Second Circuit Holds That States May Tax Non-Indian Property On An Indian Reservation

by Perkins Coie
Contact

On July 15, 2013, the United States Court of Appeals for the Second Circuit held that a state may impose a generally applicable personal-property tax on property owned by non-Indians but leased to an Indian tribe and used for gaming activities on a reservation.  The decision sets an important precedent for defining the nature of business relationships between tribes and non-tribal companies engaged in commercial activities on Indian reservations.  It also fills a significant gap in federal jurisprudence regarding the jurisdictional limits of states and local governments and Indian tribes.  Under the Second Circuit decision, it is now clear that tribal sovereignty does not trump the authority of state and local governments over non-tribal entities engaged in business associated with a tribe’s gaming operations.

The case, Mashantucket Pequot Tribe v. Town of Ledyard, began in 2005 when a slot-machine manufacturer from New Jersey that had leased its machines to the Mashantucket Pequot Tribe for use at its Foxwoods Casino informed the town that it believed it did not have to pay personal-property taxes on the machines.  Supported by the state of Connecticut, the town rejected that argument and pursued collection.  The tribe responded by suing the town in federal district court, seeking an injunction against assessment or collection of the tax.  Other businesses with property on the reservation raised similar claims of tax-exempt status, threatening the town and the state with a significant loss of revenue.  On cross-motions for summary judgment, the district court ruled in favor of the tribe, concluding that federal law preempted the tax.

Second Circuit Reversal Focuses on Property Ownership by Non-Indians

In a decision authored by Judge Richard Wesley, a panel of the Second Circuit has now reversed the district court ruling.  The court held that tax was not preempted by the Indian Trader Statutes, 25 U.S.C. §§ 261 et seq., in light of the “well established” authority of a state “to apply generally-applicable taxes to non-Indians performing otherwise-taxable functions on an Indian reservation.”  In reaching that conclusion, the court emphasized that “the incidence of the generally applicable tax falls on the non-Indian’s ownership of property, rather than on the transaction between the Tribe and the non-Indian.”  The court also rejected the tribe’s argument that the tax was preempted by the Indian Gaming Regulatory Act, 25 U.S.C. §§ 2701 et seq.  The court noted that neither IGRA itself nor the governing gaming compact restricted the state’s authority to apply its personal-property taxes to vendors of gaming equipment.

The court of appeals then turned to the balancing test prescribed by the Supreme Court in White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980).  The Bracker test weighs the interests of a state government in asserting its jurisdiction over non-tribal activities on a reservation against the tribe’s need for sovereign authority over that activity.  The Second Circuit concluded that the tax would have only “a minimal effect” on the tribe’s interest in tribal economic development, and that the “moderate” effect of the tax on tribal sovereignty was outweighed by the state’s economic interest in imposing the tax and providing services to the tribe and the state’s interests in “the uniform application of its tax code” and in “being in control of, and able to apply, its laws throughout its territory.”  The court therefore concluded that the balance of interests favored the town and the state.

Impact of Mashantucket Pequot Tribe v. Town of Ledyard

This latest decision represents an important limitation on the tax immunity of Indian tribes.  A tribe itself is not subject to taxation, and a tax that singles out those doing business with a tribe may also be vulnerable to challenge.  But a generally applicable property tax may be imposed on non-Indian property even if that property is located on a reservation and is used in doing business with a tribe.

Perkins Coie LLP represented the Town of Ledyard in this case.  The Perkins Coie team included Benjamin S. Sharp, Donald C. Baur, Mary Rose Hughes, Jena A. MacLean, Eric D. Miller, and Elisabeth C. Frost.  Mr. Miller argued the appeal.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Perkins Coie | Attorney Advertising

Written by:

Perkins Coie
Contact
more
less

Perkins Coie on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.