Source: https://openjurist.org/379/f3d/979/prairie-band-potawatomi-nation-v-s-richards-hci
Timestamp: 2020-03-31 19:09:25
Document Index: 581472188

Matched Legal Cases: ['§ 79', '§ 79', '§ 79', '§ 2701', '§ 2704', '§ 461', '§ 450', '§ 2']

379 F3d 979 Prairie Band Potawatomi Nation v. S Richards Hci | OpenJurist
379 F. 3d 979 - Prairie Band Potawatomi Nation v. S Richards Hci
379 F3d 979 Prairie Band Potawatomi Nation v. S Richards Hci
379 F.3d 979
PRAIRIE BAND POTAWATOMI NATION, Plaintiff-Appellant,
Stephen S. RICHARDS, Secretary of the Kansas Department of Revenue, Defendant-Appellee,
Winnebago Tribe of Nebraska, HCI Distribution, The Kickapoo Tribe of Indians of the Kickapoo Reservation in Kansas, The Iowa Tribe of Kansas and Nebraska, and The Sac and Fox Nation of Missouri, Amici Curiae.
No. 03-3218.
The Nation submitted expert testimony, which the Secretary does not dispute, that "the `value marketed' by [the] Nation Station results from the business generated by the casino and from employees of the casino and [the Nation's] government and residents." Id., Vol. II, at 86. This conclusion is supported by the undisputed evidence that seventy-three percent of the Nation Station's fuel customers are casino patrons and casino employees and another eleven percent live or work elsewhere on the reservation. Id.; Id., Vol. V, at 46; Aple. Br. at 5. The Nation's expert also reported that the Station is a location-dependent business because, "[b]ut for the casino, there would not be enough traffic to support [it] in its current location." Aplt.App., Vol. II, at 86.
In this dispute, the Nation challenges the 1995 amendment to the Kansas Motor Fuel Tax Act. Kan. Stat. Ann. §§ 79-3401 to 79-3464f (1997). Pursuant to this amendment, the Kansas Department of Revenue began collecting, for the first time, a tax on motor fuel distributed to Indian lands. The Kansas legislature structured the tax so that its legal incidence is placed on non-Indian distributors. Kan. Stat. Ann. § 79-3408(c); Sac and Fox Nation of Missouri v. Pierce, 213 F.3d 566, 580 (10th Cir.2000). But, the distributors are allowed to pass the tax directly to retailers, like the Nation Station. Kan. Stat. Ann. § 79-3409 ("Every distributor paying such tax or being liable for the payment shall be entitled to charge and collect an amount, including the cost of doing business that could include such tax on motor vehicle-fuels... sold or delivered by such distributor, as part of the selling price.") The Nation brought suit to enjoin the Secretary from imposing the tax on the Nation's fuel, and the district court granted summary judgment for the Secretary. We review a district court's grant of summary judgment de novo to determine whether there is a genuine issue as to any material fact and whether a party is entitled to judgment as a matter of law. Gossett v. Oklahoma ex rel. Bd. of Regents for Langston Univ., 245 F.3d 1172, 1175 (10th Cir.2001); Sac and Fox, 213 F.3d at 583.
The Nation asks us to invalidate the tax as it applies to the Nation's fuel under two independent but related doctrines. First, the Nation argues that federal law preempts the tax because federal and tribal interests against state taxation outweigh Kansas' interests in imposing the tax. Second, the Nation argues that the tax is invalid because it impermissibly infringes on its rights of self-government. Either of these doctrines would be sufficient to invalidate the Kansas fuel tax as applied here. White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 143, 100 S.Ct. 2578, 65 L.Ed.2d 665 (1980).
We first address whether the tax is preempted by federal law. The constitutional source of federal preemption is Article I, Section 8, Clause 3, which provides: "The Congress shall have Power ... [t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." When preemption analysis is applied to Indian cases, we consider the unique origins of tribal sovereignty and how it differs from state sovereignty. Bracker, 448 U.S. at 143, 100 S.Ct. 2578. Specifically, "[a]mbiguities in federal law have been construed generously in order to comport with [the] traditional notions of sovereignty and with the federal policy of encouraging tribal independence." Id. at 143-44, 100 S.Ct. 2578 (citing McClanahan v. State Tax Comm'n of Arizona, 411 U.S. 164, 174-75, and n. 13, 93 S.Ct. 1257, 36 L.Ed.2d 129 (1973)). "State jurisdiction is preempted by the operation of federal law if it interferes or is incompatible with federal and tribal interests reflected in federal law, unless the State interests at stake are sufficient to justify the assertions of State authority." New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 334, 103 S.Ct. 2378, 76 L.Ed.2d 611 (1983).
In cases like this — where a tribe is challenging a state tax — "[t]he initial and frequently dispositive question ... is who bears the legal incidence of a tax." Oklahoma Tax Comm'n v. Chickasaw Nation, 515 U.S. 450, 458, 115 S.Ct. 2214, 132 L.Ed.2d 400 (1995). "If the legal incidence of an excise tax rests on a tribe or on tribal members for sales made inside Indian country, the tax cannot be enforced absent clear congressional authorization." Id. at 459, 115 S.Ct. 2214. However, where, as here, "the legal incidence of the tax rests on non-Indians, no categorical bar prevents enforcement of the tax; if the balance of federal, state, and tribal interests favors the State, and federal law is not to the contrary, the State may impose its levy...." Id.
Although the Secretary argues that the balancing of interests test should be abandoned, citing Justice (now Chief Justice) Rehnquist's partial dissent in Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134, 176-80, 100 S.Ct. 2069, 65 L.Ed.2d 10 (1980), circuit precedent requires us to use this balancing test. See Sac and Fox, 213 F.3d at 583. The balancing test is "not dependent on mechanical or absolute conceptions of state or tribal sovereignty, but has called for a particularized inquiry into the nature of the state, federal, and tribal interests at stake, an inquiry designed to determine whether, in the specific context, the exercise of state authority would violate federal law." Bracker, 448 U.S. at 145, 100 S.Ct. 2578.
Applying these principles, we conclude that the Kansas tax, as applied here, is preempted because it is incompatible with and outweighed by the strong tribal and federal interests against the tax. The Nation's interests are particularly strong. Tribes have a recognized "interest in raising revenues for essential governmental programs, [and] that interest is strongest when the revenues are derived from value generated on the reservation by activities involving the Tribes and when the taxpayer is the recipient of tribal services." Colville, 447 U.S. at 156-57, 100 S.Ct. 2069.
Here, the Nation's fuel revenues are derived from value generated primarily on its reservation. In determining reservation value, the unique facts of this case require us to look beyond the physical fuel (the Nation receives its fuel in "ready to sell" condition) and to view the Nation's fuel sales as an integral and essential part of the Nation's on-reservation gaming enterprise. See California v. Cabazon Band of Mission Indians, 480 U.S. 202, 219-20, 107 S.Ct. 1083, 94 L.Ed.2d 244 (1987) (balancing tribal and state interests by examining the bingo enterprise as including the facilities and ancillary services offered to patrons); Bracker, 448 U.S. at 145-51, 100 S.Ct. 2578 (weighing the tribe's general economic interest in its timber industry to invalidate a state motor carrier license tax and a use fuel tax applied to non-Indians doing business with the tribe); Indian Country U.S.A., Inc. v. Oklahoma ex rel. Oklahoma Tax Comm'n, 829 F.2d 967, 986 (10th Cir.1987) (weighing the tribe's interest in its bingo enterprise as a "form of entertainment"); Gila River Indian Community v. Waddell, 967 F.2d 1404, 1410 (9th Cir.1992) (weighing the state interests in taxing tickets to on-reservation events and concessionary items against the tribes'"involvement in the production of the entertainment events which take place on its reservation").
The close nexus between the Nation's fuel sales and its gaming enterprise is critical to our analysis here. When we recently reviewed the Kansas fuel tax as it applied to a tribe's retail station alone, we held that "the revenues resulting from the Tribes' retail fuel sales to non-Indian consumers traveling from outside Indian lands is not derived from value `generated on the reservations by activities in which the Tribes have a significant interest.'" Sac and Fox, 213 F.3d at 585 (quoting Colville, 447 U.S. at 155, 100 S.Ct. 2069) (remanding to develop an adequate record to balance tribal and state interests). There, we also held that we would not invalidate the state tax solely on the ground that it would decrease tribal sales to non-Indians, particularly where the tribes'"fuel market exists only because of the Tribes' claimed exemption from the [state] fuel tax." Id. Here, in contrast, the Nation's fuel sales are derived from value generated on its reservation because its fuel marketing is integral and essential to the gaming opportunity the Nation provides. Also, unlike in Sac and Fox, the Nation's fuel market does not exist because of a claimed state tax exemption; rather, the Nation created a new fuel market by financing and building its gaming facilities. This is clear from both the undisputed expert testimony that the Station's fuel market only exists because of the Nation's casino and from the undisputed fact that seventy-three percent of the Station's fuel patrons are casino patrons and employees. For these reasons, we balance the competing interests by viewing the Nation's fuel revenues as being derived primarily from value generated on its reservation.
In balancing the interests, both the district court and the Secretary heavily relied on Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134, 100 S.Ct. 2069, 65 L.Ed.2d 10 (1980), to conclude that Kansas' interests in taxation outweigh the competing federal and tribal interests. Aplt.App., Vol. V, at 64-65; Aple. Br. at 30-31. In Colville, the Court upheld state taxes applied to on-reservation retail sales of cigarettes and tobacco products because "[w]hat the smokeshops offer ... is solely an exemption from state taxation." Id. at 155, 100 S.Ct. 2069. "It is painfully apparent," the Court said, "that the value marketed by the smokeshops to persons coming from outside is not generated on the reservations by activities in which the Tribes have a significant interest." Id. The Court then validated the state tax, holding that "[w]e do not believe that principles of federal Indian law, whether stated in terms of pre-emption, tribal self-government, or otherwise, authorize Indian tribes thus to market an exemption from state taxation to persons who would normally do their business elsewhere." Id.
Second, unlike in Colville, the Nation is not merely importing a product for resale to non-Indians; rather, the revenues from the Nation's fuel to non-Indian consumers are derived from value "generated on the reservation [ ] by activities in which [the Nation has] a significant interest." Colville, 447 U.S. at 155, 100 S.Ct. 2069. It is undisputed that when the Nation financed and built its $35 million casino to attract non-Indian patrons, it created a new fuel market for an otherwise remote area. After creating this new market, the Nation financed and built the Station to offer fuel to its casino patrons and other reservation-related traffic.
The Supreme Court has acknowledged this second distinction when it distinguished Colville where tribes "are not merely importing a product onto the reservations for immediate resale to non-Indians" but have created an entertainment enterprise designed to attract non-Indian consumers onto its reservation. Cabazon, 480 U.S. at 219, 107 S.Ct. 1083. In Cabazon, the Supreme Court held that the federal and tribal interests outweighed state interests in regulating bingo and other games because, unlike in Colville, the tribes
Aplt.App., Vol. II, at 89. The Secretary has not submitted contradictory evidence and has not argued that this opinion is either incorrect or exaggerated. The "economic realities of the situation [ ] both in the presence and absence of the motor fuel tax" are relevant in balancing the competing interests. Sac and Fox, 213 F.3d at 585; see also Colville, 447 U.S. at 157-58, 100 S.Ct. 2069 (noting that a tribe bears the burden of showing that its smokeshop businesses would be significantly reduced absent a credit for tribal taxes paid). This economic reality adds to the Nation's already strong interests against taxation.
The Nation's interests in this case are aligned with strong federal interests in promoting tribal economic development, tribal self-sufficiency, and strong tribal governments. These federal goals are stated in numerous Acts of Congress, Executive Branch policies, and judicial opinions. See generally Indian Gaming Regulatory Act, 25 U.S.C. §§ 2701-2721, § 2704(4) (2001); Indian Reorganization Act of 1934, 25 U.S.C. §§ 461-479 (2001); Indian Self-Determination and Education Assistance Act of 1975, 25 U.S.C. § 450f (2001); see also Presidential Proclamation 7500 of November 12, 2001, 66 Fed.Reg. 57641 (Nov. 15, 2001) ("We will protect and honor tribal sovereignty and help to stimulate economic development in reservation communities."); Presidential Executive Order 13175, 65 Fed.Reg. 67249, Consultation and Coordination With Indian Tribal Governments, § 2(c), (Nov. 6, 2000) ("[T]he United States recognizes the right of Indian tribes to self-government and supports tribal sovereignty and self-determination."); Bracker, 448 U.S. at 143-44, 100 S.Ct. 2578 (noting "a firm federal policy of promoting tribal self-sufficiency and economic development" as evidenced by various congressional enactments); Colville, 447 U.S. at 155, 100 S.Ct. 2069 (recognizing "varying degrees [of] congressional concern with fostering tribal self-government and economic development").
Against these strong tribal and federal interests, the sole interest Kansas asserts is its general interest in raising revenues. Of course, states have a "legitimate governmental interest in raising revenues, and that interest is ... strongest when the tax is directed at off-reservation value and when the taxpayer is the recipient of state services." Colville, 447 U.S. at 157, 100 S.Ct. 2069. Here, Kansas' interest is not at its strongest. The tax is directed at fuel which, under the particular circumstances of this case, is derived primarily from value generated on the reservation. Also, Kansas does not provide any financial assistance in maintaining the access roadway from the United States 75 Highway to the casino. The ongoing and future obligation to upkeep this stretch of roadway is exclusively the Nation's, and the Nation's only source of fuel revenue (which is designated for this obligation) comes from the Station. Under these facts, Kansas' generalized interest in raising revenues is insufficient to justify its tax.