Opinion ID: 768546
Heading Depth: 2
Heading Rank: 2

Heading: Wagers Tax Exemptions

Text: 17 Having determined that wagers placed on Indian pull-tab games are subject to taxation under sections 4401 and 4411, we next turn to the parties' arguments concerning whether Little Six is nevertheless exempt from excise and occupational taxes. Little Six argues that, under 25 U.S.C. § 2719(d)(1), Indian gaming is exempt from wagering taxes in the same manner as state gaming. Little Six contends that Indian pull-tab games should be exempt from the taxes imposed by sections 4401 and 4411, because state-conducted lotteries are exempt from them under I.R.C. § 4402(3) (exempting state-conducted lotteries from wagering taxes). Little Six further contends that, to the extent that section 2719(d)(1) may be unclear, the Indian canon of construction requires any ambiguity in the statute to be resolved in favor of the Indians. 18 The government responds that there is no provision in the IGRA that expressly exempts Indian pull-tab games from the taxes at issue. The government argues that section 2719(d)(1) only applies to the reporting and withholding of taxes from the winnings of players, and does not affect the tax liability of the entities that operate these games. The government finally argues that the Indian canon of construction does not apply in this case because: (1) Congress did not intend to create an excise tax exemption; (2) the statute cannot be reasonably construed to confer a tax exemption; and (3) tax exemptions must be clearly expressed, not implied. 19 We agree with Little Six that, although wagers placed on Indian pull-tab games are subject to taxation under I.R.C. §§ 4401 and 4411, Indian tribes are nevertheless exempt from such taxes under 25 U.S.C. § 2719(d)(1). Again, we begin with the language of the relevant statutes. Section 2719(d)(1) provides in relevant part that: 20 The provisions of the Internal Revenue Code of 1986 (including sections 1441, 3402(q), 6041, and 6050I, and chapter 35 of such Code) concerning the reporting and withholding of taxes with respect to the winnings from gaming or wagering operations shall apply to Indian gaming operations conducted pursuant to this chapter . . . in the same manner as such provisions apply to State gaming and wagering operations. 21 25 U.S.C. § 2719(d)(1) (emphasis added). Thus, chapter 35 of the Internal Revenue Code applies to Indian gaming in the same manner as it does to state gaming. Section 4402(3), which is found in chapter 35 of the Internal Revenue Code, provides an express tax exemption for any wager placed in a sweepstakes, wagering pool, or lottery which is conducted by an agency of a State acting under authority of State law. I.R.C. § 4403(3). Accordingly, section 2719(d)(1) can reasonably be construed as providing a tax exemption for wagers placed on lotteries and pull-tab games conducted by Indian tribes, because chapter 35 of the Internal Revenue Code provides such an exemption to state gaming operations. 22 The government argues that Little Six is not exempt from wagering taxes, because section 2719(d)(1) only applies to those tax provisions that concern the reporting and withholding of taxes [from] winnings. 25 U.S.C. § 2719(d)(1). However, in construing a statute we must give effect and meaning to all of its terms if possible. See Bailey v. United States, 516 U.S. 137, 145 (1995). While section 2719(d)(1) does contain the language cited by the government, it also explicitly refers to section 6050I and chapter 35 of the Internal Revenue Code, which clearly do not relate to winnings. See I.R.C. § 6050I (returns relating to cash received in trade or business); I.R.C. §§ 4401-4405 (chapter 35) (taxes on wagering). Thus, the interpretation proposed by the government would render language in the statute superfluous, a result that we must attempt to avoid. 23 In view of the inconsistency between the statute's reference to winnings and its reference to section 6050I and chapter 35 of the Internal Revenue Code, we conclude that the language in section 2719(d)(1) is ambiguous. Little Six argues that, to the extent that the statute is ambiguous, the Indian canon of construction requires section 2719(d)(1) to be construed in their favor. We agree. As stated by the Supreme Court, statutes are to be construed liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit. Montana v. Blackfeet Tribe of Indians, 471 U.S. 759, 766 (1985). 2 24 Citing Cook v. United States, 86 F.3d 1095 (Fed. Cir. 1996), the government argues that the Indian canon of construction does not apply in this case, because tax exemptions must be clearly expressed by statute. In Cook, we held that members of the Onondaga Indian Nation were not exempt from federal taxes under 26 U.S.C. § 4041(a) for the sale of diesel fuel, because there was no language in the treaties at issue that could be construed as conferring an express exemption upon Indians. See Cook, 86 F.3d at 1097. However, we then stated that [w]e recognize that if there are ambiguities in treaty language, they should be resolved in favor of the Indians. Id. (citation omitted). We further explained that none of the treaties at issue contained an ambiguity that could be construed as conferring an exemption. See id. 25 In the present case, having determined that the language of section 2719(d)(1) is ambiguous and can reasonably be construed as exempting Indian pull-tab games from the taxes at issue, we conclude that Cook is inapposite. Moreover, the Supreme Court has held that, although tax exemptions generally are to be construed narrowly, in 'the Government's dealing with the Indians the rule is exactly the contrary. The construction, instead of being strict, is liberal.' Montana, 471 U.S. at 766, n.4 (citing Choate v. Trapp, 224 U.S. 665, 675 (1912)). We therefore conclude that section 2719(d)(1) should be construed in favor of Little Six. The Court of Federal Claims erred in granting the government's motion for summary judgment and abused its discretion in denying Little Six's motion for summary judgment. 26 Our conclusion is further supported by the legislative history of the IGRA. The ultimate goal in construing a statute is to give effect to the intent of Congress. See In re Portola Packaging, Inc., 110 F.3d 786, 788 (Fed. Cir. 1997). In fulfilling that duty, we look not only to the particular statutory language, but to the design of the statute as a whole and to its object and policy. Id. (quoting Crandon v. United States, 494 U.S. 152, 158 (1990)). One of the primary purposes of the IGRA was to promote tribal economic development and self-sufficiency. See 25 U.S.C. § 2702 (1994). Equal treatment of tribes and states with respect to exemptions from federal wagering taxes is consistent with this legislative intent, and is in accord with the concept of co-equal sovereignty. See S. Rep. No. 446, at 13 (1988) (The Committee concluded that the compact process is a viable mechanism for setting various matters between two equal sovereigns.).