Opinion ID: 564917
Heading Depth: 2
Heading Rank: 3

Heading: Taxpayers' Right to Refunds

Text: 34 Although the district court properly determined the plain language of section 677p made the distributions subject to federal income tax, the court ordered refunds for the 1984 tax year, purporting to apply its decision only prospectively. The court stated: 35 Although today this court has ruled that UDC distributions are taxable, as a matter of fundamental fairness this ruling shall apply prospectively only. That is, the taxable status of UDC distributions as applied to individual shareholders shall commence with the tax year 1989.... Plaintiffs paid the 1984 assessments under protest and in spite of the longstanding position of the Department of the Interior that such distributions are nontaxable. Under such circumstances the individual plaintiffs and other UDC stockholders are not charged with notice of the taxable status of such distributions prior to this decision. 36 Ute Distribution Corp., 721 F.Supp. at 1208-09 n. 23. 37 Section 677p unambiguously imposes a duty on UDC stockholders to pay federal income tax on distributions received after August 27, 1961. This is not a case where the district court was free to determine whether to apply its decision retroactively or prospectively only. The court was bound, as we are, by the specific statutory mandate establishing the date after which taxes will be imposed. Notwithstanding the long period of IRS forbearance from collection of taxes, the statute is clear regarding the legal liability for taxes on the interests involved here beginning on August 27, 1961. 38 There is nothing fundamentally unfair about requiring these stockholders to satisfy this obligation for the 1984 tax year. Section 677p granted the mixed-bloods a tax exemption for a limited period of time. Congress declared the mixed-bloods would assume the privileges and duties of citizenship, including the payment of federal income taxes, after August 27, 1961. The district court erred in applying its decision only to future tax years and in granting the refunds. 39 We REVERSE the district court's award of refunds of income taxes assessed and collected on the UDC distributions and DISMISS the claims for declaratory judgment. The district court's other rulings have not been challenged on appeal. We REMAND to the district court for entry of an order consistent with this opinion.