FLAT CEKTEK FARMS, INC.. 

### P,

cirl~orrer

. . and Respondent,

Respondent and Appellant APPEAL, FROM: District Court of the Fifteenth Judicial District, In and for the Countyof Roosevelt, 'The Honorable David Cybulski, Judge presiding. COilNSEL.OF RECORD: For Appellant: Chris Tweeetn (argued), Assistant Attorney General, Helena, Montana Roberta Cross Guns, Spcelal Assistant Attorney Genera!, Helena, Montana Charlena Toro, Specra! Ass~stant Attorney Genera!, Helena, \.lantana For Respondent: Laura Chnstoffersen (argued), Chrlstoffersen & Kn~enm. P C ,Culbertson. Montana Rqaii Ruschc (argued),Chr~stofferscn &K~ii~rrrn, P C , Culbcrtson,Montana

Maylinn Stnith. Attorney at Law, Linivcrsily of Montana School of Law, blissoula, Montana (for The Assiniboinc and Sioux Tribes) Argued. June 5, 2001 Suhnlrtted June 5, 2001 Filed: Decided: June 21, 2002

-~ ~~ ~-~.~-~~ ---.

~~~ IJustice 'i'cc-ry 

### K. Trie~vciler deliyered the Opinion ofthe Court 

### B/! The Petitioner, Flat Ccnier Fanns, inc., appcaled thc Respoadcnt Dcpart~ncn; of Revenue's imposition ofthe Corporation License 'Tax to the State 'Tax Appeal Board. The State Tax Appeal Brrard upheld the Department of Revenue's assessment. Flat Center appealed to the District Court for the Fifteenth Judicial District in Roosevclt County. The District Court reversed the decision of the State Tax Appeal Board and held that the Corpordtron 1.icense Tax did not dpply to Flat Center. The Departmet~t of Rexenue now appeals from the order ofthe District Court. We affirm the order of the D~stnct Court. 

### 112 'The sole issue presented on appeal is whether the District Court erred when it concluiled that the Montana Corporation Liccrtse Tax itnay not be imposed on arr Indianomned coiporation which does bus~ness entlrelq wttltt~i the extetior boundar~cs ofthe Fort Peck Resenatton. F.4C'TtiAL BACKGIIOUND q3 Therelel ant facts to th~s disputewcre agreed upon bq theparttes. Flat Center Farms, Inc. was ~ncorporated pursuant to the lams ofMontana on December 3. 1903, and chartered by the Fort Peck Tribes as a Trlbal Corporatton on October 7, 1906. Flat Center's sole business activity is fanningand the farming operation is located entirely within the exterior boundaries of the Fort Peclt Reservation. (14 Kiln hlurray is an enrolled member ofthe Fort Peck Tribes. He and his wife; Denise Murray, each own 

### 200 shares ofFlat Center stock. There is no non-Indian ownership ofthe corporation. DeniseMurray is an enrolledmember ofthe Turtle Mountain Chippewa, atribethat has allotted lands within tl~c Fon Peek Reservaiio!~ and whose members receive social services ofkrcd by ille Fort Peck Reservation. 

### 75 Flat Center lcascs all the land it farms. Sonie of this land is owned in fec sili~ple by i~ldividual Indians: the remainder is held in trust by the federal government for Mr. Munay, the Tribes,orindividual Indians. All ofthe leased lands aretvithin thc FonPeck Kescrvatioa boundaries. 76 On July 12, 1990. the Department of Revenue assessed Flat Center for taxes oxect pursuant to the corporation ltcense tax for the tax year ending October 

### it, 1994. The corporation license tax provides that every corporation engaged in business in the State of 'vlontaila pay-an annual license fec "for the privilege of carrying on business in this state." 1 

### I -0 

### I Mr. The tax is assessed based on a percentage a corporation's total net income during the tau year. Flat Center appealed imposition of the tax to the Division Admtntstrator on August 8, 1996. After the 1):rector ofthe Department of Rcbenue upheld theDivision Administrator's assessmetit ofthe cot-porationlicense tax, FlatCenterpetitioned to the State Tax Appeal Board (STAR). STAB also upheld thc Department's assessment. 

## 7 Flat Center appealed STAB'Sdecision to the District Court for the Fifteenth Judicial District in Rooscvelt Count?;. The District Court reversed SIABand the Department and granted Flat Center's motion for summaryjudgment. The 13istrict Court held that 

### I) the beneficiaries of thc income were ultimately Indian persons; 2) the situs of the activity generating the inconte was ~vliolly within the reservation: and 3')the assets generating the income\vcrc Indian trust lancis. The District Court furtherheld that the corporate licensetax 3irnpcrmissihiy taxed lands heid in trusr fbr tile Tribes and individual indians. The Department now appeals from ihc order ofrhc District Court. STANDARD 

### OF REVIEW 

### ": Our standard of review of appeals from stimmaryjudgment is ifetzovo. iVfotnriev. .h'ot?lret-rz .Ilo~ifnrzii ,Joint h'cjitsc l)i.~~~osdljist. (1995); 274 Mont. 239, 242> 907 P.2d 154. 156. We applythe samecriteria which is applied by thedistrict courtpursuant to Rule 56(c), M.R.Civ.P. Spiizler v.Alleri, 1099h4'f 160,

## '1 14,295Mont. 139,

### Ti14,083P.2d 348,2 14. 'The moving party must establish both the absence of genuine issues of material fact and entitlement tojudgment as a matter of law. IJucqbt-d v. Credit Bureau offf~~~~rt., frzc., 1098 

### MT 179,7/ 14,250Mont. 529, 

### :i 14,962 2.2d 1198,q 14. Once the movingparty has met its burden, the opposingparty must present material and substantial evidence, rather than mere conclusory orspeculative statements, to raise agenuineissueofmaterial fact. Ifudji~t-d, ': 14. DISCUSSION 

### 110 Did the District Court err wlten it concluded that the corporation license tax may not be imposed on an Indian-owned corporation which does b~~siness entirely within the Fort Peck fleservation'! '10 The heart of the State's argtlment is that there is a distinction between individual lndians rind corporations. The State contendsthat becat~sc corporations are created by state law, they are not the legal eq~iivalent ofatribal member and therefore Flat Center is not an "lnclian" for purposes of Montana's tau code. C'onscyuently, thc income against which the license tax is assessed is not thc individual income ofa11Indian, but rather corporate income 3subject to ~vlonrana's state tax laws like any other corporation cloing business in Atocltana. 7;i S T'nc longstanding riile is that a siaw is ivitirout poXvver to tax reservaiio~ lands and Indian income gcncr-atedfrom on-reservation activities absent the express authorization of Congress. 

### ~\~fcscilleri,Apncl~e Tlihcv. .Joiles(1973).41 1

### U.S. 145. 148;93S.Ct. 1267, 1270. 34 1..Ed.2d 114. Whilc the State concedesthat it lacks the authorityto tax the on-reservation activities of erlrolled tribal members or to directly tax reservation lands, it contends that its authority to tax non-Indians on the reservation should be presumed. According to the State, unless Flat Center falls under an exemption to that presumptive authority, the corporate license tax should apply. 712 t~Io\vcvcr, the State'sposition reverses the presumption established by federal lndian law. liidian tribes have longbeen recognized as distinct, independent political communities qualified to exercise powers of self-governmentby virtueoftheir originaltribal sovereignty. FELIX 

### S. CO~I~~N'S 

### HANT)ROOK OF FHIIFRAI. 

### INIIIAU 

### LAW.232 (1086). Chief .lustice John Marshall wrote that Indian tribes are "domestic dependent nations" whose relationship with the federal goverrrmentresembles that ofa ward to a guardian. 

### ClzerokecAliltiorr v. 

### Georgia (1831), 30 I!.S, (5 Pet.) 1, 17. As a consequence of this special relationship between coequal sovereigns. tribal poh-ersof self-government are limited only by federal statutes, the tcl-msoftreat~es uith the federal gohernmcnt, and 

### by restraints ~mplic~t in the nature oi'thc relationship itself --- in all other respects the tribes ren~aiii ndependent and self-governing commt~niries.(~OIIEU'S 

### HAXI)R~OK, at 235. '11 3 Tlie exercise of statejurisdiction ovcr activities occurring entirely on Indian lands is 5an infiingcment on inherent tribal authority and is contrary to principles ofseii--government and tribal sovereignty. bVi/itii,ri.s \:Lee (1959)~ 358 

### Lil.S. 217, 220-23, 7X.CI.209,271-72, 3 i,.Ed.2d 25 1. In the area ofstate taxation, where "ChiefJustice %larshall'sobservationthat 'thcpowcr to tax involbesthe power to destroy' has counseled amore categorical approach:" the exercise of state jurisdiction is even more circumscribed. 

### County 

### of Ycrkinlil v. 

### L'o~?feiki~-atctl 7i-il1t.s 

### unrl Bands ?sr?f' 

### Yizkili~u inifiun ~Votio~t (1992), 502 

### U.S. 25

### I, 258, 1 12 S.Ct. 683, 688, I16 L.Ed.2d 087. 

### I That is not to say that state taxation is precluded in every instance. There is arnple federal authority to the contrary. 

### .See, e.g,,i.f'ilsliiiigtonv,

### Coizj2.rlcri1tetl7'1-ibe.r ofColt'illc Re.rei.vizriorz (1980). 447 

### U.S. 134, 156, 100 S. Ct. 206") 2283, 65 I.,.Cd,2d 10; 

### Aloe 

### v. Lh/!fi.derc~teii~Y~zli.slz 

### t111dKootc7rzcli Tribes(?fF71(~tlzeiztlKe.servcrtion (1 976j,425

### U.S.463,483, 96 S.Ct. 1634, 1646,38L.Ed.2d 96. 'l'he point here is that the State shouldnot be presumed to wieldthe swordof

### on-reservationtax authority absentan express (~ongressional provision. While we have not previously addressed the precise issue in this case, this Court has repeatedly recognized the teed to promote tribal self-determination by deferring to tribal authority on matters of essential importance to tribes and their members. 

### See, e.g., 111re jkfiirriagc of.Skille/r71908 MI' 43, "1, 287 btont. 399.7 41 :056 P.2d 

### I,

# '41 (recognizing tribal sovcrcignty and the right of self-governmctlt include authority to control the internal relations oftribal n~cmbcrs); 

### B~[ventl.nic.; f'.C 

### v, Pettit, 1998'MT252,q;36,291 Mont. 196, 

## '1 36, 967 P.2d 398,!! 36 (holding that Montana courts lack subject matterjurisdiction over debt collection action brought by non-Indian creditor whose rights arose on reservation); 01 0reArfoption 

### q/'Rijf!e

.., (IWiiSj,273 Moi~t. 237,242, 'iii? P.2d 542, 545 (hoiding that the tribe is 

### rix uiiirnaee autirorlry on eligibility for tribal membership). Furihcrrnorc; vvc i~a.~i. considered xvhethertribal membership is critical to a determination ofwhether the Statecan tax irrcolnc earned by Indians on tribal land. ,%eLnKoc-lue 1,. State (1978), 178 Mont. 315: 583 

### P.2d 1059 (holding that tribal mcrnbership was not determinative). 

### * 15 With these principles in mind, and based on theparties' stipulated facts, we conclude that Flat Center is not subject to the corporate license tax because Flat Center is a tribally chartered corporation owned and operated by Indians, conducts business entirely on the Fort Peck Reservation, and does not "carry on business in this state." $16 The 

### State contends that, as a 

### ionm member lvith a corporate identity distinct from its stockholders, FlatCenter docsnot enjoythe exemptions -- thetax shieldfrom statetaxation available to tribes and tribal members. An antecedent question, however, is whether there is statutory authority for taxing Flat Center's activities on the reservation in the first place. Based on the plain language of the corporate license tax, we conclude that there is not. The tor-porate license tax is an annual fee assessed "for the privilege of eanying on business in this state." Section 15-31

### - 101(3), MCA. Flat Cknter doesnot carryon business in Montana. Asthe stipulated facts indicate, Flat Center docs all its business in Indian count~y.Flat Center's activities occur solely on Indian land owned in fee or held in trust. All of those lands are within the exterior boundaries of the Fort Peck Resenation. In reality, the value the State wishes to tax is generated entirely in a sovereign state. Therefore, Flat Center's iricor~lc is not earned in Ltoritana.

-7 /17 'rhc Staterelies hea~ily on 11crr.ng~z P~-oci~lcrs, ii~. vChtnnzissior1c.r qj.Kei:ei~lie 

### (lV.I>. Micii. 1997),971 

### F. Supp. 

### 294, c@d(b"' Clr. 19081, 156F.3d D28: acasewhich it contends is directly on point. In Karitgiz l'i-oriticrr, tllc court opincd that "because a corporation is a legal fiction owing its existence to state law, [plaintifq is

... not the legal equivalent of a member of the Tribe." Rnrciga Procluct.~, 971 

### F. Supp. at 296. 118 However, the publislied opinion in Bcrungc~1'roduct.s leaves important questions unanswered

- the precise language of the Michigan business tax and, contrary to the suggestion in the dissenting opinion, whether significant commercial activity took place outsidethe Reservation. Furthermore, we have previously held that tribal n~embers'nip isnot esseiitial to a determination of vc-hethineomc eanlcd on the Reservation 

### is taxablc. See LcrRoque, 178 Mont. at 324, 583 P.2d at 1064. ?I19 In fact, we have in the past giveti greater weight to the situs of taxable income than the status ofthe income earner. That was the point ofour holding in Lc~Hoquc. InL~lKoq~le, this Court recognized the general tulethat individual income earned by an lndian person and derived wholly from reservation sources is exempt from state income tax. SeeXfcC,'/ililnl~rrrz

t,. Stare 

### PIX Lhrtzni'!r qfi?rizonn (1973),41 1 

### 0.S. l04> 93 S.C't. 1257, 36 LA.Ed.2d 120. LVe then went a step further and held that the income earned on the reservatio:~ by non-member lndians is exempt from state taxation. We reasoned that state jurisdiction was limited in "areas set aside by treaty forthe exclusive usc and control of Indians." LelKoy~le, 178Mont. at 323, 583 P.2d at 1063. 

### Our detcnnination of whether income colrld be subjected to state taxation included an analysis oftl~c situs of the activity as well as the status ofthc Indian as 8a member or non-member oithe tribe. LnKoqrre, 175 Monr. at 324-25, 

### 583 P.2d at 1064.

We therefore, conclude that sitzrs of the activity is the primary Factor in detcrn~iaing whcther state taxation jurisdiction exists. not the status of the individual as enrolled or non-enrolled. We read the phrase "reservation Indian" in 

### .LlcClclrznhun to mean Indians residing on the reservation, and not just lndians who are enrolled menlbers of the tribe. We find support for this conclusion in Fat-

### v.Htrreiiu 

### ofI<cvettue (1975), 87 N.M. 261,531 P.2d 1234, cert. den.424 

### CJ.S.933,96 S.Ct. i 147,47L.Ed.2d341. In 

### Fo.x, the Courtheld a Comanche Indianwhoworked and resided on the Navajo reservation in New Mexico and who was not an enrolled member of the Kavajo tribe. n~as nevertheless exempt from state income taxation. 

### Fox, 53I P.2d at 1235. The Court indicated the important factors were the coalescence of situs (reservation) and status (Indian). Faxat 1234. The Court could find no cases where the status of the lndian in question as an enrolled tribal member was crucial; in fact, in the eases decided, tribal affiliation was unimponant as siius on a resenation and status as an Indian coalesced. 10 The State suggeststhat subsequent SupremeCoust decisions habe undcrcut the logic of

### LuKoqlte and that non-member lndians are the equivalent ofnon-Indians for purposes of state taxation. We disagree with this interpretation because we find the cases cited by the Stateto bc materrally drfferent from the facts andIssue no\+before us and concl~~de that the tribal status oftheindividual or corporation tobe taxed maybe relevant, but it isby no means dispos~tnc Houc'L~~, and most tniportantly, the statutory language pursuant to 

### winch the State asscr-tstaxing authority limits that authority based on the situs of the activity from which income is earned. Flat Center, whether it is technically a tribal "me~nber" or not, conducts all its comtnercial activity and generates all the valiie that the Statenow targets for taxat~on on thc Fort Peck Reservat~on #I21 .Iforcover, analysis based on the totality of the circumstances as done in Li~Kocj~ri?would lead to the same result. Both stockholders of Fiat Center are en~olicd mcrniicts of iribcs sencdby the Fort Peck Reseriiition. Kim kliirra:; is an cnrc>ilcd member of the Fort Peck Tribes. His ivifc Denise is an enrolled nlernber of the Turtlc Mountain Chippewa, a tribe that has allotted lands within the Fort Peck Reservation and whose rne~nbers receive social services, such rrs indian Health Scrzices, orfered by the Fort Peck Tribes to enrolled menibers. The land fromwhich the corporation derivesitsincomeiseitherownedby Indians

or held in trust for [ndians. Finally, although subsequent to the tax years in question, the



### ., Tribes have recognized Flat Center as a tribally chartered corporation. Ihese factors in combination illustratethe strongnexusbetween Flat Center's activitiesandthe interest ofthe Tribes in regulating and proinotitlg 

### commercial activityon itsRcservation. Put another way, "the coalescence of situs (reservation) and status (Indian)"which guides traditional analysis is present. 

### See 

### LrrKocr~tc, 178h~lo11t. at 323, 583 P.2d at 1054. 722 For these reasons, the District Court was correct when it concluded that the Montana Corporation License Tax may not be imposed on atribally chartered corporation which does b~~siness cntirely within the Fort Peck Reservation. Accordingly, the order of the District Court is affirmed.

We Concur:JusticesJustice James 

### C. Nelson specially concurs. 

### '$23 I concur 

### in our opinion but ivrite separately to submit an additional 

### basis fbr 

### our conclusion that Montana cannot impose 

### I!.: corporate license tau on 

### F!a! Center as a slatechartered corporation. 124 In a recent United States Supreme Court case. 

### Atkitlso117jZldillzg Co. V. 

### Shirley (2001), 532 U.S. 645, 121 S.Ct. 1825: 149L.Ed.2d 889. the Court faced the questior~ ofwhctherthe gec~eral rule established 

### in i\.Iotztu~iu v. 

### L'rzited States (1981), 450 U.S. 543, 101 S.Ct. 1245: 67 L.Ed.2d 493--that, with limited exceptions, India11tribes lack civil authority over the conduct of i~onmernbers on non-Indian fee laud within a reservation--applies to tribal attempts to tax iionmember activity occurring on non-Indian fee land. The Court, in a unanimous opinion, held that the 

### ,V/orztcirzu rule did apply and that none of its exceptions obtained. Atkinson, 532 U.S. at 647, 121 

### S.Ct. at 1828-29. 125 

### In the case at bar, we are faced with the converse fact situation--the State attempting to tax busiiless activity of Indians involvilig non-fee lalids and located entirely within the exterior boundaries ofthe reservation. Nevertheless, the U.S. Supreme Court's analysis in 

### Atkitzson applies, by analogy. $26 The tax at issue in 

### Atkirzson lvas an eight percent occupancy tax upon any hotel room located within the exterior boundaries of the Navajo Nation Reservation. lGrhile the incidence ofthe tax fell directly upon the guests--for tlie most part, tourists going and coining Erom Grand Canyon National Park--nonetheless, it was incumber~t upon the owner or 12operator ofthehotel to collect and remit the tax to tribal authorities. Arkirrsorz, 

### 532 

### U.S. at 

### 648;12

### 1 S.Ct.at 

### 1829. Atkinson Trading Company, in^,^ (Atkinsonj the iioteiowner, is a corporation o~vned bq-non-Indians with its business conducted. and its hotel located upon, non-Indian fee land within the exterior boundaries of the Navajo Reservatioti. Atkir~sori, 532 

### U.S. at 648>121 S.Ct. at 1829. 1/27 Reaffirming the "controlling" principles announced in lbfon~anul and in Striztc v. 

### A-1 Cor~auctor.~ (1997), 520 U.S. 438. 1 17 

### S.Ct. 1404. 

### 137 L.Ed.2d 661, the Court applied .tlorztunu "straight up" to conclude that tribal taxation ofnon-Indians fell withiti ctlorztunu'.~ general rule that "Indian tribes lack civil authority over. 

### . . nonmembers on non-lndian fee Iarrd." Fiaving, iuade that determination, the Court then placed the burdell on the Navajo Nation (the Tribe) to establish the existence ofoneofthe twoibf()tlti~tzu exceptions. Atkiruorz, 532 

### U.S. at 654, 121 S.Ct. at 1832. 128 To meet its burden the Tribe argued that the 

### first .&luntunu exception justified the

I "Tribaljurisdiction is limited: For powers not expressly conferred them by fcderai sratute or treaty, indian tribes must rely upon their retained or inherent sovereignty.

. . .indian tribe power over nonmembers on nou-Indian fee iand is sharply cireurnscribed. 

### . . 

### . /T]he inherent sovereignty of Indian tribes was limited to 'their members and their territory': '[EJxercise oftribal power beyond what is necessary to protect tribal self-govcmment or to control internal relations is inconsistent with the dependent status oftribes [which is] necessarily inconsistent w-iththeir freedom to determine their external relations.' '[Tlhe general proposition [is]tl~at the inherent sovereign powers of an Indian tribe do not extend to the activities of nonmembers of the tribe.' [These principles, however, arc st~bjeet o two exceptions:] First, '[a] tribe may reguiate. through taxation, licensing, or other mans, the activities of nonmembers who enter consensual relationsl~ips with the tribe or its members. through commercial dealings, contracts, leases, or other arrangen~ents.' 

### . . .Second, '[a] tribe may 

### . . .exercise civil authority over the conduct oflion-Indians on fee lands within its resenation when that conduct threatens or has some direct ci'fect on the political integrity, the economic security, or the health or wclfare of the tribe."' .4tkinson, 532 U.S. at 649-51, 121 S.Ct, at 1830-31 (internal citations omitted).imposition of its hotel occrtpancy tax. Specifically, the Tribe maintained that Atkinsot: and its guests irad entered into a consensuai relationship .r-ithihc Navajo 

### Nation aind were the beneficiaries of nurnerous services--police protection. emergency medical 

### care. fire protection--provided by 

### the Tribe. .Atkinson, 532 U.S. at 654-55, 

### 121 S.Ct. at 1832-33. 1129 Importantly for our purposes here, the Supreme Court rejected this argument. While not questioning the Tribe's ability to charge an appropriate fee for a particular service actually rendered, the Court went on to state, "wethink the generalized availability oftribal servicespatently insufficient to sustaintheTribe's civil authority over nonmembers on nonIndian fee land



### . . 

### . [and that] a nonmember's actual orpotential receipt oftribal police. fire and medical services does not create the requisite connection." .Itki12sotz, 532 

### U.S. at 655. 121 S.Ct. 1833. 7130 In so holding, the ;llkinsorz Court narro>vedthe "consensual relationship" exception of hforzturza by eliminating the providing of incidental or generalized benefits as the sole basis for the tribal sovereign's imposition of taxing authority on those non-Indians wl-toa.ouSd not otherwise be subject to the tribe's taxing powers. 713 1 This reasoning applies by analogy to the instant case. Thc Department of Revenue argnes that "the State asserts its power to collect the corporatiorl license tax from Flat Center because it [Flat Center] has chosen to avail itself of the advantages of incorporating under the laws of Montana." The Department of Revenue maintains that this fact is "controlling" because \\,hen Flat Center incorporated under Montana law, "it obtained certain benefits andagreed to com~nensu~ate responsibiiities." in the context 

### ofthe instant case,Alkin.s<~n begs the "\{?hat bt.tlejjis?" 

### 732 The Department of Revenue contends that the benefits of incorporating include "estateplanning. limitations on personal liability, employee benefits and certain tax benefits." No doubt these arebenefits ofincorporating. But, importantly,these are generalized benefits ofthe corporate form ofbusiness organization. Virtually every corporation and virtually all corporate shareholders in the United States eiijoy tliese sorts of benefits; these are not benefits peculiar to Montana corporations--eventhough they may be found in Montana law. 

### 733 Under the rationale of .ltkinson. and by analogy. the fact that Montana business co~porations enjoy these sorts of "generalized benefits" no more suppoits the State's authority to tax a 100% Indian-owned Montana corporation doing business on non-fee property and solely within the reservation than does the provision of generalized benefits by tribal governments sustain the tribe's authority to tax rionmembers doing business on non-Indian fee property within the reservation. 1!33 If the State's hook to tax Flat Center on the reservation is the benefits it enjoys as a 'Montana corporation--and that seems to be the gravamen of the Department ofRe>enue's argument--then 

### f submit that the hook isnot strong enough to hold the fish. UnderAtkin.uort providing generalized governmental benefits to the putative taxpayer is not sufficient to sustain, on a stand-alonebasis, the sovereign's taxing authority under circumstances where the sovereign would not othenwiseenjoy the po\ver to tax.

### '35 if 

### a tribal sovereign may 

### not tax 

### a state corporation o~vned by 

### non-Indians doing iiusirrcss 011 fiie land within thc resenaiion, 1

### cannot by analogy seehaw tile 

### State can 

### claim any 

### greater authorivy to tax 

### a state corporation owned 100%

### by indians doing business on non-fee land entirely within the 

### reservation. y36 

### LVbile the State might impose a fee or tax incident to the act of incorporating or inc~dcnt o corporate operations and business conducted off the reseivation, in my view, under the factshere, and given the Supreme Court's rationale inAtk~nsoit, the State lost its ability to impose its annual license tax on Flat Center. "3; I 

### concur.

Justice 

### W. William Leaphart concurs in the foregoing special concurrence.

Justice 

### /Justice Jim Rice dissenting. 

### p8 8 respectfillydissent. 539 11 shouldbe clarified, as the Court notcs briefly: that tbrthe oniy tax year 

### in question. Flat Center was incorporated only as a Montana corporation, as the Tribe had not yet acted in regard to the entity. Thus, Flat Center was solely a creation of the State of Montana. Although emphasized by the parties. Flat Center's charter as a tribal corporation 

### is not relevant to this Court's consideration, as it did not occur until several 

### years after the 1993- I994 taw year in question. 740 The Court relies instead on the Indian status of the shareholders of Flat Center, describing Flat Center as an "Indian-owned" corporation. In so holding, the Court ignores the mountain of state and federal authority holding that corporations are separate entities which receive tax treatment without regard to the status ofthe shareholders, asclearly held in 

### hidineProperties v. 

### Cotfzrr~issio~rer ofIrrterrrcilRevenue (IM3), 3 19

### U.S. 436, 63 S.Ct. 

### 1 132,87L.Ed. 1499, and in 

### BnrngnProducts, llrc.

### v.Colrz~~zissionerofRevcnue (W.D. Mich. 19971,971 F.Supp. 294. 141 In 

### Bnmgrr, a non-Indian corporation owned by a tribal member and operating completely vv~thin the L'Anse Federal Ind~an Reservation brought action agamst the State of Michigan. seektng to permanently enjotn the state's le\y of a bus~ness tax against it. liegarding the status ofthe subject corporat~on, the Courl stated: Plaintiffs counsel conceded at oral argument that as a corporation, plaintiffis not actually an enrolled member ofthe Tribe.



### . . . Neither canplaintiff argue that it should be considered an enrolled member simply because its soleshareholder is a member 

### of the Tribe.



### . . 

### . 1-1 corporation cannot take on the fonn ofits shareholder in order to reduce tax iiability.

$32 Further, in 

### Oklnhorrra Ta,x Cor~zmir.~ioner v. C!~icilickrrsnw Nation (lY95), 

### 515 

### U.S. 450,115 S Ct.2214,132 L.Ed.2d400,the SupremeCourt held that taxing the pia~ntifftherc. a corporation, is not the same thing as taxing the shareholder, a tribal member. The Court reasoned that the proper inquiry was who bore the legal incidence, as opposed to the

economrc real~ty, of the tax Here. ~tis clear that the legal incidence of the tax falls upon Montana corporation Flat Center, not the shareholders, even though they may ultimately suffer the economtc consequence of the tax. 743 Under these holdings, the Indian status of Flat Center's shareholders does not determine the outcome of the corporate taxation Issue before us. Further, these holdings establish that the Court 1s ~mperrnisslbly redcfhng the character of F!at Center from a Montana corporation to an entityof Indian personage, in order to void the assessment ofthe hlontana corporation tax 1144 The Court next turns to a situs analysis to support its conclusion, citing the language in 

### LaKoyzte. The Court unpersuasively turns away the State's argument that the 

### LrzRoque holdlng has been kirtually eradicated by subsequent decis~ons ofthe Un~ted States Supreme Court, findnlg those cases to be son~ehow "materially drfferent." Instead of c~rcumspectly considering this development in the law, the Court chooses to illogically extend its situs analysis, finding that because all ofthe eco~lornic activity occurred within the reservation,""FratCenterdoes not carry on business 

### in the State 

### ofMontana," and ""E'iatfenter's income is not earned

### in bloneana." Therefore,thc CourtconcludeslFlat Centeris notrequired topay "for the privilege of carrying on business in this state." despite the mandate of $ 

### 15-13- 101(3),IMGA. 

### I respectfully suggest that 

### it may come 

### as 

### a surprise to many that the Fort Peck Reservation is no longer within the State of Montana, even for tax purposes. 745 Itwas stipulatedthat Flat Center wasvoluntarily incorporated as a domestic Montana corporation by its prii~cipals, who also elected that the corporation be a 

### "C,'' or tax-paying, entity, and who have continued to maintain that entity. Despite this elective incorporation by the principals under the laws ofthe State ofMontana, the Court reaches the nonsensical co~lclusion that Flat Center is within Montan'a for purposes offbl-mitzg a domestic i'vfonlana corporation, but that it is not within Montana for purposes of

### paying the corporate tax assessed against such domestic corporations. "When the [tribal] taxpayer chooses the advantages ofincorporation, itmust also accept the disadvantages with regard to taxation." 

### Barga,971 F.Supp. at 296 (quoting

### ,%foliize). !!46 The Court has ignored the authority which should control the outcome of this case. While the Court correctly states that, absent express federal at~thorization, reservation lands and Indian income fromreservation activitiesareexemptfrom statetaxation: such isnottrue, however, for income of non-Indians derived from the reservation. In Chrton 

### Petrolel~tn Corp. V. 

### flew &fe.xico (l989),400 U.S. 163, 109 S.Ct. 1698, 104L.Ed.2d 20'9, the Supreme Court held that where a state has not removed itself from providing government cervices benefitting the taxpayer andreser-vation residents generally, anotherwise nondiscriminatory 19Lax on a norrmember--a corporation in that casc-will be upheld unless Congress has specificallypreempted the tax, Thcre was no allegLllionhere that the %ate 

### of Montana has withdraivn public services orthat 

### Congress has specit<cally preempted the corporate tax in question, Consequently, 

### I disagrcc with the Court's adoption ofpolicy, stated in 

### 11 14,

### that the State "should notbe presumed to\i ~eld



### .. on-resewationtax authorit>absent an express Congressionalprovision." While such a policy may indeedbe preferable, the United States Supreine Court has clearly stated that such Congrcssronal action is not a prereq~t~slte for taxation ofnon-Indian corporations deriving income from the reservation. 1147 Contrary to the Court, 

### I find 

### Nurtzga persuasive, and for more than its corporate analysis, discussed above. In validatingthe assessmcnt ofMichigan's corporate tax against

an lndian-owned corporation operating on the resenation, the 

### Rurclga Court also analyzed under what conditions a corporation might be immune from state taxation: It is possible that a corporation owned by Indian shareholders might be immune from state taxation if it is acting as an equivalent to the Indian tribe itself. For example, a coiporation has been held to be entitled to the same sovereign immunity as the Indian tribe when it is organized under tribal laws; it is controlled by the Tribe; and it is operated for government purposes. See 

### Coherz v. 

### Little Six, 

### IT?^., 543 N.W.2d 376, 379 (Minn. App. 1996);

### D~xorz v. 

### Picopa Constu. Co.. 160 Ariz. 251, 772 P.2d 1104, 1109-11 (Ariz. 1989). Moreo\cr, a coiporation may be entitled to the protections of an Indian Trtbe 

### fit is acting as the tribe's agent. See

### Enterpvi~e l:lgtnt. 

### Co~zsultatzts, 

### Inc. v. 

### State ex 

### re!. Oklalzonziz Tux Conlm'rz,76s P.2d 359 

### (Oh. 1988). But none of these conditions arepresent here and pla~ntiffconcedcs it is not acttng as the Tnhe's agent nor ISit incorporated under the 1au.softhe Tribe.(I r Pursuant to this authority, and finding none of the conditions that may establish immunityfrom taxation here, 1 ~~~uid findthat the 'iinntana corporatetax is va!idly iissesscd under federal law, that Flat Center is a Montana corporation which is distinct from its shareholders. and thdt it is subject to the tau. 1/49 Theconcurrence arguesthatunder therationale offered in 

### ilfkin~otz, the Statehas lost its ability to impose the corporatetax on Flat Center. 

### ,4tkirzso12addressed tribaljurisdiction. State taxation jurisdiction, being a completely different animal, was not addressed in Atkinson, and that case offers no instruction, by analogyorotherwise, to the issuehere. The

concurrence is an attractive policy argument for reciprocity between sovereigns, but is not

an application ofthe fedcral law which 

### is dispositive here. 

### 7150 I would reverse.Chicf Jusricc Karla b1. 

### Gray,concurring.



### 75i 

### I concur 

### in the result reached by the Court, but not in tlre entirety OFits analysis. Specifically. 1donot agree mith thatportion oftheCourt's approacl-iwhich appearsto simply ignore the fact that a corporati011 has a legal identity separate from that of its owners, and which treats Flat Center as though it were a sole proprietorship owned by an indiviiiual Indian, operating~vithin the confines oftllcreservationlwith the ownerdirectiyreceiving the income from the business endeavor. My agreement with the C:ourt's result is based on a different, and much narrower approach to the present case. 

### 752 1agree that situs 

### is of great impel-tatice. But situs is not tile sole Factor, even under 

### LmRoque, where M-e emphasized the necessity that situs on a reservation and status as an Indian (an individual Indian, in that case) must coalesce. As a result, 1agrec with much of the dissent's analysis ofthe importance ofrecognizing both the factual differences between

a identity and an individual, and the legal consequences which ordinarily \vould flow 

### from those differences. Were it not for an odd aliomaly in this caser 1would join the dissent. 753 Instead, however, I concur in tltc result reached by the Court bccausc the State stipulated in the District Court to the fact that Flat Center is a tribally chartered corporation. While the stipulation included the additional fact that Flat Center didnot become a 

### tribally chartered corporatioil until after thc tax year at issue 

### in this case, the State did not argue inthe Distrkt C'ou~? that. at the relebant times. Flat Center's 

### only corporate existence was pursuant to state law rather than tribal law. Had the Siata:dune so,iwould havejoined the dissent. 

### On this record, ho\i.cver. it is my view that the State is hound by its stipulation,and 1 would not--and do not--consider any of its legal arguments that essentially attempt to change itsposition by "undoing" the stipulated fact which provides Flat Center with Indian status. 754 

### I ccincur in tlrc rcsult 1.cacl1edby tlre Court.