Opinion ID: 171982
Heading Depth: 2
Heading Rank: 2

Heading: Exemption from Federal Income Tax

Text: Barrett acknowledges that American Indians, as United States citizens, generally are subject to the federal income tax. See Squire v. Capoeman, 351 U.S. 1, 6, 76 S.Ct. 611, 100 L.Ed. 883 (1956) (Indians are citizens and ... in ordinary affairs of life, not governed by treaties or remedial legislation, they are subject to the payment of income taxes as are other citizens.). Barrett claims, however, that his compensation as chairman is not taxable income because the source of the funds used to pay him was trust fund money previously awarded by the Indian Claims Commission to the Tribe, and that funds received from that source are tax exempt. Aplt. Br. at 15. Under the Internal Revenue Code, gross income is all income from whatever source derived, 26 U.S.C. § 61(a), and an exemption from the payment of taxes should be clearly expressed, Squire, 351 U.S. at 6, 76 S.Ct. 611. See also Allen v. Comm'r, 91 T.C.M. (CCH) 673 (2006), aff'd, 204 Fed.Appx. 564 (7th Cir.2006) (unpublished) (It is well established that Native Americans, or American Indians, as U.S. citizens, are subject to the Federal income tax unless an exemption is created by treaty or statute. For such an exemption to be valid, it must be based upon clearly expressed language in a statute or treaty. (internal citations omitted)). Barrett claims the 1983 Plan's specification that none of the funds made available under this plan for programing shall be subject to Federal or State income taxes, 1983 Plan, § 6(b), is an express exemption for his compensation because his compensation was paid from the programming funds. Specifically, Barrett argues that his compensation as the chairman of the Tribe furthers the development of the Tribe, defined in the Ten-Year Plan as the growth, building up, expansion, strengthening, increased effectiveness or other evolutionary process toward the progress of the Tribe, Ten-Year Plan, § 1.4. Barrett argues that the chairman's oversight of the Tribe's day-to-day operations is one way of developing strong and stable tribal governments, Aplt. Br. at 17, which helps achieve the government's expressed goal of promoting strong tribal economic development, self-sufficiency, and self-governance, id. at 18 (citing the Indian Self-Determination and Education Assistance Act of 1975, 25 U.S.C. § 450 et seq., the Indian Financing Act of 1974, 25 U.S.C. § 1451 et seq., Okla. Tax Comm'n v. Citizen Band Potawatomi Indian Tribe of Okla., 498 U.S. 505, 510, 111 S.Ct. 905, 112 L.Ed.2d 1112 (1991), and Prairie Band Potawatomi Nation v. Wagnon, 476 F.3d 818, 824 n. 9 (10th Cir.2007), as examples in support of the government's consistent stated goal of tribal self-sufficiency). Barrett contends the compensation paid to him as chairman fits within the programming aspect of the 1983 Plan, and as such, the express language of the 1983 Plan that exempts the programming funds from tax also exempts his compensation from tax. We disagree. The express exemption authorized by Congress, for funds made available under this plan for programing, 1983 Plan, § 6(b), does not encompass the compensation paid to Barrett as the chairman of the Tribe. The funds available under the 1983 Plan for programming were the funds authorized by the Ten-Year Plan. The Ten-Year Plan authorized the use of the funds for acquisition, development and maintenance. Barrett argues his compensation falls within the definition of development, but the Ten-Year Plan defines development as those activities and/or actions undertaken by the Tribe to in some way cause growth, building up, expansion, strengthening, increased effectiveness or other evolutionary process toward the progress of the Tribe economically and/or socially, and/or governmentally. Ten-Year Plan, § 1.4. Barrett's compensation for the oversight of day-to-day operations cannot be considered development under the expressed definition of the term. Payment of a salary to Barrett, who filled the long-standing and long-defined position of tribal chairman is not an expenditure for an evolutionary process toward the progress of the Tribe economically and/or socially, and/or governmentally. In addition, even if the compensation paid to Barrett as chairman of the Tribe would satisfy the intended-use criteria of the programming funds, the tax exemption reference in the 1983 Plan is not sufficiently specific to exempt Barrett's salary from federal taxation. See Mescalero Apache Tribe v. Jones, 411 U.S. 145, 156, 93 S.Ct. 1267, 36 L.Ed.2d 114 (1973) (noting that the Supreme Court has repeatedly said that tax exemptions are not granted by implication and that if Congress intends a tax exemption, it should say so in plain words. Such a conclusion can not rest on dubious inferences (internal quotations omitted)). If the annual compensation paid to a tribal chairman was to be exempt from taxation, it could have been easily and plainly expressed. As a result, because Barrett's compensation was not expressly exempt from federal income tax, the district court was correct to grant summary judgment in favor of the United States on Barrett's claim for a refund. [6] Although Barrett cites sources which emphasize the government's strong desire for American Indians to progress toward tribal self-sufficiency, this goal does not trump the long-standing requirement that an exemption from the payment of taxes must be explicitly stated. See Okla. Tax Comm'n, 498 U.S. at 510, 111 S.Ct. 905 (noting Congress' desire to promote the goal of Indian self-government, including its overriding goal of encouraging tribal self-sufficiency and economic development and therefore refusing to modify the long-established principle of tribal sovereign immunity (internal quotations omitted)); Squire, 351 U.S. at 6-7, 76 S.Ct. 611 (recognizing that the United States has authority to tax American Indian U.S. citizens as long as there is no express exemption from tax).