Opinion ID: 221996
Heading Depth: 2
Heading Rank: 2

Heading: Federal Indian-law Preemption Doctrine

Text: [T]here is no rigid rule by which to resolve the question whether a particular state law may be applied to an Indian reservation or to tribal members. Bracker, 448 U.S. at 142, 100 S.Ct. 2578. The Supreme Court has identified two independent but related barriers to the assertion of state regulatory authority over tribal reservations and memberspreemption by federal law and tribal sovereignty. Id.; see also Ramah, 458 U.S. at 837, 102 S.Ct. 3394. As the Supreme Court explained in Ramah: The two barriers are independent because either, standing alone, can be a sufficient basis for holding state law inapplicable to activity undertaken on the reservation or by tribal members. They are related, however, in two important ways. The right of tribal self-government is ultimately dependent on and subject to the broad power of Congress. Even so, traditional notions of Indian self-government are so deeply engrained in our jurisprudence that they have provided an important back-drop, ... against which vague or ambiguous federal enactments must always be measured. 458 U.S. at 837, 102 S.Ct. 3394 (quoting Bracker, 448 U.S. at 143, 100 S.Ct. 2578) (internal quotation marks omitted). Therefore, [a]lthough determining whether federal legislation has pre-empted state taxation of lessees of Indian land is primarily an exercise in examining congressional intent, the history of tribal sovereignty serves as a necessary `backdrop' to that process. Cotton Petroleum, 490 U.S. at 176, 109 S.Ct. 1698 (citing Rice v. Rehner, 463 U.S. 713, 719, 103 S.Ct. 3291, 77 L.Ed.2d 961 (1983)). In this particular context, Supreme Court jurisprudence regarding whether a State may tax on-reservation oil production by non-Indian lessees has varied over the course of the past century. Cotton Petroleum, 490 U.S. at 173, 109 S.Ct. 1698. At one time, such a tax was held invalid unless expressly authorized by Congress; more recently, such taxes have been upheld unless expressly or impliedly prohibited by Congress. Id. Under the current doctrine, when determining whether a state has authority to impose a nondiscriminatory tax on non-Indian lessees operating on Indian lands, the court must undertake a preemption analysis that is unique to this area of the law. See, e.g., Ramah, 458 U.S. at 838, 102 S.Ct. 3394 (stating that [t]he question [of] whether federal law ... pre-empts the State's exercise of its regulatory authority [in this area] is not controlled by standards of pre-emption developed in other areas (citing Bracker, 448 U.S. at 143-44, 100 S.Ct. 2578)). This analysis is not controlled by `mechanical or absolute conceptions of state or tribal sovereignty.' Cotton Petroleum, 490 U.S. at 176, 109 S.Ct. 1698 (quoting Bracker, 448 U.S. at 145, 100 S.Ct. 2578). Instead, courts are instructed to appl[y] a flexible pre-emption analysis sensitive to the particular facts and legislation involved. Id. This fact-specific examination requires a reviewing court to undertake a particularized inquiry into the nature of the state, federal, and tribal interests at stake, which is 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. Moreover, as alluded to above, when making this inquiry the court must be cognizant of both the broad policies that underlie the legislation and the history of tribal independence in the field at issue. Cotton Petroleum, 490 U.S. at 176, 109 S.Ct. 1698; see also Ramah, 458 U.S. at 838, 102 S.Ct. 3394 ([T]he traditional notions of tribal sovereignty, and the recognition and encouragement of this sovereignty in congressional Acts promoting tribal independence and economic development, inform the pre-emption analysis that governs this inquiry.). Under this balancing test, [s]tate 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 assertion of State authority. New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 334, 103 S.Ct. 2378, 76 L.Ed.2d 611 (1983) (citing Bracker, 448 U.S. at 145, 100 S.Ct. 2578; Ramah, 458 U.S. at 846, 102 S.Ct. 3394). The particularized inquiry we are instructed to employ is better understood as it has been applied by the Supreme Court in Bracker, Ramah, and Cotton Petroleum. At the outset, it is important to point out the three primary factors the Supreme Court has focused on when applying this flexible preemption analysis: (1) the extent of the federal and tribal regulations governing the taxed activity; (2) whether the economic burden of the tax falls on the tribe or the non-Indian individual or entity; and (3) the extent of the state interest justifying the imposition of the taxes. [15] In Bracker, the Supreme Court addressed a challenge to Arizona's motor carrier license and use fuel taxes as applied to a non-Indian logging company's use of roads located solely on tribal land. 448 U.S. at 139-40, 100 S.Ct. 2578. The Court assessed the state, federal, and tribal interests at stake, and concluded that the Arizona state taxes were preempted by federal law. Id. at 145-51, 100 S.Ct. 2578. In evaluating the federal interest, the Court found that the federal regulatory scheme [was] so pervasive as to preclude the additional burdens sought to be imposed in th[at] case. Id. at 148, 100 S.Ct. 2578. It found that the assessment of [the] state taxes would obstruct federal policies, including the federal objective that the Tribe should retain the benefits derived from the harvesting and sale of reservation timber. Id. at 148-49, 100 S.Ct. 2578. As to the state interest involved, the Court deemed it equally important that the respondents were unable to identify any regulatory function or service performed by the State that would justify the assessment of taxes for activities on Bureau and tribal roads within the reservation. Id. at 148-49, 100 S.Ct. 2578. That is, the Court was not able to identify a legitimate regulatory interest served by the taxes other than a general desire to raise revenue. Id. at 150, 100 S.Ct. 2578. Furthermore, because the Tribe agreed to reimburse [the company] for any tax liability incurred as a result of its on-reservation business activities, including the Arizona taxes at issue, it was undisputed that the economic burden of the asserted taxes [would] ultimately fall on the Tribe. Id. at 140, 151, 100 S.Ct. 2578; see also id. at 150, 100 S.Ct. 2578 (stating that this is not a case in which the State seeks to assess taxes in return for governmental functions it performs for those on whom the taxes fall  (emphasis added)). [16] In light of the pervasive federal scheme of regulation, the unquestionable incidence of the economic burden on the tribe, and the lack of any identified regulatory function or service performed by the state, the Court concluded that the Arizona taxes were preempted by federal law. See id. at 151, 100 S.Ct. 2578 (Where, as here, the Federal Government has undertaken comprehensive regulation of the harvesting and sale of tribal timber, where a number of the policies underlying the federal regulatory scheme are threatened by the taxes respondents seek to impose, and where respondents are unable to justify the taxes except in terms of a generalized interest in raising revenue, we believe that the proposed exercise of state authority is impermissible.). In Ramah, the State of New Mexico sought to impose a tax on two non-Indian construction companies hired by the tribe to build a school on the reservation. In reviewing a challenge to the tax, the Court address[ed] the question [of] whether federal law pre-empts a state tax imposed on the gross receipts that a non-Indian construction company receives from a tribal school board for the construction of a school for Indian children on the reservation. Ramah, 458 U.S. at 834, 102 S.Ct. 3394. In that case, although the construction company initially paid the state tax, the company was reimbursed by the [tribe] for the full amount paid; therefore, as in Bracker, the economic burden of the tax fell on the tribe. Id. at 835, 102 S.Ct. 3394; see also Cotton Petroleum, 490 U.S. at 184, 109 S.Ct. 1698 (Also as in Bracker, the economic burden of the tax [challenged in Ramah ] ultimately fell on the Tribe.). Looking to the federal interestthat is, the extent of the federal schemethe Court observed that the [f]ederal regulation of the construction and financing of Indian educational facilities [was] both comprehensive and pervasive, Ramah, 458 U.S. at 839, 102 S.Ct. 3394, which left the State with no duties or responsibilities when it came to the education of Indian children, id. at 843, 102 S.Ct. 3394 (quoting Warren Trading Post Co. v. Ariz. Tax Comm'n, 380 U.S. 685, 691, 85 S.Ct. 1242, 14 L.Ed.2d 165 (1965)) (internal quotation marks omitted). The existence of this comprehensive and pervasive federal scheme, and corresponding lack of any identified state role, left no room for the additional burden sought to be imposed by the State through its taxation of the gross receipts. Id. at 842, 102 S.Ct. 3394. The state was otherwise unable to identify any specific, legitimate regulatory interest to justify the imposition of its gross receipts tax. Id. at 843, 102 S.Ct. 3394. The state argued that the services provided to the company for its activities off the reservation were significant enough to justify the tax, but the Court rejected this argument: The only arguably specific interest advanced by the State is that it provides services to Lembke [the non-Indian construction company] for its activities off the reservation. This interest, however, is not a legitimate justification for a tax whose ultimate burden falls on the tribal organization. Furthermore, although the State may confer substantial benefits on Lembke as a state contractor, we fail to see how these benefits can justify a tax imposed on the construction of school facilities on tribal lands pursuant to a contract between the tribal organization and the non-Indian contracting firm. Id. at 843-44, 102 S.Ct. 3394 (footnote omitted). [17] In the end, [t]he State's ultimate justification ... amount[ed] to nothing more than a general desire to increase revenues, which the Court foundas it did in Bracker was insufficient to justify the additional burdens imposed by the tax on the comprehensive federal scheme regulating the creation and maintenance of educational opportunities for Indian children and on the express federal policy of encouraging Indian self-sufficiency in the area of education. Id. at 845, 102 S.Ct. 3394. Having considered each of these factors, the Court concluded that the case was analogous to Bracker, and therefore that the state tax was preempted by federal law. Id. at 839, 102 S.Ct. 3394. In Cotton Petroleum, which is most important for our purposes, the Court considered a challenge to the same five taxes at issue in the present appeal, brought by a non-Indian lessee conducting oil and gas operations on the Jicarilla Apache Reservation in New Mexico, which was an executive reservation. [18] Applying the analytical principles articulated in Bracker, and further developed in Ramah, the Court concluded that the five New Mexico taxes were not preempted by federal law. In reaching this conclusion, the Court first looked to the relevant federal legislationthe IMLAand found that the Act neither expressly permits state taxation nor expressly precludes it. Cotton Petroleum, 490 U.S. at 177, 109 S.Ct. 1698. The Court agree[d] that a purpose of the [IMLA] is to provide Indian tribes with badly needed revenue, but f[ound] no evidence for the further supposition that Congress intended to remove all barriers to profit maximization through the Act. Id. at 180, 109 S.Ct. 1698; see also id. at 180-83, 109 S.Ct. 1698 (rejecting Cotton Petroleum's argument that the IMLA impliedly prohibited state taxation of oil and gas operations on Indian land by non-Indians, and stating that the Act was fully consistent with an intent to permit state taxation of nonmember lessees). Next, the Court examined the history of tribal independence in the area of oil and gas leasing on Indian land. Id. at 181-82, 109 S.Ct. 1698. [A]t least as to Executive Order reservations, it concluded, state taxation of nonmember oil and gas lessees was the norm from the very start, and therefore there was no history of tribal independence from state taxation of the lessees to form a `backdrop' against which the [IMLA] must be read. Id. at 182, 109 S.Ct. 1698. [19] The Court then analyzed the state, federal, and tribal interests at stake, focusing on the same factors that had been highlighted in Bracker and Ramah the extent of the federal regulatory scheme, the economic burden, and the services and functions of the State justifying the taxes. [20] In considering the federal regulatory scheme, the Court concluded that the regulations were extensive, but not exclusive, as were the regulations in Bracker and Ramah, because the State regulate[d] the spacing and mechanical integrity of the wells located on the reservation. Id. at 186, 109 S.Ct. 1698. [21] As to the State's interest, the Court found that the State had a valid interest in imposing the tax because it provide[d] substantial services to both the Jicarilla Tribe and Cotton, at a rate of approximately $3 million dollars per year. Id. at 185, 109 S.Ct. 1698. The Court distinguished the case from Bracker and Ramah, which involved complete abdication or noninvolvement of the State in on-reservation activity. Id. Lastly, as to the economic burden, the court acknowledged that [n]o economic burden [fell] on the tribe by virtue of the state taxes, because the five taxes were paid by Cotton Petroleum and were not passed on to the tribe. Id. at 168, 185, 109 S.Ct. 1698 (first alteration in original) (internal quotation marks omitted). Furthermore, the Tribe could, in fact, increase its taxes without adversely affecting on-reservation oil and gas development. Id. at 185, 109 S.Ct. 1698. Accordingly, because of the stated differences between that case and Bracker and Ramah, the Court held that the five New Mexico taxes at issue here were not preempted by federal law. Id. at 186, 109 S.Ct. 1698.