U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

75–356 PDF 2012

S. HRG. 112–619

STATE AND FEDERAL TAX POLICY: BUILDING

NEW MARKETS IN INDIAN COUNTRY

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

DECEMBER 8, 2011

Printed for the use of the Committee on Indian Affairs

(

(II)

COMMITTEE ON INDIAN AFFAIRS 

DANIEL K. AKAKA, Hawaii, Chairman 

JOHN BARRASSO, Wyoming, Vice Chairman 

DANIEL K. INOUYE, Hawaii 

KENT CONRAD, North Dakota 

TIM JOHNSON, South Dakota 

MARIA CANTWELL, Washington 

JON TESTER, Montana 

TOM UDALL, New Mexico 

AL FRANKEN, Minnesota 

JOHN MCCAIN, Arizona 

LISA MURKOWSKI, Alaska 

JOHN HOEVEN, North Dakota 

MIKE CRAPO, Idaho 

MIKE JOHANNS, Nebraska 

LORETTA A. TUELL, Majority Staff Director and Chief Counsel 

DAVID A. MULLON JR., Minority Staff Director and Chief Counsel 

(III)

C O N T E N T S 

Page 

Hearing held on December 8, 2011 ........................................................................ 1

Statement of Senator Akaka ................................................................................... 1 

Statement of Senator Barrasso ............................................................................... 3 

Statement of Senator Franken ............................................................................... 1 

Statement of Senator Tester ................................................................................... 3

Statement of Senator Udall .................................................................................... 3

WITNESSES

Gunn, Steven J., Attorney/Professor of Law (Adjunct), Washington University 

in St. Louis ........................................................................................................... 14

Prepared statement .......................................................................................... 15

Leecy, Hon. Kevin W., Chairman, Bois Forte Band of Chippewa Indians ......... 4

Prepared statement .......................................................................................... 6

Ortego, Peter, General Counsel, Ute Mountain Ute Tribe ................................... 7

Prepared statement .......................................................................................... 8

APPENDIX

Black Eagle, Hon. Cedric, Chairman, Crow Tribe, prepared statement ............. 25

(1)

STATE AND FEDERAL TAX POLICY: BUILDING 

NEW MARKETS IN INDIAN COUNTRY 

THURSDAY, DECEMBER 8, 2011

U.S. SENATE, COMMITTEE ON INDIAN AFFAIRS, Washington, DC. 

The Committee met, pursuant to notice, at 3:40 p.m. in room 

628, Dirksen Senate Office Building, Hon. Daniel K. Akaka,

Chairman of the Committee, presiding. 

OPENING STATEMENT OF HON. DANIEL K. AKAKA,

U.S. SENATOR FROM HAWAII 

The CHAIRMAN. I call this meeting of the Committee on Indian 

Affairs to order. 

Welcome to this oversight hearing on State and Federal Tax Policy: Building New Markets in Indian Country. 

Before I proceed with my statement, I would like to ask Senator 

Franken for any comments. 

STATEMENT OF HON. AL FRANKEN,

U.S. SENATOR FROM MINNESOTA 

Senator FRANKEN. Thank you. I appreciate that, Mr. Chairman, 

first of all that you are holding this hearing, and I thank the CoChairman, and I thank you for allowing me to make a brief opening statement, because we have a great chairman here, Kevin 

Leecy of Bois Forte. I just want to be able to say a few words about 

this topic and about their Band and about the chairman. 

As we continue to look for ways to support economic development 

in Indian Country, it is critical that we examine the role of State 

and Federal policy. When designed well, tax incentives can work to 

bring new businesses and jobs to low income communities, including to Indian Country. But overlapping, conflicting and unclear tax 

policies can stifle economic development. In short, bad tax policy 

can handcuff a Tribal government’s ability to provide even the most 

basic services to their communities. 

It is easy to become discouraged when talking about the many 

obstacles to economic development in Indian Country. That is why 

I think it is also important to look at the success stories. I want 

to thank Mr. Chairman for inviting Chairman Leecy from Bois 

Forte to testify today. As I mentioned during last week’s hearing, 

I have visited Bois Forte and seen first-hand how economic development can transform a community. 

2

In 1997, the Bois Forte Reservation Tribal Council assumed full 

responsibility for the delivery of all government programs and services to its 3,000 members. The Tribal Council has worked tirelessly 

to strengthen the region’s economy and increase job opportunities 

for Band members, all while preserving a strong sense of community and respect for traditions. 

Since first being elected chairman in 2004, Kevin Leecy has 

worked to diversify the Band’s resources. In addition to the Fortune Bay Resort Casino and the Bois Forte Wild Rice Company, 

the Band now owns and operates a golf course, a radio station, convenience store, and a manufacturing company. The Band has also 

made numerous investments in education, housing, health care and 

infrastructure to serve the needs of the community. 

Chairman Leecy, thank you for your leadership and for coming 

today. Unfortunately, as I told you before the business meeting, I 

am unable to stay for the hearing. But I want to thank both witnesses for being here, and I also will submit questions in writing 

for the record. And I really thank the Chairman for allowing me 

to make these opening remarks. Thank you. 

The CHAIRMAN. Thank you very much, Senator Al Franken. 

In these difficult economic times, there has been a lot of discussion about how to improve our Federal and State tax policies. Some 

tax policy has the potential not only to sustain local economies, but 

to help them grow into vibrant job creators. This is especially true 

for Tribal communities who have disproportionately found themselves suffering the worst in the American economy. For tribes, 

double digit unemployment has been the norm for generations, not 

the exception. 

Today we will examine important Federal tax policies designed 

to promote economic development and drive job growth in Tribal 

communities. We will hear from Tribal witnesses today who have 

taken advantage of these Federal tax incentives and we will hear 

about tribes that use them to support their local economies. Some 

of those tax policies will expire at the end of this year if Congress 

does not act to extend them. 

We also will hear today about the role of the State taxation on 

Tribal economic development. Many tribes find it difficult to attract 

capital, sell goods and grow other enterprises when States attempt 

to tax their economic activity. Our witnesses will highlight some of 

these challenges, but also identify solutions in working with States 

to ensure vibrant Tribal economies that support their own members as well as enrich the economies of their neighboring communities. 

I look forward to hearing about the impact these policy issues 

have on our Tribal communities, as well as identifying promising 

practices in working with our State and Federal partners to remove 

barriers to Tribal economic development. 

Senator Barrasso, any statement that you may have, you may 

proceed at this time.

3

STATEMENT OF HON. JOHN BARRASSO,

U.S. SENATOR FROM WYOMING 

Senator BARRASSO. Thank you very much, Mr. Chairman. I think 

you said it so very well, in the summary that you have just given, 

that I will keep my opening statement very brief so we can hear 

from our witnesses. 

This Committee has been hearing from Indian Country for a long 

time about the effects of taxation on Indian reservations. The tax 

issues came up last Congress, when Senator Dorgan introduced his 

energy bill. And several tribes raised the issues again this year, 

Mr. Chairman, when you and I worked together on S. 1684, the energy bill that I introduced and you were gracious enough to cosponsor. 

So it is clearly an important economic development topic for the 

tribes, and it is one that we should look at very carefully. This 

oversight hearing will give Tribal representatives a formal stage to 

share their concerns with the Committee, and I thank you, Mr. 

Chairman, for making this all possible. Thank you. 

The CHAIRMAN. Thank you very much. Are there any other Senators with opening statements? Senator Tester. 

STATEMENT OF HON. JON TESTER,

U.S. SENATOR FROM MONTANA 

Senator TESTER. Thank you, Mr. Chairman. 

We just passed the SAVE Native American Women Act out of 

this Committee. That is dealing with violence on one level. Dealing 

with violence on another level is dealing with it economically. The 

fact is, when you have poverty and you have cycles of poverty, the 

prevalence of violence is much, much higher. 

So what I would ask the witnesses for is what really works. We 

are at a time where we have to save some dough, but at the same 

time, we have to spend some money, too. So how do we spend it, 

and how do we spend it smartly to get the most bang for the buck 

in Indian Country? I can tell you, there are a lot of challenges out 

there. With challenges come opportunity and there is an incredible 

amount of opportunity, and there may be some things that we can 

do outside this bill, outside the tax code, that will also help. And 

we would appreciate those suggestions, too, at least from that perspective. 

Thank you both for being here. I appreciate your time, and appreciate your willingness to come to Washington, D.C. I look forward to your testimony. 

The CHAIRMAN. Thank you very much, Senator Tester. 

Senator Udall? 

STATEMENT OF HON. TOM UDALL,

U.S. SENATOR FROM NEW MEXICO 

Senator UDALL. Thank you, Chairman Akaka, and once again, 

thank you for holding this hearing and focusing on this issue, 

which I think is important to all of the Native community. 

As my colleagues have said, this is an important issue for all of 

us. I am pleased we are here today to raise awareness about the 

need for improving tax policy affecting Indian Country. This year, 

taxes have been a popular subject to talk about, and we have all 

4

heard about possible tax code reform. Like you, I want to make 

sure in any piece of legislation that moves forward, it addresses the 

needs of Indian Country. It is not an area we can afford to ignore, 

and it deserves a place in every discussion. 

In New Mexico, we are the most familiar with the New Markets 

Tax Credit Program. It has been a real success, and has in recent 

years made strides in reaching Native communities. 

I would like to take a moment to highlight some of the recent 

awards that have gone to Tribal entities, like Isleta Pueblo Housing Authority, the Laguna Housing Development and Management 

Enterprise, and the San Juan Tribal Council. This program is making a real difference in the lives of Native Americans in New Mexico. 

Please be assured that I will work with the Committee to do everything I can to make sure that we are including the tax provisions important to Indian Country, especially the NMTC, in any 

tax legislation. 

With that, Chairman Akaka, I would yield back and look forward 

to hearing from the witnesses. 

The CHAIRMAN. Thank you very much, Senator Udall. 

With that, I welcome our witnesses. I appreciate that you have 

all traveled to be with us today and look forward to hearing your 

testimony on this very important matter. 

I ask that you limit your oral testimony to five minutes. Your full 

written testimony will be included in the record. 

Also, the record for this hearing will remain open for two weeks 

from today, so we welcome written comments from any interested 

parties. So thank you all for considering that. 

I would like now to welcome our first panel, the Honorable Kevin 

Leecy, Chairman, Bois Forte Band of Chippewa Indians; and Mr. 

Peter Ortego, General Counsel of the Ute Mountain Ute Tribe. 

Chairman Leecy, please proceed with your remarks. 

STATEMENT HON. KEVIN W. LEECY, CHAIRMAN, BOIS FORTE 

BAND OF CHIPPEWA INDIANS 

Mr. LEECY. Aloha. Good afternoon. I am Kevin Leecy, I am the 

Tribal Chairman of the Bois Forte Band of Chippewa in Northern 

Minnesota. I am pleased to provide testimony today on important 

issues that impact the ability of Indian tribes to finance development within their reservations. 

It is my understanding that the Committee is interested in hearing from Indian Country about Tribal experience with New Market 

Tax Credits and the tax incentives associated with accelerated depreciation and employment tax credits. 

Bois Forte was able to access the New Market Tax Credits program at a time when it was absolutely necessary to find a source 

of affordable financing. In the summer of 2009, our Tribal government building was burned to the ground by arson. It was a total 

loss and there was no place for Tribal government to work. Because 

we needed to continue to provide the services to our Tribal citizens, 

we immediately began to search for ways to finance the new Tribal 

government building. 

We decided that the New Market Tax Credit program promised 

to be a vital part of that financing. We used a loan from another 

5

Tribe, grants and our own resources to put the New Market Tax 

Credit program in place. As a result, we were able to plan, design 

and construct the new building in one year. We moved into our 

new Tribal government and community services center in August 

of 2010. 

Some observations of the New Market Tax Credit program, number one, is we could not have financed the projected without it. 

Two, although it is a complex process, both in financial structure 

and in terms of ongoing compliance, the fees were less than 2 percent of the overall project, and it was an affordable way to finance 

the project. 

Number three, the program reduced the cost of borrowing for a 

project that some lenders have usually considered to be too high of 

a risk and short on collateral, because it was located on Tribal 

trust land within the reservation. 

I urge Congress to reauthorize the New Markets Tax Credit program so that it remains accessible to Indian tribes throughout the 

Country. My reasons for supporting an extension include: New 

Market Tax is a program that has worked in Indian Country. For 

many tribes, they are just now learning about it. For example, Bois 

Forte hosted a delegation from the Red Lake Nation this summer 

and made a presentation on how it worked for us. In addition, the 

Fond du Lac Band of Lake Superior Chippewa followed our example of New Market success to finance a natural resources building. 

I foresee great opportunities in Indian Country if this program 

continues to be available. 

The New Market Tax program does not need to be reformed to 

continue to be successful in Indian Country. It will succeed because 

tribes are now in a better position to use this program. 

This Committee can help make the New Markets program even 

more successful if it encourages Executive Branch agencies to use 

this program to make their dollars go further. I believe that some 

agencies have the legal authority to re-lend into New Market structure, but have been reluctant to do so, simply because it is new to 

them. But if there is no statute or regulation that prevents participation by an agency, I hope they will embrace the possibilities presented by New Markets Tax Credits. 

The New Markets program is vital in Indian Country because 

more traditional lenders shy away from loans on trust land. When 

a lender knows that it cannot foreclose and sell the property in the 

event of default, the risk goes up and so do interest rates. Our experience was that the New Markets program provided the flexibility investors needed to make the project possible on trust land. 

Finally, I believe that the accelerated depreciation and employment tax credits should also be extended by Congress. Although we 

have not had specific instances at Bois Forte in which employers 

have taken advantage of those programs, entities that consider locating on reservations always ask for a list of advantages of doing 

business on the reservation. The existence of those programs may 

just make the difference for a new or expanding business and tip 

the scale in our favor. 

In short, we need to make every effort to develop reservation 

economies and those tools should include to continue to be available. So again, we support and wish to see that continued. 

6

Thank you very much. 

[The prepared statement of Mr. Leecy follows:]

PREPARED STATEMENT OF HON. KEVIN W. LEECY, CHAIRMAN, BOIS FORTE BAND OF

CHIPPEWA INDIANS

Good afternoon. I am pleased to provide testimony today on important issues that 

impact the ability of Indian tribes to finance development within their Reservations. 

It is my understanding that the Committee is interested in hearing from Indian 

country about tribal experience with New Markets Tax Credits and the tax incentives associated with accelerated deprecation and employment tax credits. 

Bois Forte was able to access the New Markets Tax Credit program at a time 

when it was absolutely necessary to find a source of affordable financing. In the 

summer of 2009 our tribal government building was destroyed in a fire set by an 

arsonist. It was a total loss and there was no place for tribal government to work. 

Because we needed to continue to provide services, we immediately began to search 

for ways to finance a new tribal government facility. We decided that the New Markets Tax Credit program promised to be a vital part of the financing. 

We used a loan from another Tribe, grants, and our own resources to put the New 

Markets Program in place. As a result, we were able to plan, design and construct 

the new building in about a year. We moved into our new Tribal Government and 

Community Services Center in August of 2010. 

Some observations of the New Markets Tax Credit program:

1. We could not have financed the project without it.

2. Although it is a complex process both in financial structure and in terms of 

on-going compliance, the fees were less than 2 percent of the overall project 

and it was an affordable way to finance the project.

3. The program reduced the cost of borrowing for a project that some lenders 

have usually considered to be high on risk and short on collateral because 

it was located on tribal trust land within the Reservation.

I urge the Congress to re-authorize the New Markets Tax Credit program so that 

it remains accessible to Indian tribes throughout the country. My reasons for supporting an extension include:

• New Markets is a program that has proven to work in Indian country, but 

many tribes are just now learning about it. For example, Bois Forte hosted a 

delegation from the Red Lake Nation this summer and made a presentation on 

how it worked for us. In addition, the Fond duLac Band followed our example 

of New Markets success to finance a natural resources building. I foresee great 

opportunities in Indian country if the program is available.

• The New Markets program does not need to be reformed to continue to be successful in Indian country. It will succeed because Tribes are now in a better position to use the program.

• This Committee can help make the New Markets program even more successful 

if it encourages Executive Branch agencies to use this program to make their 

dollars go further. I believe that some agencies have the legal authority torelend into the New Markets structure but have been reluctant to do so simply 

because it is new to them. But if there is no statute or regulation that prevents 

participation by an agency, I hope they will embrace the possibilities presented 

by New Markets.

• The New Markets program is vital in Indian country because more traditional 

lenders shy away from loans on trust land. When a lender knows that it cannot 

foreclose and sell the property in the event of default, risk goes up and so do 

interest rates. Our experience was that the New Markets program provided the 

flexibility investors needed to make the project possible on trust land.

Finally, I believe that the accelerated depreciation and employment tax credits 

should also be extended by Congress. Although we have not had specific instances 

on our Reservation in which employers have taken advantage of those programs, entities that consider locating on reservations always ask for a list of advantages of 

doing business on the reservation. The existence of those programs may just make 

the difference for a new or expanding business and tip the scale in our favor. In 

short, we need to make every effort to develop reservation economies and those tools 

should continue to be available.

The CHAIRMAN. Thank you very much, Mr. Leecy. 

7

Mr. Ortego, will you please proceed with your remarks? 

STATEMENT OF PETER ORTEGO, GENERAL COUNSEL, UTE 

MOUNTAIN UTE TRIBE 

Mr. ORTEGO. Thank you, Mr. Chairman, Committee members. It 

is an honor to be invited to speak here today. Thank you. 

This topic is very important to the Ute Mountain Ute Tribe. I am 

here primarily today to talk about the effect of State taxation on 

the Ute Mountain Ute Tribe. Ute Mountain Ute Tribe is located in 

Colorado, New Mexico and in Utah. It is over 500,000 acres of land. 

We have 2,000 Tribal members. We are the largest employer in 

Montezuma County. 

And what we have seen is that as the Tribe benefits and the 

Tribe seeks access to resources and seeks economic development, so 

does the community around us see that benefit. And so when there 

is a burden on us, and we cannot operate as effectively as we would 

like, that is a burden that ends up affecting our entire community, 

not just the Indian community, but the non-Indian community as 

well. 

In New Mexico, our lands are not occupied by a person who lives 

there, but we do have oil and gas operations in New Mexico. The 

Tribe itself has a severance tax that it applies to oil and gas being 

severed from the lands. So does the State of New Mexico. So the 

Tribe in 1992, confronted with this dual taxation, passed a resolution stating that if the Tribe could eliminate the State severance 

taxes, then the Tribe’s severance tax would be increased by a proportionate amount. What amount that would be would be determined at the time, but we reserved the right to increase it to the 

full extent of the State taxation. 

In 2009, the Ute Mountain Ute Tribe sued the State of New Mexico in Federal court, and we were seeking relief from those taxes. 

The trial court agreed with the Tribe. The trial court stated that 

the taxes, that the benefit that the Tribe received was de minimis 

from State activities, that the off-reservation services that the 

State provides to the oil and gas operators, the non-Indian oil and 

gas operators, is significant; however, it does not justify the taxation. 

We also argued with that court that the regulatory structure for 

oil and gas on the reservation is comprehensive. Between the Bureau of Land Management, the Bureau of Indian Affairs, and the 

Tribe’s regulations, there is no need for the State to regulate oil 

and gas on the reservation. And the court agreed. 

The State of New Mexico appealed that to the Tenth Circuit of 

Appeals, and the Tenth Circuit Court of Appeals reversed. They 

found that the services were not de minimis, that the off-reservation services that the State provides lend value to our resource. 

And in fact, the court went so far basically as to state that the only 

way a Tribe really can avoid State taxation is if it does all of it 

itself, if we did not use any off-reservation resources. 

And that simply is not tenable to the Tribe, it is not tenable to 

the operators who work with us. What we would rather see is that 

the State and the tribes work together. We know that what we do 

on the reservation impacts the States, and we know that what the 

States do off our reservation impacts us on the reservation. 

8

So rather than us being forced to have a disadvantage because 

our operators both have to pay our tax and the State tax, something which they don’t have to do off the reservation, we need to 

work with the States to come up with solutions as to how to resolve 

these issues, not to force us to have to have taxation on the reservation. 

The Tribe paid, in State taxes, three quarters of a million dollars. 

And that is what the Tribe paid, that is in payroll and cigarette 

taxes. We also have some fee lands where we pay property taxes. 

So we give a benefit to the State and we feel like we don’t receive 

enough benefit back. And we can’t tax operations that happen on 

the State, and we don’t think they should be able to tax operations 

that happen on the reservation. And by working together, I think 

we can continue to see this benefit. 

About a year and a half ago, two years ago, the Tribe had a 

meeting with the local governments in Montezuma County. It was 

the first time we had ever had that meeting. Out of that came an 

economic development association, which is working with the Tribe 

and the communities off the reservation. And we are seeing some 

benefit now. We are starting to see that the area is becoming more 

attractive and that we can work together to bring economic development to the Indians and the non-Indians. 

So thank you for this opportunity today. These topics you are addressing are very important and I appreciate the hard work that 

you do. Thank you. 

[The prepared statement of Mr. Ortego follows:]

PREPARED STATEMENT OF PETER ORTEGO, GENERAL COUNSEL, UTE MOUNTAIN UTE

TRIBE

Mr. Chairman and Committee members, thank you for the opportunity to testify 

in regards to state and federal taxation in Indian country and its effects on tribal 

economic development. My name is Peter Ortego and I am the General Counsel for 

the Ute Mountain Ute Tribe. I reside in Lewis, Colorado, about thirty miles North 

of Towaoc, Colorado, the governmental seat for the Tribe. My testimony today is 

limited to the facts and circumstances as they relate to the Ute Mountain Ute Tribe, 

as this is where my experience lies, but I believe there are sufficient similarities 

between tribes so that these comments could apply to numerous tribes. 

The Ute Mountain Ute Reservation consists of over 500,000 acres located in Colorado, Utah, and New Mexico. The Tribe has just over 2,000 members, most of whom 

reside on the Reservation either in Towaoc, Colorado, or White Mesa, Utah. No person resides within the New Mexico portion of the Reservation. 

According to the United States Census for 2000, the average annual income of an 

adult living on the Reservation was $8,159. By comparison, income for residents of 

San Juan County, New Mexico, where the New Mexico portion of the Reservation 

is located was $14,282 and $17,261 for residents of the State of New Mexico. Income 

for residents of Montezuma County, Colorado, where Towaoc is located, was $17,003 

and $24,049 for residents of the State of Colorado. 

The Tribe distributes $2,000 per year to each Tribal member (slightly more for 

elders). The distributions are made out of funds generated from oil and gas royalty 

and tax revenues. Additional financial benefits are paid to Tribal members under 

the general welfare doctrine. No gaming revenues are distributed to Tribal members 

on a per capita basis and all funds derived from economic development activities are 

used for governmental purposes and to defray the costs of government services. 

The Tribe has obtained funds from the settlement of water claims and uses these 

funds for economic development and resource enhancement. One fund is specifically 

restricted to economic development and the other is restricted to resource enhancement. The Tribe currently uses interest earned from the economic development fund 

for its economic development projects and has never spent any portion of the principal, to the best of my knowledge. 

9

The Tribe is engaged in numerous economic activities. The Tribe has a casino and 

hotel, a construction company, a farm and ranch enterprise, a pottery store, a guided tour service, and two travel centers. The Tribe also earns significant revenue 

from oil and gas operations in both Colorado and New Mexico. The Tribe is venturing into renewable energy and has several commercial scale projects under review, including a closed loop pump back storage project that is currently pursuing 

a FERC permit. 

The Tribe is the largest employer in Montezuma County and owns several 

ranches in the State of Colorado. The Tribe asserts Indian preference in employment, provides free employment training to its members, and provides financial literacy education to employees and members. 

The Tribe does not impose very many taxes; there is a severance tax and 

possessory interest tax imposed on oil and gas extraction, and there is a hotel tax 

that is charged to patrons of the hotel. The Tribe imposes fees for some services provided to its members, and charges non-members for access permits, rights-of-way, 

and leases over trust and non-trust properties. 

The Tribe pays numerous state and federal taxes, as well. The Tribe pays state 

fuel, excise, cigarette, property, and employment taxes and federal excise and employment taxes. The Tribe also pays for unemployment insurance and workman’s 

compensation insurance. In fiscal year 2011, the Tribe’s travel centers paid $561,570 in federal fuel-related taxes and $588,626 in state fuel-related taxes (Utah and Colorado). The Tribe’s travel centers and casino paid $67,895 in state cigarette taxes. 

I believe one of the best ways to understand and appreciate the impact of state 

taxes on Tribal economic development is to review the lawsuit that the Tribe filed 

in federal court in 2009 against the Treasurer for the State of New Mexico alleging 

that the state has no authority to collect taxes and impose regulations on oil and 

gas activities that occur within the boundaries of the Reservation. The basis of the 

Tribe’s claim is that the taxes impose a significant economic burden on the Tribe, 

and, in light of the fact that the Tribe and its members receive no direct services 

from the state of New Mexico on the Reservation, the state has no justification to 

impose the taxes. 

The Tribe was successful in the District Court and received a judgment in its 

favor. (See Ute Mountain Ute Tribe v. Homans, 775 F.Supp.2d 1259 (D.N.M. 2009).) 

The District Court made specific findings that were uncontested by the state and 

concluded that the services provided by the state to the Tribe and its members are 

de minimus and that the imposition of the taxes creates an economic burden to the 

Tribe. The Court found that in 2007, the total revenue earned by the Tribe was 

$16,052,092 with $4,426,741 being distributed to Tribal members on a per capita 

basis generated from oil and gas taxes and royalties, primarily from the New Mexico 

portion of the Reservation. Notably, in the same year, according to the Court’s estimates, the state received approximately more than $1,300,000 in revenues from 

taxes imposed on onReservation oil and gas activities. 

In 1992, the Ute Mountain Ute Tribal Council passed a resolution stating that 

if state taxes imposed on oil and gas activities within the Reservation were reduced 

or eliminated, then the Tribal taxes imposed on the same activities would be increased by the amount that the state taxes were reduced. In 2007, this would have 

resulted in an increase in Tribal oil and gas revenues of approximately $1,300,000. 

This would mean that $650 could be distributed per capita to each Tribal member, 

increasing the average income of Tribal members by 8 percent using 2000 Census 

income levels. The District Court found that if the state taxes were reduced or eliminated, the Tribe could exercise one of several alternatives, including amending the 

1992 resolution to impose a lesser tax or no tax at all, and the result would be that 

oil and gas production on the Reservation would be more attractive to potential operators than it is with the burden of the state taxes. 

The State of New Mexico appealed the decision of the District Court to the Tenth 

Circuit Court of Appeals. Unfortunately for the Tribe, the Tenth Circuit did not 

agree with the findings of the District Court and reversed the ruling. (See Ute 

Mountain Ute Tribe v. Rodriguez, 660 F.3d 1177 (N.M. 2011 ).) The Tenth Circuit 

found that the District Court was wrong to find that the taxes created an economic 

burden to the Tribe because the Tribe did not subsume the cost of the taxes by reimbursing the operators for the tax. Also, the Tenth Circuit found that off-reservation services provided by the state—such as roads and processing facilities—were 

sufficient to justify the on-Reservation taxes, even though the state already imposes 

separate taxes on oil and gas operators for those off-reservation services. Finally, 

and the most problematic for the Tribe, is that, under the Tenth Circuit holdings, 

the only way for the Tribe to conduct oil and gas activities on its Reservation without the burden of state taxes being imposed on its non-Indian operators is for the 

10

Tribe to provide all services related to the production, regulation, and processing of 

oil and gas extracted from the Reservation. Although the Tribe may someday be 

able to provide such extensive services, it cannot do so now and the continued imposition of the state taxes hinder the Tribe’s ability to do so in the future. 

Another significant issue for the Tribe is that we do not see a benefit from the 

taxes that are collected by the states. In Colorado, for instance, revenues acquired 

by the state from taxation of on-Reservation oil and gas activities are deposited into 

various funds, some of which are specifically designated for use in Montezuma 

County. None of the revenues serve the Tribe directly and we see no benefit from 

the taxes collected. 

Similarly, the Tribe pays state property taxes for some of its ranches in Colorado 

which are held in fee and restricted fee, and yet we have a very difficult time obtaining services for these ranches that would be available to any other tax payer, 

such as law enforcement. 

Taxation also carries with it an implied right to regulate through audits and other 

regulatory functions. Tribes are experiencing a high number of audits from the Internal Revenue Service based upon the tribes’ obligations to pay certain federal employment taxes. The states of Colorado and Utah assert the right to inspect the 

Tribe’s underground fuel storage tanks and to impose sanctions if the tanks are not 

properly maintained. 

Finally, everything the Tribal government does is for the purpose of helping its 

members and its employees. State and federal taxation hinders the Tribe’s ability 

to act in promotion of these interests. If the Tribe desires to impose a tax or a fee 

in order to defray its costs and the activity is already taxed by the state or the 

United States, then the contactors paying the taxes are exposed to higher taxation 

then they would experience off the Reservation, thus making onReservation work 

much less attractive. When Tribal activities are unencumbered by state and federal 

taxation, then the Tribe can best determine how to receive compensation for the 

services it provides. In order to remain competitive and secure contracts for economic development activities, the Tribe may wish to levy fees and taxes, or it may 

not, but at least the Tribe gets to make the determination based upon what it feels 

is necessary for its people. 

The Ute Mountain Ute Tribe strives for independence. The Tribe is proud of its 

heritage and the Ute people have demonstrated strength in stamina, perseverance, 

and foresight. There will be a day when the Tribe can survive on its own, as it did 

for centuries before European settlers arrived. The Ute people will not always be 

dependent upon the states and the Federal Government for assistance. A day will 

come when the Ute Mountain Ute Tribe can stand with its neighbors as an equal, 

able to assert its sovereignty for the betterment of all people, but this day will not 

come soon enough if the Tribe continues to have to accommodate the taxation regimes that are imposed on its activities without its consent. 

Thank you, again, for this opportunity. If there is any other assistance I can provide as you take on this very important work, please do not hesitate to ask.

The CHAIRMAN. Thank you very much, Mr. Ortego, for your remarks. 

Chairman Leecy, you mentioned that lenders often ask you for 

a list of advantages to doing business on the reservation. Without 

the accelerated depreciation and employment tax credit, do you 

think you would be at a competitive disadvantage? 

Mr. LEECY. I think we would be at a disadvantage without those 

opportunities and the New Market Tax Credits. I just want to say 

that right now we are looking at a biofuels plant, for instance, on 

the Bois Forte Reservation, to not only assist our economy but assist the declining logging industry in northern Minnesota. We are 

looking at the possibility of tax cuts for that. That is an advantage 

that we could use in designing a demonstration plant on the Bois 

Forte Reservation to employ a lot of people. 

So we feel that that is a good advantage for us. 

The CHAIRMAN. Chairman Leecy, how can Congress improve existing Federal incentive programs, such as accelerated depreciation 

and Indian employment tax credit? 

11

Mr. LEECY. I think right now there is a need to spur investment 

in the United States. I think we need to provide both the corporate 

and government and have them work together. One of the ways we 

can do that, for instance, I am going to use an example, because 

it was just discussed the other day with our planning department, 

with our Tribal council, is health care is one, and health care is a 

matter in the United States, it is also a matter in Indian Country. 

We are looking at a new clinic in the health services building. 

We looked at the New Market Tax Credits and we also looked 

at the USDA Rural Loan program. We cannot use one and use the 

other. If we use the tax credit program, we cannot use the USDA 

loan program. I think by putting them together and having them 

work together, I think you are going to have more, spur more development, not only in Indian Country but across the Country, if 

government and corporations work hand in hand to make these 

happen. 

The CHAIRMAN. Thank you. 

Mr. Ortego, you discuss how taxation of Tribal activities can impact the Tribe’s ability to be self-sufficient. How can we improve 

the tax scheme to make your Tribe more self-sufficient? 

Mr. ORTEGO. I think that if we were not encumbered by the 

State taxes that are imposed upon us for operations on the reservation, I think that would free us up a great deal. As Chairman 

Leecy has mentioned, there is a benefit to doing work on the reservation. That resolution I mentioned in 1992 would allow the 

Tribe to increase its taxes by the same amount as the State taxes, 

but frankly, we don’t feel that that would be appropriate. Because 

that would still put us at a competitive disadvantage. It is up to 

the tribes to figure out what those taxes should be. 

So to be blunt, Mr. Chairman, if the tribes are not under the regime of State taxation, then I think that would free us up a great 

deal in economic development and the ability to attract people to 

come onto the reservation and work with us would be greatly enhanced. Much of what we do is in coordination and in cooperation 

with either other tribes or non-Tribal entities. And those entities 

need an incentive to come onto the reservation as these tax credits 

do. But the State taxation pushes them away and makes them decide to do their work off the reservation. 

So I think literally eliminating the ability of a State to tax a 

Tribe would be an incredible gift to the tribes. And it would free 

us up to truly exercise our sovereignty and do it in a way that we 

feel is best for our people and our community and the surrounding 

area. 

The CHAIRMAN. Mr. Ortego, please describe some of the issues 

created by IRS’s interpretation of essential government function. 

What can be done to remedy this situation? 

Mr. ORTEGO. The Internal Revenue Service is essentially going, 

in my opinion, the Tribal casinos are a target. It appears as if casinos under these IRS regulations and other large, successful Tribal 

operations are going to lose their immunity from suit, for activities 

that they do on the reservation, they are going to come under the 

jurisdiction of courts that are not under the Tribe’s consent. 

If Tribal enterprises are parts of the Tribal government, as ours 

are, they serve a governmental purpose. Every dollar that is made 

12

at our casino goes to help the people. It doesn’t go into any individual’s pocket to make them wealthy. We wish we could make all the 

Tribal members wealthy, but we can’t. But we use that money to 

pay for the administration and we use that money to help the Tribe 

run the Tribal government. 

If the IRS continues to treat our casinos as if they don’t share 

that purpose, they aren’t part of that, then they are going to be 

subject to State laws, they are going to be subject to a whole realm 

of jurisdictions that are beyond the Tribe. Every other enterprise 

that we have on the reservation shares in the government’s sovereign immunity. And it is a part of the Tribal government. The 

IRS is pulling that away, and it is now making it so that our casino 

has to operate just as if it was off the reservation. It no longer gets 

the benefit of being a Tribal operation. It is now simply a corporation within the State. 

I think that is where we are headed with these IRS regulations. 

We are not in favor of that at all. We think that is a real, its impact on the Tribe is such that we cannot provide services to our 

members and to the community the way we would like to. The end 

result is that our casino is going to be a corporation like any other, 

off the reservation or on the reservation, and the protections that 

we can give it will no longer exist. 

The CHAIRMAN. Thank you very much. 

Senator Udall, your questions. 

Senator UDALL. Thank you, Chairman Akaka. I think that the 

testimony has been very good in answer to the Chairman’s questions. 

One of the things, Mr. Ortego, you mentioned, is this whole issue 

of dual taxation, which we know is a problem. Because you have 

business entities and others that want to go on the reservation and 

when they see double taxation, they see that there isn’t the incentive to locate there. I think you have hit on one of the things that 

New Mexico has tried to do, maybe not well enough, but to coordinate and cooperate and work with the Tribe and try to, in particular areas, alleviate that double taxation. I think you have made 

some good suggestions. 

Aside from the double taxation issue, what type of tax credit 

would you create to spur job creation in Indian Country, and are 

there industries that we aren’t reaching, with the programs mentioned today, that you believe we should be targeting? 

Mr. ORTEGO. I feel a little uninformed about the tax credits, so 

if you don’t mind, the example I can use is one entity we have right 

now who is taking advantage of renewable energy tax credits. And 

that has been extremely helpful. The problem with that situation, 

however, is that we cannot take an ownership interest in the 

project. It has to be owned by the entity that can take advantage 

of the tax. Tribes are not able to take advantage of that tax credit, 

because we don’t pay those taxes. 

So if there can be a way for tribes to have ownership interest in 

the projects and also the entities that work with the tribes, if they 

can also take advantage of the credit, even though they may not 

be a full or even a 50 percent owner in the project, that would be 

very helpful. 

13

Senator UDALL. That area I think is one we ought to take a look 

at. I think that is a very good suggestion. 

Chairman Leecy, on the New Market Tax Credit, you heard the 

question I asked him, do you think there are other areas we should 

be targeting where we are not hitting particular businesses that 

could come in and do business in Indian Country? 

Mr. LEECY. Thank you, Mr. Udall. I agree totally with Mr. 

Ortego, and that would have been my response, is renewable energy and the ability to utilize New Market Tax Credits in that area 

for the benefit of the Tribe itself. That has been a struggle. I think 

not only renewable energy resources but emerging markets, such 

as that and this biofuels, this bio-oil, renewable, I think those are 

all new markets that Indian Country would be favorable. Because 

most of them, where they are located, they do have resources. But 

there is really no funding to extract some of the natural resources. 

So that would be my answer to assist in that area. 

Senator UDALL. Those are, I think, good areas for us to look into. 

Chairman Leecy, you mentioned that, as I said in my opening 

statement, that the New Markets Tax Credit was working in New 

Mexico. You mentioned examples of it working that you knew of. 

Could you give us a concrete example of how that has worked and 

what type of business or enterprise was fostered as a result of 

that? 

Mr. LEECY. We have done a number of tax credit, one is 60-unit 

housing, number one. Number two is an additional 60-unit housing. We have built a government center with New Market Tax 

Credit, which we couldn’t have done, which houses the Tribe’s government programs and services. It is essential. It has worked for 

us, and I have been to Montana to participate in the Montana economic development and explain the advantages of the New Market 

Tax Credit that we have. 

We have also invited other tribes into Bois Forte to show exactly 

how the New Market Tax Credit has worked for us. Everyone we 

have spoken to has utilized that and built something for themselves. But it is kind of financially, it is financially easy to do and 

there are some hurdles to go through, but it is well worth it. 

Senator UDALL. Thank you. Thank you both for your testimony 

today. I really appreciate it. 

The CHAIRMAN. Thank you very much, Senator Udall, for your 

questions. 

I want to thank Chairman Leecy and Mr. Ortego for your participation in our hearing and providing us with what you have done 

with your Tribe to improve the situation there. Our big hope, of 

course, is that other tribes in other places will be able to use and 

even take advantage of some of these that are already in place and 

hearing it from other tribes may help the cause. 

So I thank you very much and I hope you continue to be with 

us in terms of keeping us apprised of how things are going. And 

if you find a better way of doing what you are doing in helping the 

tribes, we should also help other tribes as well. So I thank you very 

much for your participating here. Thank you. 

And now I would like to call on the second panel, Professor Steven Gunn, Adjunct Professor of Law at the Washington University 

School of Law. Professor Gunn, it is good to have you. Thank you 

14

very much for being here. Will you please proceed with your testimony? 

STATEMENT OF STEVEN J. GUNN, ATTORNEY/PROFESSOR OF 

LAW (ADJUNCT), WASHINGTON UNIVERSITY IN ST. LOUIS 

Mr. GUNN. Mr. Chairman, thank you for the opportunity to comment on the important issue of overlapping and conflicting Tribal 

and State tax jurisdiction claims in Indian Country. 

American Indian tribes are self-governing political communities, 

with attributes of sovereignty over both their members and their 

territories. The power to tax is an essential attribute of Indian sovereignty. It enables tribes to raise revenue to build strong institutions of Tribal government and to operate essential programs and 

services. 

Strong Tribal governments and programs fuel economic development by providing the institutional and legal framework, physical 

infrastructure and human capital necessary for Tribal economic development. Indian tribes have a government to government relationship with the United States. But they are not subordinate to 

or dependent on the States. In the area of taxation, the Supreme 

Court has adopted a categorical rule. States may not tax Indian 

tribes or their members, absent Congressional authorization. 

The rationale behind that rule is simple and centuries old. As 

Chief Justice Marshall reminded us in McCulloch v. Maryland, the 

power to tax involves the power to destroy. If permitted, States taxation of Indian tribes and their members would essentially destroy 

tribes by depriving them of their revenue and their tax base. And 

the courts have been vigilant in striking down State taxes directly 

imposed on tribes and Tribal members. 

State taxation of non-members in Indian Country is another matter. Such taxation is not categorically barred; instead, it is preempted if it interferes with or is incompatible with Federal and 

Tribal interests. The preemption analysis is flexible and requires a 

case by case balancing of Federal, Tribal and State interests. Applying this analysis, courts have struck down some State taxes on 

non-members, while upholding others. 

The lack of a bright line rule creates uncertainty and this has 

caused some non-Indian investors to avoid participating in reservation economies. 

When State taxation of non-members is permitted, it imposes significant burdens on tribes. First, it infringes on the Tribal tax base. 

Under existing Federal law, tribes can tax non-members and nonmember businesses that engage in commercial dealings and whose 

activities take place on trust lands. A Tribe’s ability to tax nonmembers in these circumstances is essential. Yet that ability is impaired when States and even local governments assert overlapping 

claims to tax the same transactions. 

The resulting double or triple taxation is often more than Tribal 

markets can bear and tribes may be forced to lower their tax rates 

or eschew Tribal taxation altogether. This has the potential to deprive tribes of millions of dollars in tax revenue. 

Second, State taxation of non-member businesses raises the cost 

of goods and services available to tribes and their members. Although the legal incidence of such taxes falls on the non-Indian 

15

business, the economic burden is passed on to Tribal consumers, 

and for tribes, this can raise the cost of economic development 

projects involving non-member contractors and businesses. 

Finally, State taxation of sales to non-member consumers has the 

effect of raising the price of goods and services they buy on-reservation. This creates a competitive disadvantage for Tribal businesses 

who market their goods and services to non-members. Such nonmembers are likely to go off-reservation instead of paying double 

or triple taxes on the reservation. 

Some Indian tribes and States have responded to these problems 

by reaching cooperative agreements regarding the collection of various taxes. In fact, over 200 tribes have entered into tax collection 

compacts with States. A common approach involves joint collection 

of Tribal and State taxes with revenue sharing between the governments. 

These agreements provide predictability and steady revenue 

streams for tribes and States. However, the process is not without 

its limitations. From the Tribal perspective, revenue sharing of any 

kind deprives tribes of tax dollars generated by on-reservation activity. Preemption of State taxation of non-member activity would 

better preserve Tribal tax bases. 

The Federal Government can address these issues in a number 

of ways, two of which I will mention here. First, Congress can reaffirm the inherent authority of Indian tribes to tax all transactions 

in Indian Country, including non-member transactions. Such authority is essential to defray the cost of providing Tribal services 

to those who pass through their reservations. 

Second, Congress can provide clarity on the scope of permissible 

State tax authority over non-members. Specifically, Congress can 

establish bright line rules preempting State taxation in areas 

where that taxation would undermine Tribal economic development. Definitive guidance from Congress would remove uncertainty, and to the extent State taxes were preempted, it would preserve the Tribal tax base from State interference. 

I thank you again for the opportunity to appear before you and 

to comment on these important issues. 

[The prepared statement of Mr. Gunn follows:]

PREPARED STATEMENT OF STEVEN J. GUNN, ATTORNEY/PROFESSOR OF LAW

(ADJUNCT), WASHINGTON UNIVERSITY IN ST. LOUIS

Mr. Chairman, Mr. Vice Chairman, and distinguished Members of the Committee, 

thank you for the opportunity to appear before you today and to comment on the 

important issue of tribal and state taxation in Indian country. I will divide my comments into four areas: first, I will address the important role tribal taxation plays 

in promoting economic development in Indian country; second, I will examine the 

burden state and local taxation places on Indian tribes and their efforts to develop 

their reservation economies, and the jurisdictional conflicts such taxation engenders; 

third, I will share insights about the cooperative approaches some tribes and states 

have taken to work coordinate their respective taxes in Indian country; and finally, 

I will suggest some ways in which the Federal Government can help shape a tax 

policy for Indian country that will maximize tribal self-government and economic development. 

16

1 Nat’l Farmers Union Ins. Co. v. Crow Tribe of Indians, 471 U.S. 845, 851 (1985). 2See, e.g., Treaty with the Teton, 1815, Art. 3 (7 Stat. 125). 3Oklahoma Tax Comm’n v. Potawatomi, 498 U.S. 505, 509 (1991). Accord, Cherokee Nation 

v. Georgia, 30 U.S. (5 Pet.) 1, 17 (1831). 4Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 140 (1982), quoting United States v. 

Mazurie, 419 U.S. 544, 557 (1975). Accord, Worcester v. Georgia, 31 U.S. (6 Pet.) 515, 557 (1832). 5Merrion, 455 U.S. at 139. 6 Id. (citing Washington v. Confederated Tribes of Colville Reservation, 447 U.S. 134, 153 

(1980)). 7 Id. at 137. 8 Id. 

9See, e.g., 25 U.S.C. § § 3601(1), 3701(1); Executive Order 13175, 65 F.R. 67249 (Nov. 9, 2000); 

Executive Memorandum, 59 Fed. Reg. 22951 (April 29, 1994). 10 Colville, 447 U.S. at 154. 111T3AWilliams v. Lee, 358 U.S. 217 (1959). 12Montana v. Blackfeet Tribe, 471 U.S. 761, 764 (1985) (citations omitted). 13 17 U.S. (4 Wheat.) 316, 431 (1819). 14 Bryan v. Itasca County, 426 U.S. 373, 388–89, n.14 (1976). 

1. Tribal Taxation Plays an Essential Role in Promoting Tribal SelfGovernment and Economic Development in Indian Country 

American Indian tribes are ‘‘self-governing political communities that were formed 

long before Europeans first settled in North America.’’ 1 Although they accepted the 

protection of the United States through treaties, 2 Indian tribes retain the sovereign 

status of ‘‘domestic dependent nations,’’ 3 and continue to ‘‘‘possess[] attributes of 

sovereignty over both their members and their territory.’’’ 4

The power to tax has long been recognized as an ‘‘essential attribute of Indian 

sovereignty.’’ 5 All three branches of the Federal Government recognize that this 

power is ‘‘an essential instrument of [tribal] self-government and territorial management.’’ 6 The power to tax ‘‘enables a tribal government to raise revenues for its essential services.’’ 7 The power derives from ‘‘the tribe’s general authority, as sovereign, to control economic activity within its jurisdiction, and to defray the cost of 

providing governmental services by requiring contributions from persons or enterprises engaged in economic activities within that jurisdiction.’’ 8

Indian tribes have primary responsibility for meeting the basic needs of their tribal members and other individuals who reside on or who do business on their reservations. Meeting these needs requires strong, well-funded tribal governments and 

strong, well-funded tribal programs and services. Tribal taxation provides an essential source of revenue for the operation of tribal governments and tribal programs. 

Strong tribal governments and tribal programs, in turn, fuel economic development in Indian country. Among other things, tribal legislatures, agencies, and 

courts provide the governmental and legal framework necessary for economic development. Tribal programs pay for the construction and maintenance of reservation 

roads, bridges, utilities, and other facilities that provide the physical infrastructure 

necessary for economic growth. Tribal education and job training programs build 

human capital, and tribally owned economic enterprises create jobs and revenue 

streams for Indian tribes. Without tribal tax revenue, these government institutions 

and programs could not exist. 

2. State and Local Taxation in Indian Country Undermines Tribal SelfGovernment and Economic Development 

Indian tribes have a government-to-government relationship with the United 

States, 9 but they are in no way ‘‘dependent on’’ or ‘‘subordinate to’’ the states. 10 As 

a general rule, reservation Indians are subject only to federal and tribal law, not 

state law. 11 This is especially true in the area of taxation: 

The Constitution vests the Federal Government with exclusive authority over 

relations with Indian tribes... and in recognition of the sovereignty retained 

by Indian tribes even after the formation of the United States, Indian tribes and 

individuals generally are exempt from state taxation within their own territories. 12

In McCulloch v. Maryland, Chief Justice John Marshall reminded us that, ‘‘the 

power to tax involves the power to destroy.’’ 13 The Supreme Court has long recognized that, if permitted, state taxation of Indian tribes and their members would 

‘‘essentially destroy[]’’ tribes by depriving them of their tax base. 14 Thus, ‘‘‘[i]n the 

special area of state taxation of Indian tribes and tribal members,’’’ the Supreme 

17

15 County of Yakima v. Confederated Tribes and Bands of Yakima Nation, 502 U.S. 251, 267 

(1992) (quoting California v. Cabazon Band of Mission Indians, 480 U.S. 202, 215 n.17 (1987)). 16Mescalero Apache Tribe v. Jones, 411 U.S. 145, 148 (1973) (quoting McClanahan v. Arizona 

Tax Comm’n, 411 U.S. 164, 171 (1973). 17Oklahoma Tax Comm’n v. Chickasaw Nation, 515 U.S. 450, 458 (1995). 18McClanahan, 411 U.S. at 165–81; Oklahoma Tax Comm’n v. Sac and Fox Nation, 508 U.S. 

114, 123–126 (1993). 19 United States v. Rickert, 188 U.S. 432 (1903); The New York Indians, 72 U.S. (5 Wall.) 761 

(1866); The Kansas Indians, 72 U.S. (5 Wall.) 737 (1866). 20See, e.g., Bryan, 426 U.S. at 375; Moe v. Confederated Salish and Kootenai Tribes of Flathead Reservation, 425 U.S. 463, 480–81 (1976) (motor vehicle tax); Colville, 447 U.S. at 163 

(same); Sac and Fox, 508 U.S. at 127–28 (same). 21Moe, 425 U.S. at 475–481, Potawatomi, 498 U.S. at 507; Dep’t of Taxation and Finance of 

New York v. Attea & Bros., 512 U.S. 61, 64 (1994). 22 County of Yakima, 502 U.S. at 268. 23 Chickasaw Nation, 515 U.S. at 459–62; Moe, 425 U.S. at 480–81. 24Mescalero Apache Tribe, 411 U.S. at 158. 25Montana v. Blackfeet Tribe, 471 U.S. at 764–66. 26Menominee Tribe v. United States, 391 U.S. 404 (1968); Tulee v. Washington, 315 U.S. 681 

(1942). 27 Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 176 (1989). 28Mescalero Apache Tribe, 411 U.S. at 148. 29 COHEN’S HANDBOOK OF FEDERAL INDIAN LAW § 8.03 (2005) (discussing Ramah 

Navajo School Board, Inc. v. Bureau of Revenue, 458 U.S. 832 (1982)) (internal citations omitted). 30Warren Trading Post v. Ariz. State Tax Comm’n, 380 U.S. 685 (1965); Central Machinery 

Co. v. Ariz. State Tax Comm’n, 448 U.S. 160 (1980). See also, COHEN’S HANDBOOK OF FEDERAL INDIAN LAW § 8.03 (collecting cases). 31See, Colville, 447 U.S. at 156–157. 32 Cotton Petroleum, 490 U.S. at 187. 33 COHEN’S HANDBOOK OF FEDERAL INDIAN LAW § 8.03 (collecting lower court cases). 

Court has adopted ‘‘‘a per se rule:’’’ 15 ‘‘‘such taxation is not permissible absent congressional consent.’’’ 16

’’Taking this categorical approach, [the Supreme Court has] held unenforceable a 

number of state taxes whose legal incidence rested on a tribe or on tribal members 

inside Indian country,’’ 17 including: income taxes, 18 real property taxes, 19 personal 

property taxes, 20 sales taxes, 21 transaction taxes, 22 vendor taxes, 23 use taxes, 24

mineral royalty taxes, 25 and hunting and fishing license fees. 26

State taxation of nonmembers in Indian country is not categorically barred. Instead, the courts apply a ‘‘flexible preemption analysis sensitive to the particular 

facts and legislation involved.’’ 27 According to the Court, such taxation is prohibited 

if it infringes on tribal selfgovernment or if it is preempted by federal law. 28 State 

taxation of nonmembers is preempted if it interferes with or is incompatible with 

federal and tribal interests, as reflected in federal law, unless there are sufficient 

countervailing state interests to justify the assertion of state authority. 

The preemption analysis requires a particularized balancing of federal, tribal, and 

state interests and, thus, is inherently less predictable than the per se rule barring 

all state taxation of tribes and tribal members. Applying the balancing test, the 

courts have struck down certain state taxes on nonmembers in Indian country and 

upheld others. For example, in Ramah Navajo School Board, Inc. v. Bureau of Revenue:

the Supreme Court found that the state could not tax the gross receipts that 

a non-Indian construction company received from a tribal school board for construction of a school on the reservation. The Court found the federal regulation 

of construction and financing of Indian schools to 

be . . . comprehensive... Federal statutes also reflected an ‘‘express federal 

policy of encouraging tribal selfsufficiency’’ in education. In terms of the tribal 

interests, the tribal school board absorbed the economic impact of the tax, which 

could affect its ability to provide education for Indian children. And the state 

provided no services to either the Indian school children or the non-Indian taxpayer for its activity on the reservation. 29

The courts have struck down other state taxes on nonmembers in Indian country, 

including state taxes on nonmember retailers’ sales to tribes and tribal members. 30

However, the courts have upheld state taxes on cigarette sales to nonmembers, 31

state severance taxes on oil and gas produced by nonmembers in Indian country, 32

and a number of other ‘‘state taxes on non-Indians doing business in Indian country.’’ 33

The Court’s case-by-case approach has created uncertainty for tribes, states, and 

nonmembers seeking to do business in Indian country. It is difficult to determine 

18

34See, Montana v. United States, 450 U.S. 544, 565–566 (1981). 

ex ante whether a state will have jurisdiction to tax a given nonmember transaction 

in Indian country. This uncertainty makes it difficult for nonmembers to evaluate 

the total cost of doing business in Indian country, and it may cause some nonmembers to avoid investing in Indian country altogether. 

State and local taxation of nonmembers in Indian country imposes significant economic burdens on Indian tribes, and it has the potential to undermine tribal selfgovernment and tribal economic development. This is true for several reasons: 

First and foremost, state and local taxation of nonmembers in Indian country infringes on the tribal tax base. Under existing federal law, an Indian tribe can tax 

nonmembers who engage in commercial dealings with the tribe or its members. 34

(This includes nonmember businesses that provide goods and services to the tribe 

or its members, and nonmember consumers who purchase goods and services from 

tribal businesses.) A tribe’s ability to tax nonmember transactions, however, is severely impaired when state and local governments assert concurrent, or overlapping, 

jurisdiction to tax the same transactions. The resulting double or triple taxation is 

often more than tribal markets can bear, and tribes may be forced to lower their 

tax rates or to eschew collection of their taxes altogether on nonmember transactions. This has tremendous consequences for tribes, depriving them of millions of 

dollars in tax revenue on activities occurring within their jurisdictions. 

Second, state and local taxation of nonmember businesses in Indian country raises 

the cost of the goods and services those businesses provide to Indian tribes and their 

members. Whenever possible, nonmember businesses, like all others, pass the financial burden of the state and local taxes on to their tribal customers in the form of 

higher prices. This burdens tribal members by raising the cost of the ordinary, dayto-day good and services they purchase from on-reservation, nonmember businesses. 

It also burdens the economic development initiatives of tribal governments and tribally owned businesses by raising the cost of construction, management, and other 

essential services they purchase from nonmember contractors and businesses. The 

impacts can be significant, especially on multi-million dollar tribal economic development projects, where the imposition of state and local taxes can add tens or hundreds of thousands of dollars to the cost of the project. 

Third, if market conditions prevent nonmember businesses from passing the financial burden of state and local taxes on to their customers, the businesses may 

be forced to relocate off-reservation. In this way, double or triple taxation of nonmember businesses in Indian country creates a disincentive to investment in Indian 

country and reduces the supply of goods and services available to Indian tribes and 

their members. 

Fourth, state and local taxation of nonmember consumers in Indian country has 

the effect of raising the price of goods and services sold to those consumers by tribal 

businesses. Imposing these taxes in addition to tribal taxes creates a competitive 

disadvantage for on-reservation tribal businesses in relation to their off-reservation 

counterparts. Nonmember consumers will have an incentive to purchase goods and 

services off-reservation, to avoid paying double or triple taxes. 

Finally, allowing states and local governments to tax on-reservation nonmember 

consumers eliminates the ability of Indian tribes to attract nonmember business by 

marketing tribal tax rates that are lower than corresponding state and local rates. 

State and local governments have the power to adjust their tax rates to gain competitive advantages in relation to neighboring jurisdictions, and there appears to be 

no principled reason why tribes should not share in that power, especially when the 

value of the goods and services they offer is generated on the reservation, or when 

the goods and services will be consumed on the reservation. 

In sum, overlapping claims of tribal, state, and local tax authority over nonmembers in Indian country hinders tribal self-government and economic development in 

a number of ways. It allows states and local governments to infringe on the tribal 

tax base; it raises the cost of goods and services sold by nonmembers to tribes and 

their members; it discourages nonmember investment in Indian country; it creates 

tax disadvantages for tribal businesses that sell goods and services to nonmembers; 

and it eliminates the ability of tribes to attract nonmember business by marketing 

lower tax rates. 

3. Many Tribes and States Have Entered Cooperative Agreements to

Address the Problems Created by Multiple Taxation in Indian Country 

Indian tribes and states have incentives to reach cooperative agreements regarding the collection of tribal, state, and local taxes in Indian country. As has been 

shown, there is uncertainty in existing federal law over the precise extent of state 

and local taxing authority over nonmembers in Indian country. This creates the poVerDate 0ct 09 2002 13:56 Nov 26, 2012 Jkt 075356 PO 00000 Frm 00022 Fmt 6633 Sfmt 6621 S:\DOCS\75356.TXT JACK
19

35 COHEN’S HANDBOOK OF FEDERAL INDIAN LAW § 8.05 (2005). 36 Id. 37 COHEN’S HANDBOOK OF FEDERAL INDIAN LAW § 6.05. See also, David H. Getches, 

Negotiated Sovereignty: Intergovernmental Agreements with American Indian Tribes as Models 

for Expanding First Nations Self-Government, 1 REV. CONST. STUD. 120, 121 (1993). 38 COHEN’S HANDBOOK OF FEDERAL INDIAN LAW § 8.05 (citing Tax Fairness and Tax 

Base Protection: Hearings on H.R. 1168 Before the United States House of Representatives Committee on Resources, 105th Cong. (1998) (Testimony of W. Ron Allen, President, National Congress of American Indians); Arizona Legislative Council, STARTED: State Tribal Approaches 

Regarding Taxation & Economic Development, 81–105 (1995)). See also, Richard J. Ansson, Jr., 

State Taxation of Non-Indians Whom Do Business With Indian Tribes: Why Several Recent 

Ninth Circuit Holdings Reemphasize the Need for Indian Tribes to Enter Into Taxation Compacts 

with Their Respective State, 78 Or. L. Rev. 501, 546 (1999). 39 COHEN’S HANDBOOK OF FEDERAL INDIAN LAW § 8.05 (summarizing various approaches and authorities). 

tential for expensive and protracted litigation. Further, when state and local taxation of nonmembers is permitted, it creates the potential for double or triple taxation, which imposes hardships on nonmembers and tribes. Some have suggested 

that, ‘‘it is in the economic interests of states and tribes to determine the maximum 

tax burden that a taxpayer will bear before abandoning the taxable activity entirely.’’ 35 Finally, ‘‘[t]he fact that states can tax non-Indians and nonmembers in Indian country under certain circumstances, but cannot tax tribal members, also presents states and tribes with challenging record-keeping problems.’’ 36

To address these problems, tribes and states have entered cooperative agreements 

and enacted laws to allocate tax authority and coordinate tax collection in Indian 

country:

In the face of potentially overlapping or conflicting jurisdictional claims, tribalstate cooperative agreements offer both sets of governments the opportunity to 

coordinate the exercise of authority, share resources, reduce administrative 

costs, deliver services in more efficient and culturally appropriate ways, address 

future contingencies, and save costs of litigation. They also enable governments 

to craft legal arrangements reflecting the particular circumstances of individual 

Indian nations, rather than relying on uniform national rules. Insofar as cooperative agreements create a stable legal environment conducive to economic development, they may appeal to the common interests of tribes and states. 37

It has been reported that over 200 tribes have entered into compacts with 

states. 38 These compacts and related laws employ a variety of approaches, including: ‘‘exempting sales by Indian tribes or tribal merchants from state taxes, adjusting the state tax rate when a tribal tax exists so that the total tax does not exceed 

the state tax rate, excluding the tribal tax from the definition of sales or gross receipts taxable by the state, extending credits to taxpayers liable for state and tribal 

taxes, and authorizing agreements or compacts for tribal refunds from state tax revenues.’’ 39

The tax collection agreements in South Dakota provide one example of cooperative 

tax collection in Indian country. These agreements encompass many, but not all, of 

the state taxes that are imposed in Indian country, including sales taxes, cigarette 

taxes, motor vehicle taxes, and contractor’s taxes. Under the agreements, tribes 

agree to impose tribal taxes that are uniform with the state taxes. The state collects 

all taxes included in the agreements and remits a percentage to the tribes. The percentage remitted to the tribes is based on the percentage of their reservation populations that are Indian. (This percentage is a proxy for the percentage of on-reservation transactions that would be taxable by the tribes, under existing law.) In most 

cases, the great majority of taxes collected are remitted to the tribes. State collection 

of uniform tribal and state taxes provides predictability for taxpayers, eases the 

ability of the state to collect the tax, and provides competitive equality for on- and 

off-reservation businesses. 

Intergovernmental cooperative agreements, like those employed in South Dakota, 

have distinct advantages, including certainty and predictability in the imposition 

and collection of taxes in Indian country. While many agreements require tribes to 

share tax revenue with the states, they provide predictable revenue for the tribes 

and certainty as to collectability and enforcement of tribal taxes on nonmembers. 

These agreements are not without their limitations. From the tribal perspective, 

revenue sharing deprives tribes of tax dollars generated by on-reservation economic 

activity, including the on-reservation activity of nonmembers. Preemption of state 

and local taxation over nonmember activity would preserve tribal tax bases in a way 

that many cooperative agreements do not. Further, to the extent the cooperative 

agreements require tribes to impose tax rates equal to the state rates, they elimiVerDate 0ct 09 2002 13:56 Nov 26, 2012 Jkt 075356 PO 00000 Frm 00023 Fmt 6633 Sfmt 6621 S:\DOCS\75356.TXT JACK
20

40Montana, 450 U.S. at 565–566. 41Merrion, 455 U.S. at 137–140. 42 532 U.S. 645, 654–655 (2001). 43Merrion, 455 U.S. at 137. 44See, e.g., South Dakota v. U.S. ex rel. Cheyenne River Sioux Tribe, 105 F.3d 1552 (8th Cir.), 

cert. denied, 522 U.S. 981 (1997), on remand, 102 F.Supp.2d 1166 (D.S.D. 2000) (striking down 

state motor vehicle tax as applied to Sioux tribal members residing on their reservations). 45 United States v. Lara, 541 U.S. 193 (2004). 

nate the ability of tribes to attract nonmember business by marketing lower tax 

rates. Finally, tax agreements are not an option for tribes in states that are unwilling to enter into such agreements. 

4. The Federal Government Can Promote Economic Development in Indian 

Country by Reaffirming Inherent Tribal Taxing Authority and

Preempting State and Local Taxing Authority 

The Federal Government plays a critical role in shaping tribal and state tax policy 

in Indian country. The Government is dedicated to promoting tribal self-government 

and economic development in Indian country, and its tax policies for Indian country 

can help fulfill those objectives. 

First, Congress can reaffirm the inherent authority of Indian tribes to tax all 

transactions in Indian country. As it stands, Indian tribes have the power to tax 

their own members, but their authority to tax nonmembers who reside or do business in Indian country has been diminished by the Supreme Court. Under existing 

case law, Indian tribes have the power to tax nonmembers who engage in commercial dealings with the tribes or their members, 40 or whose activities occur on tribal 

trust lands, 41 but they have little inherent power to tax nonmembers outside these 

contexts. In Atkinson Trading Co. v. Shirley, the Supreme Court held that the Navajo Nation could not tax nonmember patrons of an on-reservation hotel to defray 

the cost of providing tribal governmental services available to those patrons, including tribal police and fire protection and tribal emergency medical services. 42 This 

is contrary to principle previously articulated by the Court in Merrion, that Indian 

tribes, like other governments, have the inherent power ‘‘to defray the cost of providing governmental services by requiring contributions from persons or enterprises 

engaged in economic activities within that jurisdiction.’’ 43 Congress can assist tribes 

by reaffirming their inherent power to tax all transactions in Indian country in 

order to defray the cost of providing government services throughout Indian country. 

Second, the Federal Government—in particular, the Justice Department—can 

work with Indian tribes to challenge direct state and local taxation of tribes and 

tribal members. Despite the Supreme Court’s clear, categorical bar against such taxation, tribes still face challenges from states and local governments that seek to impose their taxes on the property and activities of tribal members in Indian country. 

The Federal Government has intervened on behalf of tribes and their members in 

the past to challenge such taxes, and to seek restitution of taxes unlawfully collected, 44 and it should continue to do so. (Federal intervention is necessary to overcome state sovereign immunity and to seek restitution of past taxes.) 

Third, it would be most helpful if Congress could provide, by Joint Resolution or 

otherwise, clarity on the scope of permissible state and local taxing authority in Indian country. In particular, Congress could reaffirm the categorical bar against state 

and local taxation of tribes and tribal members. In addition, Congress could establish bright line rules preempting state and local taxation of nonmembers in areas 

in which such taxation would undermine well-settled federal and tribal interests in 

promoting tribal self-determination and economic development in Indian country. 

Such guidance from Congress would remove uncertainty for tribes, states, and cities-and for nonmembers seeking to invest in Indian country. Preemption of state 

and local taxation would also preserve the tribal tax base from state and local interference. As discussed above, the existing federal preemption doctrine employs a costly, case-by-case approach and is prone to uncertainty and inconsistent results. It is 

based on the federal common law and is susceptible to clarification by Congress. 45

Finally, Congress could pass legislation to alleviate the burdens of multiple taxation in Indian country, in cases where state and local taxes are not preempted. For 

example, Congress could provide a federal tax credits for individuals forced to pay 

overlapping state and tribal taxes, or it could provide federal incentives for tribes 

and states to enter cooperative agreements. In these and other ways, the Federal 

Government can help shape a tax policy for Indian country that will maximize tribal 

self-government and economic development. 

I thank you again for the opportunity to appear before you and to comment on 

these important issues.

21

The CHAIRMAN. Thank you very much, Professor Gunn. 

In your testimony, Professor, you discuss the importance of tribes 

being able to develop their own tax structures to support the communities, similar to State and local governments. How does dual 

taxation of the same goods and services on Tribal lands prevent 

this? 

Mr. GUNN. States, under existing law, have some authority to tax 

the same transactions that tribes can tax. For example, tribes have 

authority to tax non-members who engage in consensual relationships with the Tribe or its members, and in some cases, Federal 

law allows dual taxation by the States. 

This dual taxation, if permitted, can have deleterious effect. 

First, tribes may not be able to impose their taxes to the full extent, because their reservation markets won’t support double taxation. Non-member businesses can’t afford to pay double; non-member consumers won’t pay double. They will shop off-reservation. 

And in these ways, it depresses economic development, discouraging investment and driving non-member consumers off-reservation. 

Additionally, any time a State taxes a transaction that is within 

the Tribal authority, it deprives the Tribe of that tax revenue. And 

in that way, potentially takes hundreds of thousands or, depending 

on the amount of revenue, millions of dollars away from Tribal governments. 

The CHAIRMAN. Professor, in a recent hearing, the Committee examined the impacts that potential internet gaming legislation may 

have on tribes. One area of particular concern deals with the taxation of Tribal governments who choose to participate in internet 

gaming. In your view, would that type of taxation be consistent 

with treatment of tribes in Federal Indian tax policy? 

Mr. GUNN. No, it would not. The United States has a treatybased government to government relationship with Indian tribes. 

The Federal Government historically has not taxed the income of 

Tribal governments or tribally-owned corporations or Tribal gaming 

enterprises in existing land-based Class 1, 2, and 3 gaming facilities. 

There is no reason to depart from this longstanding Federal policy in the case of tribally-owned internet gaming facilities. Under 

the Indian Gaming Regulatory Act, Tribal gaming revenues are 

dedicated to Tribal government programs and services, Tribal economic development initiatives, among other uses. The Tribal perspective, as I understand it, is that Tribal revenue generated by 

internet gaming facilities, should remain within the Tribal governments, subject to the same uses. It should stay in Indian Country. 

The revenue is generated there, and it should benefit the Indian 

people who live there. 

Retention of this revenue would further Tribal self-government 

and economic development, and those are goals that the Federal 

Government has endorsed for decades. These goals are critical for 

tribes seeking to improve their economic condition, including the 

Sioux Tribes I have represented for over a decade, many of which 

are located on the poorest counties in America. 

The CHAIRMAN. Thank you. Professor, as someone who has negotiated many State-Tribal taxation agreements, let me ask, what do 

22

you think are the keys to their successes? Are these agreements a 

model for other parts of the Country? 

Mr. GUNN. The agreements that I am most familiar with and 

have been involved with have been in the State of South Dakota. 

And there, by statute, the State is authorized to enter agreements 

with tribes to collect certain taxes within Indian Country. Those 

agreements are effective in that the State and the tribes impose 

corresponding taxes on the same transaction at the same tax rate. 

All taxes are collected by the State with a percentage remitted to 

the Tribe. The percentage is based on the population on-reservation 

of Indians to non-Indians. So in many cases, the vast majority of 

revenue collected by the State is remitted to the tribes, well over 

three-quarters. 

This provides a steady source of revenue for Tribal governments. 

It also takes advantage of the efficient State administrative mechanism for collecting taxes and State enforcement mechanisms. 

As I said in my testimony, it is not without flaws. Federal preemption of State taxation of non-Indian activity in Indian Country 

would be a bright line fix and would provide the same kind of clarity and predictability that tax collection agreements can. It would 

have the effect of preserving nearly 100 percent of the Tribal tax 

base for tribes. However, in the absence of a Federal fix, these 

agreements are an effective way for States and tribes to avoid costly litigation, acrimony and to efficiently collect the maximum 

amount of Tribal and State tax. 

The CHAIRMAN. Well, I want to thank you very much for your 

views on tax policy that affects the indigenous people, tribes especially, of our Country. We are looking for ways of trying to help the 

tribes across the Country by making good use of what is available 

and not being used. So we value your responses and look forward 

to continuing to work with you for future advice as well, when we 

work on these. 

But as we do this, we want to, if need be, to get as far as legislatively trying to help or administratively trying to help them. But 

we want to take advantage of what is there now for the Indian 

tribes of our Country and I thank you for adding to this and look 

forward to continuing to work with you on this. 

I want to thank you very much, and thank you to all of our witnesses today. It has been very helpful for us to hear from all of you 

about the ways that our Federal and State tax policies can promote 

or inhibit strong Tribal economic development. We have heard 

about several important tax incentives offered through Federal law 

that have been used to attract capital, grow jobs and build economies in Tribal communities. And we have also heard about some 

of the challenges for tribes when States attempt to tax Tribal lands 

or enterprises. It is important that we identify tax policy tools that 

promote and not harm Tribal economic development. 

Again, I want to say thank you for all those who participated 

today and I want to remind you that the Committee record will remain open for two weeks for any other contributions to the record. 

It will remain open for two weeks from today. 

So again, I thank you very much, and thank you very much, Professor Gunn. 

This hearing is adjourned. 

23

[Whereupon, at 4:33 p.m., the Committee was adjourned.] 

(25)

APPENDIX

PREPARED STATEMENT OF HON. CEDRIC BLACK EAGLE, CHAIRMAN, CROW TRIBE

Introduction 

Thank you for the opportunity to share the views and concerns of the Crow Nation on Federal tax policy. Given that the Crow Nation’s resources are primarily energy-based, our comments today focus on Indian energy development. 

The Crow Nation’s energy resources are abundant- an estimated 3 percent of US 

coal reserves along with significant oil, natural gas and wind reserves—and the financial stability of our Tribe is wholly dependent upon them. As such, the Crow Nation is uniquely positioned to contribute to the energy independence of our country. 

We applaud this Committee’s leadership in reviewing ways that tax policy can 

help level the playing field for energy, development in Indian Country and help realize the economic value of such resources not only to the Tribes that own them, but 

to the nation as a whole. 

Providing tax incentives to create energy jobs in Indian Country will help overcome other obstacles to energy project development, and will build additional national capacity to create even more jobs in the national economy. This is an opportunity that cannot be missed. 

Energy Opportunities and Obstacles 

Coal 

There is an estimated (some believe conservatively so) 9 billion tons of coal held 

by the Crow Nation. The Absaloka mine outside of Hardin, Montana produces 6 million tons of Crow coal annually; over 175 millions of tons since 1974. The mine annually pays taxes and royalties to the Crow Nation totaling $19 million, which is 

60 percent of our non-Federal budget. The mine provides skilled jobs that pay $16 

million; again critical in our economy which struggles with nearly 50 percent unemployment. As a source of jobs, critical financial support, and U.S. produced energy, 

it is absolutely critical that it remain open and competitive. 

A recent outage at Absaloka’s largest coal customer’s power plant will hurt jobs 

and revenues in 2012, and emphasizes the need for multiple energy projects to diversify our revenue sources. 

To that end, we have been developing Many Stars, a planned Coal to Liquid mine 

and production facility. The original plans are for a state of the art clean coal facility that will be capable of producing up to 50,000 barrels or more of liquid products 

per day ultimatelylultra-clean liquid fuel capable of replacing oil for jet and diesel 

fuel, which translates to a significant reduction in the need for importing foreign 

oil, which in turn contributes to national security. It was anticipated that Many 

Stars, as designed, would create many jobs—up to 2,000 construction jobs and a 

range of 250 to 900 production jobs dependent on through-put. And with full carbon 

capture and sequestration, Many Stars seems to be the best way to monetize the 

Tribe’s vast coal resources in the long run while not contributing to the climate 

change problem. 

But uncertainty about national energy policy has made it difficult to attract investment for this cutting edge project. Regulatory uncertainty combined with expiring tax provisions make future planning quite difficult. Fortunately, technology improvements have made a smaller scale facility possible. We are cutTently working 

to bring in a new developer and starting on a smaller scale (8,000 barrels per day), 

which is now more feasible due to technology improvements. 

In addition to Absaloka and Many Stars, there is a potential for additional development of very low-sulfur coal on the Reservation that is dependent on rail access 

to the west coast. This option is complicated by some cost disadvantage and additional BIA regulatory hurdles, as compared to nearby Federal coal. 

26

Oil and Gas 

Recent oil and gas exploration has found reserves worth developing, but activity 

has been hampered by the markets and the Bureau of Land Management’s Application for Permit to Drill (APD) fees of which the Committee is aware. 

Wind 

Several years-worth of wind data indicates a steady and reliable Class 5/6 wind 

resource in several areas of the Reservation located in direct proximity to existing 

transmission lines. Because the wind resource areas encompass lands held in a variety of ownership patterns, including tribal trust, individual tribal member allotments (many of which are highly fractionated), and non-Indian fee lands, developing 

this resource will be a challenge. 

Hydropower 

The recent Crow Water Rights Settlement Act of 2010 grants the Nation exclusive 

rights to develop and market hydropower from the Yellowtail Afterbay Dam. Preliminary planning and feasibility studies are underway. To date, the plan is to build 

a small, low-head hydropower facility with an estimated capacity of 10–15 

Megawatts to supply the local rural cooperatives that provide electric power to the 

Reservation. 

Leveling the Playing Field for Indian Energy Projects 

Regulatory Obstacles 

The lease approval process is needlessly burdensome, excessively slow, and inaccurate. BIA requirements for surface access approvals to conduct exploration, along 

with slow environmental assessments, create delays significant enough to make our 

projects non-competitive. These types of burdens and other limitations in the federal 

Indian law tend to discourage investments in, and ultimately development of our 

projects. 

Incomplete land records, inadequate staffing, and surface land fractionation add 

more burdens to energy projects on Reservation lands, in the form of extensive land 

title work, mineral rights research, and surface landowner consents. 

Effective Federal tax incentives are essential to help offset some of these extra 

burdens. 

Federal Tax Incentives 

While the existing federal tax incentives work to encourage investment and development on Indian energy projects, their usefulness is limited by the length of their 

applicability. 

For example, the tax incentives that have worked to keep the Absaloka mine open 

and competitive since 2006 are due to expire next year, and thus do not help encourage new long-lead-time projects and investments that will take 5–10 years to begin 

producing. 

We strongly recommend that the Indian Coal Production Tax Credit and the accelerated depreciation provision be made permanent, along with some additional 

modifications. We also recommend that the Indian Wage Tax Credit be refashioned 

to minor the very successful Work Opportunity Tax Credit, which will be a much 

more effective tool to encourage employment on reservations. 

Extension of Wind Energy Production Tax Credit is also essential to development 

of Tribal wind resources—and ability for the Tribe to make direct use of the credit 

will provide options for ownership and control. 

Many Stars Needs Government Support 

Grant the Department of Defense and other federal agencies the ability to enter 

into long-term, guaranteed fixed-price contracts that will underpin the commercial 

framework needed to base-load these types of long-term CTL projects. 

Extend the expiration date of the current 50-cents per gallon alternative fuel excise tax credit for a period of 10 years following start-up for those projects starting 

construction prior to 2015. 

Support a twenty percent investment tax credit for each CTL plant placed in service before the same future date, and/or allow 100 percent expensing of investments 

in the year of capital outlay for any CTL plant in operation by the same future date. 

Support DOE and DOD alternative fuel development programs as part of a comprehensive energy policy that supports the full spectrum of energy technologies and 

provides a level playing field for developing new innovation in clean coal technology 

to meet national environmental goals. 

Enact longer-term tax incentives for clean-coal projects will help remove the general uncertainty in energy policy and will provide investors confidence to support 

27

new innovation and major investment in the clean coal sector. Our observation is 

that policy uncertainty—including lack of long-term tax incentives—with respect to 

clean coal technology, equates to paralysis in trying to move the Many Stars CTL 

Project forward with new investors. 

Conclusion 

Given our vast mineral resources, the Crow Nation can, and should, be self-sufficient. We seek to develop our mineral resources in an economically sound, environmentally responsible and safe manner that is consistent with Crow culture and beliefs. 

The Crow people are tired of saying that we are resource rich and cash poor. We 

respectfully request your assistance in setting the foundation to make our vision a 

reality. 

We have been working to develop our energy resources and to remove obstacles 

to successful development. We hope to build a near-term future when our own resources, in our own hands, provide for the health, hopes and future of our people. 

It is critical that Congress act to protect Indian nations’ sovereignty over their 

natural resources and secure Indian nations as the primary governing entity over 

their own homelands. This will have numerous benefits for the local communities 

as well as the Federal Government. 

The Crow Nation has been an ally of the United States all through its history. 

Today, the Crow Nation desires to develop its vast natural resources not only for 

itself, but to once again help the United States with a new goal—achieving energy 

independence, securing a domestic supply of valuable energy, and reducing its dependence on foreign oil. 

However, our vision can only become a reality with Congress’ assistance. Mr. 

Chairman and Committee members, thank you again for the opportunity to provide 

testimony on how federal tax policy and incentives can help level the playing field 

for Indian Energy development.

Æ