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 County of 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 

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

I 
Justice 'i'cc-ry K. Trie~vciler deliyered the Opinion of the Court 

B/! The Petitioner, Flat Ccnier Fanns, inc., appcaled thc Respoadcnt Dcpart~ncn; of 

Revenue's imposition of the 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 of the 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 of the Fort 

Peck Resenatton. 

F.4C'TtiAL BACKGIIOUND 

q3 The relel ant facts to th~s dispute wcre agreed upon bq the parttes. Flat Center Farms, 

Inc. was ~ncorporated pursuant to the lams of Montana 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 fanning and the farming operation is located entirely within the exterior 

boundaries of the Fort Peclt Reservation. 

(14 Kiln hlurray is an enrolled member of the Fort Peck Tribes. He and his wife; Denise 

Murray, each own 200 shares of Flat Center stock. There is no non-Indian ownership ofthe 

corporation. Denise Murray is an enrolled member of the Turtle Mountain Chippewa, a tribe 
that 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, or individual Indians. All of the leased lands are tvithin thc Fon Peck 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 of the Department of Rcbenue upheld 

the Division Administrator's assessmetit of the cot-poration license tax, Flat Centerpetitioned 

to the State Tax Appeal Board (STAR). STAB also upheld thc Department's assessment. 

7 Flat Center appealed STAB'S decision to the District Court for the Fifteenth Judicial 

District in Rooscvelt Count?;. The District Court reversed SIAB and the Department and 

granted Flat Center's motion for summary judgment. 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 further held that the corporate license tax 

3 
irnpcrmissihiy 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 stimmary judgment is ife tzovo. iVfotnrie v. 

.h'ot?lret-rz .Ilo~ifnrzii ,Joint h'cjitsc l)i.~~~osdljist. (1995); 274 Mont. 239, 242> 907 P.2d 154. 

156. We apply the same criteria which is applied by the district court pursuant to Rule 56(c), 

M.R.Civ.P. Spiizler v. Alleri, 1099 h4'f 160, '1 14,295 Mont. 139, Ti 14,083 P.2d 348,2 14. 

'The moving party must establish both the absence of genuine issues of material fact and 

entitlement to judgment as a matter of law. IJucqbt-d v. Credit Bureau of ff~~~~rt., frzc., 1098 

MT 179,7/ 14,250 Mont. 529, :i 14,962 2.2d 11 98,q 14. Once the moving party has met its 

burden, the opposing party must present material and substantial evidence, rather than mere 

conclusory or speculative statements, to raise a genuine issue of material 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 contends that becat~sc corporations are created by state 

law, they are not the legal eq~iivalent ofa tribal 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 of a11 Indian, but rather corporate income 

3 
subject 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-ated from on-reservation activities absent the express authorization of 

Congress. ~\~fcscilleri,Apncl~e Tlihc v. .Joiles (1973). 41 1 U.S. 145. 148; 93 S.Ct. 1267, 1270. 

34 1..Ed.2d 114. Whilc the State concedes that it lacks the authority to 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's position reverses the presumption established by federal lndian 

law. liidian tribes have long been recognized as distinct, independent political communities 

qualified to exercise powers of self-government by virtue of their original tribal 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 goverrrment resembles that of a ward to a guardian. Clzerokec Aliltiorr v. Georgia 

(1831), 30 I!.S, (5 Pet.) 1, 17. As a consequence of this special relationship between coequal sovereigns. tribal poh-ers of self-government are limited only by federal statutes, the 

tcl-ms of treat~es uith the federal gohernmcnt, and by restraints ~mplic~t in the nature oi'thc 

relationship itself --- in all other respects the tribes ren~aiiindependent and self-governing 

commt~niries. (~OIIEU'S HAXI)R~OK, at 235. 

'11 3 Tlie exercise of state jurisdiction ovcr activities occurring entirely on Indian lands is 

5 
an infiingcment on inherent tribal authority and is contrary to principles ofseii--government 

and tribal sovereignty. bVi/itii,ri.s \:Lee (1959)~ 358 Lil.S. 21 7, 220-23, 7X.CI. 209,271-72, 

3 i,.Ed.2d 25 1. In the area of state taxation, where "Chief Justice %larshall's observation that 

'thc powcr to tax involbes the power to destroy' has counseled a more 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 (1 992), 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'ilsliiiigton v, Coizj2.rlcri1tetl 7'1-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 t111d Kootc7rzcli Tribes (?fF71(~tlzeiztlKe.servcrtion (1 976j, 425 U.S. 463,483, 

96 S.Ct. 1634, 1646,38 L.Ed.2d 96. 'l'he point here is that the State should not be presumed 

to wield the sword of on-reservation tax authority absent an 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., 111 re 

jkfiirriagc of.Skille/r7 1908 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 of tribal 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 matter jurisdiction over 

debt collection action brought by non-Indian creditor whose rights arose on reservation); 01 

0 
re Arfoption 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 xvhether tribal membership is critical to a determination of whether the State can 

tax irrcolnc earned by Indians on tribal land. ,%e LnKoc-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 the parties' 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, Flat Center docs not enjoy the exemptions -- the tax shield from state taxation 

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 15-3 1 - 101(3), MCA. Flat Cknter does not carry on business in Montana. 

As the 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 State relies hea~ily on 11crr.ng~z P~-oci~lcrs, ii~. v Chtnnzissior1c.r qj.Kei:ei~lie (lV.I>. 

Micii. 1997), 971 F. Supp. 294, c@d(b"' Clr. 19081, 156 F.3d D28: acase which 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 

outside the Reservation. Furthermore, we have previously held that tribal n~embers'nip is not 

esseiitial to a determination of vc-heth ineomc 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 of the income earner. That was the point of our holding in Lc~Hoquc. In L~lKoq~le, 

this Court recognized the general tule that individual income earned by an lndian person and 

derived wholly from reservation sources is exempt from state income tax. See XfcC,'/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 for the exclusive usc and control of Indians." LelKoy~le, 178 Mont. 

at 323, 583 P.2d at 1063. Our detcnnination of whether income colrld be subjected to state 

taxation included an analysis of tl~c situs of the activity as well as the status of thc Indian as 

8 
a 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 147,47 L.Ed.2d 341. In Fo.x, the Court held 

a Comanche Indian who worked 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, 53 I P.2d at 1235. The 

Court indicated the important factors were the coalescence of situs 

(reservation) and status (Indian). Fax at 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 suggests that subsequent Supreme Coust decisions habe undcrcut the logic 

of LuKoqlte and that non-member lndians are the equivalent of non-Indians for purposes of 

state taxation. We disagree with this interpretation because we find the cases cited by the 

State to bc materrally drfferent from the facts and Issue no\+ before us and concl~~de that the 

tribal status ofthe individual or corporation to be taxed may be relevant, but it is by no means 

dispos~tnc Houc'L~~, and most tniportantly, the statutory language pursuant to winch the 

State asscr-ts taxing 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 State now 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 sencd by 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 from which the corporation derives its income is either owned by 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 illustrate the strong nexus between Flat Center's activities and the interest of the 

Tribes in regulating and proinotitlg commercial activity on its Rcservation. Put another way, 

"the coalescence of situs (reservation) and status (Indian)" which guides traditional analysis 

is present. See LrrKocr~tc, 178 h~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 a tribally chartered corporation which does 

b~~siness cntirely within the Fort Peck Reservation. Accordingly, the order of the District 

Court is affirmed. 

We Concur: 
Justices 
Justice 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. Atkitlso11 7jZldillzg Co. V. Shirley (2001 ), 

532 U.S. 645, 121 S.Ct. 1825: 149 L.Ed.2d 889. the Court faced the questior~ ofwhcther the 

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, India11 tribes 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 of the 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 of the 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 

12 
operator ofthe hotel 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 iiotei owner, 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 of non-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 of one of the two ibf()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 "Tribal jurisdiction 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 of tribal power beyond what is necessary to protect tribal self-govcmment or to 

control internal relations is inconsistent with the dependent status of tribes [which is] necessarily 

inconsistent w-ith their 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~bjeeto 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 of lion-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 1830-3 1 (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-ith ihc 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, "we think the generalized availability of tribal 

services patently insufficient to sustain the Tribe's civil authority over nonmembers on nonIndian fee land . . . [and that] a nonmember's actual or potential receipt of tribal 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>ved the "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-to a.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 and 
agreed to com~nensu~ate responsibiiities." in the context of the instant case, Alkin.s<~n begs 

the "\{?hat bt.tlejjis?" 

732 The Department of Revenue contends that the benefits of incorporating include 

"estate planning. limitations on personal liability, employee benefits and certain tax benefits." 

No doubt these are benefits of incorporating. But, importantly, these are generalized benefits 

of the corporate form of business 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--even though 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 is not strong enough to hold the fish. Under Atkin.uort 

providing generalized governmental benefits to the putative taxpayer is not sufficient to 

sustain, on a stand-alone basis, the sovereign's taxing authority under circumstances where 

the sovereign would not othenwise enjoy 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 see haw 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~dcnto corporate operations and business conducted off the reseivation, in my view, 

under the facts here, and given the Supreme Court's rationale in Atk~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. 

p 8 8 respect filly dissent. 

539 11 should be clarified, as the Court notcs briefly: that tbr the 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 of the shareholders, as clearly held 

in hidine Properties v. Cotfzrr~issio~rer of Irrterrrcil Revenue (I M3), 3 19 U.S. 436, 63 S.Ct. 

1 132,87 L.Ed. 1499, and in Bnrngn Products, 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 of the subject corporat~on, the Courl stated: 

Plaintiffs counsel conceded at oral argument that as a corporation, plaintiff is 

not actually an enrolled member of the Tribe. . . . Neither can plaintiff argue 

that it should be considered an enrolled member simply because its sole 
shareholder is a member of the Tribe. . . . 1-1 corporation cannot take on the 

fonn of its 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.2d 400, the Supreme Court 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. ~t is 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 entity of Indian personage, in order to void the assessment of the 

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 of the 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 of the eco~lornic activity occurred within the reservation, 
""Frat Center does not carry on business in the State of Montana," and ""E'iat f enter's income 

is not earned in bloneana." Therefore, thc Court concludesl Flat Center is not required to pay 

"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 It was stipulated that Flat Center was voluntarily 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 of the State of Montana, 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 of incorporation, it must 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 from reservation activities are exempt from state taxation: such is not true, 

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, 104 L.Ed.2d 20'9, the Supreme 

Court held that where a state has not removed itself from providing government cervices 

benefitting the taxpayer and reser-vation residents generally, an otherwise nondiscriminatory 

19 
Lax on a norrmember--a corporation in that casc-will be upheld unless Congress has 

specifically preempted the tax, Thcre was no allegLllion here that the %ate of Montana has 

withdraivn public services or that Congress has specit<cally preempted the corporate tax in 

question, Consequently, I disagrcc with the Court's adoption of policy, stated in 11 14, that 

the State "should not be presumed to \i ~eld . . on-resewation tax authorit> absent an express 

Congressional provision." While such a policy may indeed be preferable, the United States 

Supreine Court has clearly stated that such Congrcssronal action is not a prereq~t~slte for 

taxation of non-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 validating the assessmcnt of Michigan'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 1 104, 1109-1 1 (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 are present here and pla~ntiffconcedcs it is not acttng as the 

Tnhe's agent nor IS it incorporated under the 1au.s of the Tribe. 
(I r Pursuant to this authority, and finding none of the conditions that may establish 

immunity from taxation here, 1 ~~~uid find that the 'iinntana corporate tax 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 The concurrence argues that under the rationale offered in ilfkin~otz, the State has lost 

its ability to impose the corporate tax on Flat Center. ,4tkirzso12 addressed tribal jurisdiction. 

State taxation jurisdiction, being a completely different animal, was not addressed in 

Atkinson, and that case offers no instruction, by analogy or otherwise, to the issue here. The 

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

an application of the fedcral law which is dispositive here. 

7150 I would reverse. 
Chicf Jusricc Karla b1. Gray, concurring. 

75 i I concur in the result reached by the Court, but not in tlre entirety OF its analysis. 

Specifically. 1 do not agree m ith that portion ofthe Court's approacl-i which appears to 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 oftllc reservationl with the owner directiy receiving 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 1 agree 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, 1 agrec with much of 

the dissent's analysis of the importance of recognizing 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 1 would 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 did not become a tribally 

chartered corporatioil until after thc tax year at issue in this case, the State did not argue in 
the 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, i would have joined 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 its position by "undoing" the stipulated fact which provides Flat Center with Indian 

status. 

754 I ccincur in tlrc rcsult 1.cacl1ed by tlre Court.