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[Senate Report 109-294]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 536
109th Congress                                                   Report
                                 SENATE
 2d Session                                                     109-294

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     AMENDING THE INDIAN LAND CONSOLIDATION ACT TO MODIFY CERTAIN 
                      REQUIREMENTS UNDER THAT ACT

                                _______
                                

                 July 26, 2006.--Ordered to be printed

                                _______
                                

    Mr. McCain, from the Committee on Indian Affairs, submitted the 
                               following

                              R E P O R T

                         [To accompany S. 3526]

    The Committee on Indian Affairs, to which was referred the 
bill (S. 3526), to amend the Indian Land Consolidation Act to 
modify certain requirements under that Act, having considered 
the same, reports favorably thereon without amendment and 
recommends that the bill do pass.

                                Purpose

    The purpose of S. 3526 is to amend certain provisions of 
the Indian Land Consolidation Act relating to the uniform 
Indian probate code at 25 U.S.C. 2206. These amendments 
include, inter alia, clarifying amendments to certain defined 
terms in 25 U.S.C. 2201; amendments to the defined term 
``land'' in that section that will have the effect of delaying 
the application of the uniform Indian probate code to permanent 
improvements until after July 20, 2007; and amendments in 25 
U.S.C. 2206 that will have the effect of delaying the 
application of certain provisions of the uniform Indian probate 
code until after July 20, 2007.

                        Background and Overview

    On October 27, 2004, the President signed S. 1721, the 
American Indian Probate Reform Act of 2005, Public Law 108-374 
(``AIPRA''). The centerpiece of AIPRA is its uniform Indian 
probate code, which was intended in part to stem the phenomenon 
of Indian land ``fractionation'' caused in large part by the 
application of state laws of intestate succession to trust and 
restricted Indian lands. To achieve this end, AIPRA was 
deliberately structured to encourage the practice of estate 
planning and will-writing among Indian landowners and to 
discourage the pervasive historical tendency among Indian 
landowners to allow their interests in trust and restricted 
land to pass from one generation to the next by intestate 
succession.
    To encourage estate planning, AIPRA amended the estate 
planning provisions in the ILCA (25 U.S.C. 2206(f)) to state 
that the Secretary's estate planning services ``shall be 
designed to . . . dramatically increase the use of wills and 
other methods of devise among Indian landowners [and] . . . 
substantially reduce the quantity and complexity of Indian 
estates that pass intestate through the probate process'' 
(emphasis added). AIPRA also amended this section to authorize 
a substantial grant program for Indian tribes, nonprofit legal 
service organizations and, on reservations where such 
organizations do not operate, other legal service providers to 
provide estate planning services in Indian country.
    AIPRA also included provisions intended to discourage the 
tendency to allow interests in trust and restricted land to 
pass without a will. These provisions include a ``single-heir 
rule'' (25 U.S.C. 2206(a)(2)(D)) and the involuntary ``purchase 
at probate'' (25 U.S.C. 2206(o)(5), both of which only apply to 
small fractional interest passing without a will. Similarly, 
wills that would pass land to ``all my children, share and 
share alike'' or to ``all my grandchildren, share and share 
alike,'' which would cause fractionation as surely as intestate 
succession, are discouraged with a rule that a testamentary 
devise of land to two or more people is presumed to create a 
joint tenancy with rights of survivorship rather than a tenancy 
in common, absent ``clear and express language'' that a tenancy 
in common was intended. See, 25 U.S.C. 2206(c). These 
provisions can all be avoided with careful estate planning, 
which is, again, one of the central goals of the AIPRA.
    AIPRA was developed through considerable consultation with 
and collaboration among representatives of Indian tribes and 
Indian organizations as well as with various levels and 
components of the Department of the Interior. The Committee 
acknowledges that although not explicit, there was an implicit 
understanding among the rather divergent interests involved in 
the development of AIPRA that the consequences of provisions 
like the single-heir rule and the involuntary purchase option 
at probate would be avoided by a significant effort throughout 
Indian country to encourage estate planning and will writing 
among Indian landowners. However, on April 21, 2005, less than 
six months after the enactment of AIPRA, the Department 
announced its intent to ``discontinue the practices of 
assisting Indians in preparing wills by acting as a scrivener 
and accepting wills for storage'' \1\--services that the 
Department had been providing to Indian landowners for decades. 
The only reason given for this decision was that the Department 
``was not required by law to perform these services.'' \2\ At 
the same time, to the Committee's knowledge the Department 
provided but one contract in FY 2005 for an estate planning 
pilot project for two of the twelve regions of the Bureau of 
Indian Affairs. While this pilot project, funded in the amount 
of $500,000, has had a very positive impact in disseminating 
information and provoking discussion about AIPRA, it cannot, by 
itself, possibly meet the AIPRA objective of ``dramatically 
increas[ing] the use of wills'' among Indian landowners.
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    \1\ See, memorandum dated April 21, 2005, from Associate Deputy 
Secretary of the Interior James E. Cason and Special Trustee for 
American Indians Ross Swimmer to all ``AS-IA/BIA Employees and OST 
Employees.''
    \2\ Id.
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    As noted above, the more onerous provisions of the 
intestate provisions of the uniform probate code as well as the 
presumption of joint tenancy in devises to two or more persons 
can be avoided by careful estate planning. The Committee is 
deeply troubled by the prospect that, in light of the 
significant changes in the law brought by AIPRA, the combined 
effects of the Department's (1) decision to discontinue will-
writing services and (2) failure to adequately fund alternative 
estate planning services through the grant program authorized 
by AIPRA or otherwise will result in an unfair hardship on 
landowners--especially on the many elderly landowners who 
reside in remote areas of Indian reservations where adequate 
estate planning services are simply unavailable. S. 3526 would 
provide some relief to Indian landowners by delaying until 
after July 20, 2007, the application of rules that can only be 
avoided through the execution of a proper will after receiving 
advice on how AIPRA works.
    S. 3526 would make technical amendments to clarify an 
ambiguity in the definition of the term ``trust or restricted 
interest in land'' (25 U.S.C. 2201(4)) and the application of 
ILCA to permanent improvements (25 U.S.C. 2201(7)). In the 
latter case, the amendments would clarify that ``land'' 
includes such improvements only for purposes of intestate 
succession of a decedent's interest in the improvements under 
25 U.S.C. 2206(a) and even there only when the decedent also 
owns a trust or restricted interest in the parcel of land to 
which the improvements are attached.\3\ Although the Committee 
feels that both of these ILCA provisions can be interpreted in 
the same way that these amendments make clear, they are 
included in S. 3524 to eliminate doubt. The bill also amends 
the definition so as to delay the application of the uniform 
probate code to permanent improvements until after July 20, 
2007, in order to provide additional time to study how 
permanent improvements should be handled under the code.
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    \3\ The reason improvements were addressed in AIPRA was to assure 
that permanent improvements are inherited by the same persons who 
inherit the underlying real estate.
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    Finally, S. 3526 would amend the provisions relating to the 
purchase option at probate in three principal respects. First, 
under current law, where two or more persons express an 
interest in purchasing an interest during probate, the interest 
is to be sold by the Secretary at auction. Because so many 
interests are small and of low value, the cost and delay in the 
probate process associated with holding an auction will often 
be unjustified. Accordingly, S. 3526 would amend 25 U.S.C. 
2206(o)(3) to allow the person who would otherwise be 
inheriting the interest to designate which party may purchase 
the interest. Second, with respect to the involuntary purchase 
option at probate, the bill amends 25 U.S.C. 2206(o)(5)(A)(iii) 
so that the 5% threshold is measured against the decedent's 
ownership interest in the land immediately before death and not 
against the interest passing to the heir. Third, this provision 
is amended so that the only purchasers that are eligible to 
cause an involuntary sale of a small interest are the Secretary 
as part of the fractional interest acquisition program and the 
Indian tribe where the small interest is passing to a person 
who is not a member, or eligible to be a member, of the tribe.

                          Legislative History

    S. 3526 was introduced on June 15, 2006, by Senator John 
McCain and referred to the Committee on Indian Affairs. On June 
22, 2006, in an open business session the Committee ordered S. 
3526 to be reported favorably without amendment.

            Committee Recommendation and Tabulation of Vote

    In an open business session on June 22, 2006, the 
Committee, by voice vote, ordered the bill, S. 3526, to be 
reported favorably to the Senate without amendment.

                      Section-by-Section Analysis

Section 1

    Section 1 sets forth the short title of the bill, the 
Indian Land Consolidation Act Amendments of 2006.

Section 2

    Section 2 amends the definition of ``trust or restricted 
interest in land'' and ``trust or restricted interest in a 
parcel of land'' set forth at 25 U.S.C. 2201(4) and the 
definition of ``land'' insofar as it relates to permanent 
improvements. The amendment restricts the definition to a 
decedent's interest in permanent improvements permanently 
affixed to a parcel of trust or restricted land that was owned 
in whole or in part by the decedent immediately prior to the 
decedent's death. The amendment also states that it applies to 
decedents who die after July 20, 2007.

Section 3

    Section 3(1) amends 25 U.S.C. 2206(a)(2)(D) to state that 
the paragraph, which sets forth the single heir rule, does not 
apply to any interest in the estate of a decedent who dies 
during the period beginning on the enactment date of the 
amendment and ending on July 20, 2007, and authorizes the 
Secretary to extend this period for up to 1 year.
    Section 3(2) amends 25 U.S.C. 2206(c) by providing that the 
presumption that a devise of an interest in trust or restricted 
land to more than one person creates a joint tenancy with 
rights of survivorship absent clear language creating a tenancy 
in common will not apply to any will executed prior to July 21, 
2007.
    Section 3(3) amends 25 U.S.C. 2206(o) by eliminating the 
auction requirement where the Secretary receives multiple 
requests to purchase an interest and allowing the heir, devisee 
or surviving spouse to select the purchaser; providing that the 
5% threshold for the involuntary purchase at probate is 
measured against the interest in the decedent's hands rather 
than the interest passing to the heir; limits the eligible 
purchasers of an interest in the context of an involuntary sale 
at probate to (1) the Secretary under the fractional interest 
acquisition program and (2) the Indian tribe, where the 
interest would otherwise be inherited by a nonmember; provides 
for a period of nonapplicability of the involuntary purchase 
provisions to interests in the estates of decedents who die on 
or before July 20, 2007; and authorizes the Secretary to extend 
this period of nonapplicability for up to one year.

                   Cost and Budgetary Considerations

    The following cost estimate dated July 13, 2006, was 
prepared for S. 3526:
                                     U.S. Congress,
                       Congressional Budget Office,
                                     Washington, DC, July 13, 2006.
Hon. John McCain,
Chairman, Committee on Indian Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 3526, the Indian 
Land Consolidation Act amendments of 2006.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Matthew 
Pickford (for federal costs), Marjorie Miller (for the impact 
on state, local, and tribal governments), and Amy Petz (for the 
impact on the private sector).
            Sincerely,
                                          Donald B. Marron,
                                                   Acting Director.
    Enclosure.

S. 3526--Indian Land Consolidation Act Amendments of 2006

    S. 3526 would make technical and clarifying amendments to 
the Indian Land Consolidation Act (ILCA). The legislation would 
clarify that permanent improvements to land are covered by the 
provisions of the ILCA. It would delay implementation of 
certain interstate inheritance provisions of the probate code 
until July 20, 2007. Based on information from the Office of 
Special Trustee for American Indians, CBO estimates that 
implementing S. 3526 would have no significant impact on the 
federal budget.
    S. 3526 contains one intergovernmental and two private-
sector mandates as defined by the Unfunded Mandates Reform Act 
(UMRA), but CBO expects the aggregate cost of those mandates 
would be small and would fall well below the annual thresholds 
established in UMRA ($64 million for intergovernmental entities 
and $128 million for the private sector in 2006, adjusted 
annually for inflation).
    The bill would impose an intergovernmental and private-
sector mandate on certain Indian tribes and individuals because 
it would limit the right they now enjoy to bid without the 
consent of the heirs on small fractional property interests at 
probate. CBO expects that any costs imposed by this mandate on 
tribal governments or the private sector would not be 
significant. The bill would impose no other costs on state, 
local, or tribal governments.
    The bill also would impose a private-sector mandate on 
certain individuals who would otherwise inherit small 
fractional interests in land under the ``single heir rule.'' 
Under current law, if an Indian owning a small fractional 
interest in certain types of land dies without a will, only one 
individual is eligible to inherit that interest based on the 
single heir rule. S. 3526 would suspend implementation of the 
single heir rule through July 20, 2007, which would allow a 
larger set of heirs to be eligible to receive an equal share of 
the property interest. CBO expects the suspension would result 
in a loss of a portion of inheritance for a limited number of 
individuals in the near term and would impose a small cost on 
those individuals in such cases. Consequently, the cost of the 
mandate would be very small relative to the annual threshold 
established by UMRA for private-sector mandates.
    The CBO staff contacts for this estimate are Matthew 
Pickford (for federal costs), Marjorie Miller (for the impact 
on state, local, and tribal governments), and Amy Petz (for the 
impact on the private sector). This estimate was approved by 
Peter H. Fontaine, Deputy Assistant Director for Budget 
Analysis.

                      Regulatory Impact Statement

    Paragraph 11(b) of rule XXVI of the Standing Rules of the 
Senate requires each report accompanying a bill to evaluate the 
regulatory and paperwork impact to be incurred in carrying out 
the bill. The Committee believes that S. 3526 will have minimal 
regulatory or paperwork impact.

                        Executive Communications

    The Committee has received no official executive 
communications on S. 3526.

                        Changes in Existing Law

    In compliance with subsection 12 of rule XXVI of the 
Standing Rules of the Senate, the Committee states that the 
enactment of S. 3526 will result in the following changes in 
existing law, with existing law proposed to be omitted enclosed 
in black brackets, new language proposed to be added in italic, 
and existing law to which no change is proposed shown in roman:

25 U.S.C. 2201(4)

    (4)(i) ``trust or restricted lands'' means lands, title to 
which is held in trust for an Indian tribe or individual, or 
which is held by an Indian tribe or individual subject to a 
restriction by the United States against alienation; and 
[``trust or restricted interest in land'' or] (ii) ``trust or 
restricted interest in land'' or ``trust or restricted interest 
in a parcel of land'' means [an interest in land, title to 
which] an interest in land, the title to which interest is held 
in trust by the United States for an Indian tribe or 
individual, or which is held by an Indian tribe or individual 
subject to a restriction by the United States against 
alienation.

25 U.S.C. 2201(7)

    [(7) ``land'' means any real property, and includes within 
its meaning for purposes of this act improvements permanently 
affixed to real property.]
    (7) the term ``land''--
          (A) means any real property; and
          (B) for purpose of intestate succession only under 
        section 207(a), includes, with respect to any decedent 
        who dies after July 20, 2007, the interest of the 
        decedent in any improvements permanently affixed to a 
        parcel of trust or restricted lands (subject to any 
        valid mortgage or other interest in such an 
        improvement) that was owned in whole or in part by the 
        decedent immediately prior to the death of the 
        decedent.

25 U.S.C. 2206(A)(2)(D)(I)

    (i) General rule
    Notwithstanding subparagraphs (A) and (B), and subject to 
any applicable Federal law, any trust or restricted interest in 
land in the decedent's estate that is not disposed of by a 
valid will and represents less than 5 percent of the entire 
undivided ownership of the parcel of land of which such 
interest is a part, as evidenced by the decedent's estate 
inventory at the time of the heirship determination, shall 
descend in accordance with [clauses (ii) through (iv)] clauses 
(ii) through (vi).

25 U.S.C. 2206(A)(2)(D)(V)

    [(v) Rule of construction
    This subparagraph shall not be construed to limit a 
person's right to devise any trust or restricted interest by 
way of a valid will in accordance with subsection (b) of this 
section.]
    (v) Effect of subparagraph; nonapplicability to certain 
interests.--Nothing in this subparagraph--
    (I) limits the right of any person to devise any trust or 
restricted interest pursuant to a valid will in accordance with 
subsection (b); or
    (II) applies to any interest in the estate of a decedent 
who died during the period beginning on the date of enactment 
of this subclause and ending on July 20, 2007 (or the last day 
of any applicable period of extension authorized by the 
Secretary under clause (vi)).
    (vi) Authority to extend period of nonapplicability.--The 
Secretary may extend the period of nonapplicability under 
clause (v)(II) for not longer than 1 year if, by not later than 
July 2, 2007, the Secretary publishes in the Federal Register a 
notice of the extension.

25 U.S.C. 2206(C)

    (c) Joint tenancy; right of survivorship
    (1) Presumption of joint tenancy
    If a testator devises trust or restricted interests in the 
same parcel of land to more than 1 person, in the absence of 
clear and express language in the devise stating that the 
interest is to pass to the devisees as tenants in common, the 
devise shall be presumed to create a joint tenancy with the 
right of survivorship in the interests involved.
    (2) Exception
    Paragraph (1) shall not apply to any devise of an interest 
in trust or restricted land where the will in which such devise 
is made was executed prior to [the date that is 1 year after 
the date on which the Secretary publishes the certification 
required by section 8(a)(4) of the American Indian Probate 
Reform Act of 2004.] July 21, 2007.

25 U.S.C. 2206(O)(3), (4) AND (5)

    [(3) Request to purchase; auction; consent requirements
    No sale] (3) Request to purchase; consent requirements; 
multiple requests to purchase.--
          (A) In general.--No sale of an interest in probate 
        shall occur under this subsection unless--
                  [(A)] (i) an eligible purchaser described in 
                paragraph (2) submits a written request to 
                purchase prior to the distribution of the 
                interest to heirs or devisees of the decedent 
                and in accordance with any regulations of the 
                Secretary; and
                  [(B)] (ii) except as provided in paragraph 
                (5), the heirs or devisees of such interest, 
                and the decedent's surviving spouse, if any, 
                receiving a life estate under subparagraph (A) 
                or (D) of subsection (a)(2) of this section 
                consent to the sale.
          [If the Secretary receives more than 1 request to 
        purchase the same, the Secretary shall sell the 
        interest by public auction or sealed bid (as determined 
        by the Secretary) at not less than the appraised fair 
        market value to the eligible purchaser submitting the 
        highest bid.]
          (B) Multiple requests to purchase.--Except for 
        interests purchased pursuant to paragraph (5), if the 
        Secretary receives a request with respect to an 
        interest from more than 1 eligible purchaser under 
        paragraph (2), the Secretary shall sell the interest to 
        the eligible purchaser that is selected by the 
        applicable heir, devisee, or surviving spouse.
    (4) Appraisal and notice
    Prior to the sale of an interest pursuant to this 
subsection, the Secretary shall--
          (A) appraise the interest at its fair market value in 
        accordance with this Act; and
          (B) provide eligible heirs, other devisees, and the 
        Indian tribe with jurisdiction over the interest with 
        written notice, sent by first class mail, that the 
        interest is available for purchase in accordance with 
        this subsection[; and].
          [(C) if the Secretary receives more than 1 request to 
        purchase the interest by a person described in 
        subparagraph (B), provide notice of the manner (auction 
        or sealed bid), time and place of the sale, a 
        description, and the appraised fair market value, of 
        the interest to be sold--
                  (i) to the heirs or other devisees and the 
                Indian tribe with jurisdiction over the 
                interest, by first class mail; and
                  (ii) to all other eligible purchasers, by 
                posting written notice in at least 5 
                conspicuous places in the vicinity of the place 
                of the hearing.]
    (5) Small undivided interests in Indian lands
          (A) In general
          Subject to paragraph (B), the consent of a person who 
        is an heir otherwise required under paragraph (3)(B) 
        shall not be required for the [auction and] sale of an 
        interest at probate under this subsection if--
                  (i) the interest is passing by intestate 
                succession; [and]
                  (ii) prior to the auction the Secretary 
                determines in the probate proceeding that [the 
                interest passing to such heir represents], at 
                the time of the death of the applicable 
                decedent, the interest of the decedent in the 
                land represented less than 5 percent of the 
                entire undivided ownership of the parcel of 
                land as evidenced by the Secretary's records as 
                of the time the determination is made[.]; and
                  (iii)(I) the Secretary is purchasing the 
                interest as part of the program authorized 
                under section 213(a)(1); or
                  (II) after receiving a notice under paragraph 
                (4)(B), the Indian tribe with jurisdiction over 
                the interest is proposing to purchase the 
                interest from an heir who is not a member, and 
                is not eligible to be a member, of that Indian 
                tribe.
          [(B) Exception
          Notwithstanding subparagraph (A), the consent of such 
        heir]
          (B) Exception; nonapplicability to certain 
        interests.--
                  (i) Exception.--Notwithstanding subparagraph 
                (A), the consent of an heir or surviving spouse 
                shall be required for the sale at probate of 
                the heir's interest if, at the time of the 
                decedent's death, the heir or surviving spouse 
                was residing on the parcel of land of which the 
                interest to be sold was a part.
                  (ii) Nonapplicability to certain interests.--
                Subparagraph (A) shall not apply to any 
                interest in the estate of a decedent who dies 
                on or before July 20, 2007 (or the last day of 
                any applicable period of extension authorized 
                by the Secretary under subparagraph (C)).
          (C) Authority to extend period of nonapplicability.--
        The Secretary may extend the period of nonapplicability 
        under subparagraph (B)(ii) for not longer than 1 year 
        if, by not later than July 2, 2007, the Secretary 
        publishes in the Federal Register a notice of the 
        extension.

                                  
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