare exclusion act and that these benefits are not lavish an extravagant or if there is a portion of it that could be determined to be lavish work strive to get any amount below that amount should be subject to the general welfare exclusion act thank you your honors under the purview and scope of the bureau been in affairs not the internal revenue service mr romney's correct that we adopt the arguments he's already made behalf of mischief he's correct that the lower court stopped the ability or failed or abused its discretion in analyzing federal statutes and laws treaties and obligations the u s had with the tribe and its members with regard to this method that they calculate the use of their lands the gross receipts tax but all of the things that you're referring to in your brief it seems to me deal with the relationship of the federal government to the tribe and whether or not the federal government can exercise taxing authority as to the tribe and i think on those points you're probably right but it's been at least federal common law since the one nine hundred forty s or fifty's that members of indian tribes are generally subject to income tax in the same way as everybody else's unless there's an exception for some of karbala so isn't this jim stuck with that you're a hundred percent correct there if you pay taxes like everyone else united states squires cappleman said unless there are specific treaty or stature that exempts them from that and what was jim relies upon our treaties and statutes between the united states and the tribe that exempt the income earned from its lands as exempted all the mckissack eastlands from federal and state income tax it says that clearly in the law so she's relying on that as a starting point for why these these funds as paid at the point seven percent of g revenue for the use of the land that the game of facilities sits on are exempt from taxation it's directly in line with the supreme court's holding and if there's an ambiguity in the application of that it has to be libera kids or the government but under your theory the government and you may be right the government cannot tax any member of an indian tribe on gaming revenue no absolutely not  as the statute says net gaming revenue no but if you're right about the effect of those other statutes and treaties the other stuff doesn't matter because if you can't tax revenue derived from land given to the mega suki tribe you can't tax it at all and that treaty supersedes any later statute that congress passed so if you're right there's a matter what net revenue is if the income is derived from indian lands and this case look at what derive from land means and that's that what the court did attempt to do but the lower courts stopped its analysis because it didn't go into the statutes that control and dictate how indian lands may be used and what that term means there is no question that the leases are payments for tribal lands is tax exempt to the people who hold that land that's that's well settled internal revenue commissioner law and revenue rulin their land how it's used and how they'll be compensated for that use that's what the gross receipts tax is in eighty four when they enacted it given the unique nature of the everglades it was hard to get a cop for different areas there are as at your argument  bottom line that the tribe by its own sovereign regulations etc and time and how much taxes paid to united states know the tribe by its own sovereign authority can determine the method by which it l s i understand it's not my doing all of that but they get a lot the united states out of any taxes that are argument no it's all right to what extent is a drab turd well look it's there dependent nation and congress can pass legislation which impacts them feet and the settlement agreements that were entered into were were completed during the time that the tribe was already imposing this eight point seven percent so you can impute to the to congress and everyone else that was involved in that negotiation that they accepted and approved of that that methodology for receiving money i do not disagree and it's not mr jim's position that a net revenue distribution of indian gaming even with the  taxable that is not our argument our position is that the tribe within a sovereign authority in the reservation of rights it retains that which treaties has not only the authority but it's mandated that they can and should determine the best use of its land and how to compensate for that the simple fact that the lower court of the ira says it's from gaming that means it's taxable does not even get to the root of where the money comes from and the tribe is said and the bureau of the affairs agrees the best person in the best regulatory act has a definition for net revenue it's a defined term and it's used in several places throughout the act the definition is net revenue from indian gaming is gross revenue from indian gaming minus pri i'm sorry should have that right away but i think it is a twenty seven it's twenty seven eleven the district court didn't cite that definition its order did did not and i apologize for not citing it my brief right up at the front but it is a defined term it's gross revenue from indian gaming minus prize pay out an operating expenses net revenues so that most of the benefit of the casino goes to the tribe and not to managers but returning back to this gross receipts tax the question to ask is is it a prize payout or is it an operating expense and it is neither an operating expense i shouldn't have to say is something that the operator has to pay to a third party not something the operator keeps for itself gross receipts taxes the tax the tribe imposes on its operations it's really a tax it's not in the record but i'm assuming that before the casino the tribe used a gross receipts tax something like a sales tax you want to buy gas at our tribal gas station we're charging three plus a gallon plus five percent you want to ride on the airboats for four it's one hundred dollars plus five percent there's no evidence that the gross receipts tax was imposed on wagers in the casino in that fashion it looks like for most for all the record shows the tribes accountants simply applied a formula to revenues from the casino and extracted a gross receipts tax  was whatever one may think of the legal implications i thought that it was undisputed that the gross receipts tax was paced on monies coming in to the to the bingo operation whether it was somebody buying food or somebody's playing a game or somebody's placing a wager or somebody's paying for their car having been valeted so whatever money came in the gross receipts tax applied to all of the income that was being received was that is that incorrect you know that's correct and certainly some of those revenue sources might not be gaming revenue sale drinks parking valet whatever and that's why the district court gave the in selly jim an opportunity to show it trial what portion of the distributions came from other sources and she held off analyzing at him whether those other sources were exempt from tax intil some shorts source had been shown and by the new trial she concluded that no evidence had been introduced as to what portion of the distributions came from a source other than game i'm go help my opponent give a better answer the question what makes sense does it make to apply the two thousand and fourteen law to two thousand and one liability when the law was passed it was made effective for all open years in this gym had not file a tax return in two thousand and two and had in fact never filed one until after the complaint was filed so it was still an open year and technically the welfare exclusion act can apply to two thousand and one was that part codification or just the drafting part that you can find in the statutes at large it's not income it's not an internal revenue code section one thirty nine easy but is in the statu statutes at large brown which which is for this act maybe if you can locate it at some point maybe let us know afterwards that'll be fine ok a good side in my in my  from a specifically cited statute supporting the theory that gaming revenue is open to interpretation by the chairman of the tribe or is ambiguous in some fashion and i cannot find actual language to have to say about that theory right can i turn you to a couple of areas where i do have some concern please the check that was made out or i know there were a number of checks but i'm going to treat it as one because they were all according to the district court's order the same so the check written by the tribe to miss jim and her family was made out to miss jim and to her husband not or but and to her husband right the ones that we have are i think there exhibit thirty nine there are several checks most are made out to ms jim and her husband some are made out to just her ok let's talk only about the ones that are made out payable to her and her husband yes under all the law that i'm aware of including the uniform commercial code  check that is payable to two people jointly with an and instead of an or belongs to both of those people and in fact requires the endorsement of both of those people to negotiate and there's also testimony in the record undisputed i think that ms jim gave her husband the quarter share that purportedly belonged to him when she negotiated the checks if that's the case why isn't the economic reality that sixty eight thousand dollars for tax year two thousand and one is attributable to mr osceola and not to miss jim to answer one is that miss jim testified that she endorsed husband's name on the checks i know so she may have committed some transaction that was not quite valid but the economic reality is that everything happened as if both of them had negotiated the check she kept her share and the share for the two children and she gave him the one quarter share that the tribe deemed he was entitled to understand your point so if if they had gone together to a bank or to the tribal administration office presented their i d s gotten two hundred seventy two thousand dollars in cash i know it happened over a number of events but using one example to  and the teller says how would you like this money and she says i will take two hundred and four thousand dollars and mr osceola says i will take sixty eight thousand dollars and the teller gives them those amounts respectively changed to make her liable for that sixty eight thousand given that the tribe intended it for him and although she negotiated the check maybe improperly he got the money the entire one quarter share and used it at the point to good point in my research i couldn't find any cases close enough to this to provide any sort of guidance but judge decide this issue after a trial in which was jim testified her husband testified and their adult daughter testified and several trouble fishel testified she based her decisions are these are it's a fact bound issue no it's not it may now or it may not be because what constitutes taxable income to one person if if if he had filed a tax return in two thousand and fifteen saying i got sixty eight thousand dollars i now understand that it's taxable income to me i'm ready to pay my taxes and i'd like you to talk to me about a payment schedule for penalties the i r s would have said thank you very much and then place the sent a letter to him and said we're ready to talk with a process to return yes and would have taken his money gladly iris doesn't isn't glad about things you know that is probably a very true statement as if on a very true statement it would have it would have process the return take the money and perhaps he would have sued the next year and said whatever it really wasn't much the government is always talking about economic reality if you start with the economic reality of the situation and that is a fact bound issue one that judge alex not going to made after can see all the facts but she almost ignored the fact that he took the money and the money was his and she gave him the money she never exercised any use of that money in this case she wanted the check was made out to the two of them in this case she walked away from the trouble administrative office with the cash and she gave some to him now she gave it all to she gave him the one quarter share according to her i don't know that then things undisputed that did she ever filed a tax return for two thousand and one she followed tax return after the complaint was filed that was are they doing a joint return or a single return she she filed single she benefit i did and then she testifies that she gave some of that money to her husband yes because some of the all i'm saying is that it is you really want to split hairs a lot of it's a richer and more complicated argument is a summary judgment should not have been granted because there was actually that there was no summary judgment on this issue the attribution of you know his quarter there was only summary judgment on the conflict or the potential resolution of the welfare about how to treat per capita distributions of net revenue from gaming but the district court reached it she didn't need to use a panther serial and so i'm asking you if we proceed down the same analytical road as a district court and we have to address that issue how do you begin to figure out what constitutes lavish an extravagant i think in terms of distributing welfare benefits lavish only applies to general welfare benefits and distribution of gaming revenue is not a general welfare benefit correct that is my understanding that's not my position ok i'm short on time i didn't hear anything in opening argument about the declaration that gaming revenue was taxed and you can look at both of those orders in the records so she never analyzed what is net mean did anybody tell her what net meant most certainly we already knew what did you believe net revenue well no revenue under gap principles it includes as is my esteem council opposing counsel says payments to a third party the third party receiving this money are the individual members and the receiving it as compensation for the use of the land that they hold an undivided interest to say that that's not an operating expense is a is a ridiculous application of what's generally accepted in the accounting world they that argument was presented to the district court yes you are both in brief and in testimony that he was essentially a pass through cost a pass through lease provision what was undisputed what's interesting about this case is that the united states put on no evidence they rested solely on the method so that's that's undisputed in any context and was presented to the court so the word in that is never used any place in her orders and she just simply glosses over that and says all gaming revenue well there's a  implied finding and of as far as the bench crouse concerned there was an implied finding that it came from gaming well the i think her ruling is an indication that the the the money's com entities if you read the exhibit seventy five eighty four didn't see the tried clearly delineates out sales tax and other taxes and the method by which they're supposed to be computed and those are separate and apart from the gross receipts tax that that's what was a creation by the tried to trying to address the unique nature of all members only an undivided interest in lands and their constitution which says all resources are shared equally by all the members it was not practical to have six hundred members sign a lease agreement or to get guardians in trustees for minor children to sign a lease agreement for every piece of dirt that was utilized by any entity even the tribe and the tribe although it's comprised of its members must still ask permission of everyone to have a given facility or put a business there that's what they did general welfare i want to dress that wrist briefly very rightly because your time or general welfare includes the