NO. 91-552 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

STATE OF MONTANA, 

DEPARTMENT OF REVENUE, 

Helena, Montana, 

Plaintiff and Appellant, 

ADRIAN BIRD, a/k/a 

ADRIAN and NORA BIRD, 

Defendants and Respondents. 

APPEAL FROM: District Court of the Thirteenth Judicial District, 

In and for the County of Big Horn, 

The Honorable Russell K. Fillner, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Hon. Marc Racicot, Attorney General; Deanne L. 

Sandholm, Assistant Attorney General, Helena, 

Montana 

David W. Woodgerd, Chief Legal Counsel, Department 

of Revenue, Helena, Montana. 

For Respondents: 

James L. Vogel, Attorney at Law, Hardin, Montana. 

For Amicus: 

Dale T. White, Fredericks, Pelcyger & Hester, 

Boulder, Colorado: for Amicus Curiae Crow Tribe of 

Indians. 

Submitted on Briefs: March 5, 1992 

Clerk 
Justice John Conway Harrison delivered the Opinion of the Ccurt. 

 his is an appeal from the District Court of the Thirteenth 

Judicial ~istrict, State of Montana, in and for the County of Big 

Horn, the Honorable Russell K. Fillner presiding. We affirm. 

The issue here is whether the State of Montana may impose its 

income tax upon a member of the Crow Indian Tribe for income earned 

directly through the mining of coal within an area adjacent to the 

Crow Reservation, where the underlying mineral rights (coal) are 

reserved to the Crow Tribe. The income for which the taxes have 

been levied was earned during the years 1981 through 1984 by 

respondent, Adrian Bird, who was employed as a miner by 

Westmoreland Resources, Inc. (Westmoreland) to mine coal at the 

Sarpy Creek Mine facility. 

The Sarpy Creek Mine is on a strip of land located adjacent to 

the Crow Indian Reservation in eastern Montana. This area was 

ceded by the Tribe to the United States Government, but the mineral 

interests, including coal, underlying this ceded strip were, by 

statute, conveyed to the Crow Indian Tribe. The Crow Tribe 

subsequently leased the coal in the ceded strip to Westmoreland 

which engaged in the activity of mining the coal reserves from the 

ceded strip. During the years at issue, 1981 through 1984, Adrian 

Bird did not pay individual income tax on the income he derived 

from employment with Westmoreland. 

On April 29, 1991, the State of Montana, Department of 

Revenue, filed a complaint requesting a judgment against Adrian 

Bird for unpaid income taxes plus penalties and interest thereon. 

The respondents, Adrian and Nora Bird, were served with a summons 
and complaint setting forth the years and the amounts owed as 

follows: 

Years - Tax Interest Penalties 

1981-1984 $8,191.30 $5,292.06 $1,481.27 

With the total amount due: $14,964.63 

In reply to this complaint, the respondents filed a motion to 

dismiss on June 24, 1991, noting that the ~istrict Court did not 

have proper jurisdiction over the Birds; that the court did not 

have subject matter jurisdiction; and that the complaint failed to 

state a cause of action. 

By way of historical background, we note that Westmoreland 

carried out its mining operation at the Sarpy Creek Mine under a 

federally-approved mineral lease entered into with the Crow Tribe 

in 1972, as amended in 1974. See Crow Tribe v. Montana (9th Cir. 

1981), 650 F.2d 1104, 1107, (amended (1982), 665 F.2d 1390), cert. 

denied, 459 U.S. 916 (Crow I) ; Crow Tribe v. Montana (9th Cir. 

l987), 819 F.2d 895, summarily aff'd, 484 U.S. 997 (l988), (Crow 

- TI). The Westmoreland mining operation is located within the socalled "ceded stripn which is an area adjacent to the Crow 

Reservation that was opened to homesteading pursuant to the Act of 

April 27, 2904, Ch. 1624, 33 Stat. 352; Crow I, 650 F.2d at 1107; 

Crow 11, 819 F.2d at 896; see Crow Tribe of Indians v. United 

States (D. Mont. 1985), 657 F.Supp. 573, 575-79. 

The 1904 Act authorized the Secretary of the Interior to sell 

lands within the ceded strip to homesteaders; and as a result of 

the 1904 Act, "a considerable amount of both the surface and 
mineral estate" within the ceded strip was conveyedto non-Indians. 

The coal mined at Westmoreland's Sarpy Creek Mine facility was not 

conveyed under the 1904 Act and has always remained in Tribal trust 

status. Crow I, 650 F.2d at 1107; Crow 11, 819 F.2d at 896. 

In 1958, Congress acted to restore "undisposed of ceded lands" 

to the Crow Reservation. It did so in the Act of May 19, 1958, 72 

Stat. 121, which provided: 

Title to the lands restored to tribal ownership by this 

Act shall be held by the United States in trust for the 

respective tribe or tribes, and such lands are hereby 

added to and made part of the existing reservations for 

such tribe or tribes. 

Crow 11, 819 F.2d at 898; quoting 72 Stat. 121 (May 19, 1958). In 

Crow I and Crow 11, the Ninth Circuit Court of Appeals held that 

the above-listed Act restored the previously undisposed of minerals 

to the Crow Tribe, including the coal underlying the Westmoreland 

lease. Crow I, 650 F.2d at 1117; also see Crow 11, 819 F.2d at 

898. 

In its order and memorandum, the District Court noted that the 

question before it was whether the court had subject matter 

jurisdiction. It noted that the Tribe, while it asserted that it 

had ceded the surface area of the Sarpy Creek Mine facility, 

retained the mineral interests which Westmoreland subsequently 

leased for production purposes. 

It is the respondents' contention that the mineral interests 

are a part of the Reservation as a Reservation resource and that 

the individual Indian income derived solely from the Reservation 

resources is not subject to individual state income tax. In 
addition, they contend, the State's right to tax a Reservation 

Indian's individual income, which is derived wholly from a 

Reservation resource, is preempted by federal law and policy since 

it is within the exclusive jurisdiction of the federal government 

and the Tribe itself. 

The State argues that the right to tax Mr. Bird's income is 

not preempted by federal law and policy because his income was 

earned from a private non-Indian company, and that the company's 

operations are a non-Reservation source of income to Mr. Bird. In 

light of the foregoing, our inquiry must focus on whether the 

State's attempted taxation of Adrian Bird's individual income has 

been preempted. 

This Court, in LaRoque v. State (1978), 178 Mont. 315, 321, 

583 P.2d 1059, 1063, quoted from Mescalero Apache Tribe v. Jones 

(l973), 411 U.S. 145, 148, 93 S.Ct. 1267, 1270, 36 L.Ed.2d 114, 

119, wherein the United States Supreme Court noted: 

[Albsent cession of jurisdiction or other federal 

statutes permitting it, there has been no satisfactory 

authority for taxing Indian reservation lands or Indian 

income from activities carried on within the boundaries 

of the reservation. . . . 

LaRome, 178 Mont. at 321, 583, P.2d at 1063. 

In McClanahan v. State Tax Commission of Arizona (1973), 411 

U.S. 164, 93 S.Ct. 1257, 36 L.Ed.2d 129, the United States Supreme 

Court held that "the State may not impose individual income tax on 

Reservation Indians whose income is earned exclusively on the 

reservation. 'I In McClanahan, the Court held that the tax 

interfered with matters which the relevant treaty and statutes left 
to the exclusive province of the federal government and the 1ndian 

Tribe itself. The Court reasoned that a review of the relevant 

treaty and statute made it clear that the State had exceeded its 

lawful authority in attempting to impose a tax. McClanahan, 411 

U.S. at 173, 93 S.Ct. at 3263, 36 L.Ed.2d at 136. 

 his Court, in LaRocrue, relying on the above authorities, 

addressed the issue of lrwhether an Indian not an enrolled member of 

the tribe on whose reservation he is living, may be taxed by the 

State for income earned on that reservation[.]" LaRome, 178 Mont. 

at 318, 583 P.2d at 1061. This Court concluded, after review of 

the relevant statutes, that a cession to Montana jurisdiction as to 

taxation of individual income had not occurred. Further, we 

concluded ''that situs of the activity is the primary factor in 

determining whether state taxation jurisdiction exists . . . the 

important factors were the coalescence of situs {reservation) and 

status (Indian) . LaRome, 178 Mont. at 324, 583 P. 2d at 1064. 

We further note that in Crow I, the ~inth Circuit Court of 

Appeals determined that the Tribe's mineral resources are f'a 

component of the reservation land itself. 'I Crow I, 650 F. 2d at 

1117. Therefore, we are not persuaded by the State's argument that 

the trial court misapplied the governing law in determining the 

Sarpy Creek Mine facility is part of the Crow Reservation. 

In the instant case, the respondent, Adrian Bird, by 

affidavit, stated that he was an enrolled member of the Crow Tribe 

and resided within the boundaries of the Crow Reservation. 

Further, we note that the State conceded in its brief that its 
cause of action is an attempt to collect unpaid State income tax 

from the respondents during the time that Adrian Bird was employed 

mining coal in the ceded strip. As previously determined, the 

mineral resources on the ceded strip are part of the Reservation, 

and therefore, we apply the criteria of LaRoaue, Crow I, and Crow 

to support the holding of the District Court that the State of 

Montana, Department of Revenue, is without authority to impose 

individual income tax on the respondent, Adrian Bird. 

Congress enacted legislation in 1958 restoring to beneficial 

tribal ownership 10,260.95 acres of vacant and undisposed of lands 

subject to the 1904 Act. Act of May 19, 1958, 72 Stat. 121; Crow 

-, I1 657 F.Supp. at 590. The acreage restored under the 1958 Act 

was reduced by 4,900 acres several months later. Act of Aug. 14, 

1958, 72 Stat. 575; See Crow 11, 659 F.Supp. at 578. Section 2 of 

the 1958 Act provided that these lands would be held in trust for 

the Crow Tribe by the United States and that they were added to and 

made a part of the existing Reservation. Although the statute 

facially restored to tribal ownership only surface lands, it was 

construed in Crow I1 as also applying to undisposed of mineral 

rights underlying the deeded area. Crow 11, 657 F.Supp. at 590. 

The decision of the District Court is affirmed. 
We concur: 
April 15, 1992 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the following 

named: 

Hon. Marc Racicot, Attorney General 

Deanne L. Sandholm, Asst. Atty. General 

215 N. Sanders, Justice Bldg. 

Helena, MT 59620 

Charles E. Snyder, Esq. 

Ste. 325, 2720 Third Ave. No. 

Billings, MT 59101 

David W. Woodgerd, Legal Counsel 

Department of Revenue 

Mitchell Bldg. 

Helena, MT 59620 

James L. Vogel 

Attorney at Law 

P.O. Box 525 

Hardin, MT 59034 

Dale T. White 

Fredericks, Pelcyger & Hester 

1881-9th St., Ste. 216 

Boulder, CO 80302 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE OF MONTANA