# Petition — Fry v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_2560%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1978 - **Citation:** 434 U.S. 1011 ## Text | Supra Coun, ILED SEP 17 1977 IN THE MICHAEL RODAK, JR., CLERI SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1977 77-429 - LAWRENCE R. FRY §& NELLIE R. FRY, Husband § Wife, Petitioners, Vv. UNITED STATES OF AMERICA, PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES SUPREME COURT J r ie a, ’ WILLIAM J. WELL, o counsel for GUSTAFSON §& REYNOLDS, P.S. 1315 Washington Mutual Bldg. Spokane, Washington 99201 Counsel for Petitioners September 14, 1977 IN THE ‘ SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1977 LAWRENCE R. FRY §& NELLIE R. FRY, Husband §& Wife, Petitioners, Vv. UNITED STATES OF AMERICA, PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES SUPREME COURT Bee, WILLIAM ae, WELL, o counsel for GUSTAFSON §& REYNOLDS, P.S. 1315 Washington Mutual Bldg. Spokane, Washington 99201 Counsel for Petitioners September 14, 1977 INDEX Index . Case Citations Opinions Below. Jurisdiction. Questions Presented,.. Statutory and Constitutional Provisions Involved. Statement of Facts Basis for Jurisdiction Below. Reasons for Granting Writ Conclusion. .... -« Appendix A (Opinion of United States Court of Appeals) Appendix B (Opinion of United States District Court, Eastern District of Washington . oii Le) uo Oo ON .10 27 CASE CITATIONS Cases: Squire v. Capoeman, 351 os. 1 T1585) i ee 8 Stevens v. C.I.R., 1971) 452 I (9th cir. Constitution and Statutes: Constitution of the United States, Amendment 26 U.S.C. 61 26 U.S.C. 1401 28 U.S.C. Section 1254(1) 28 U.S.C. Section 1346(a) offs Sixteenth IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1977 LAWRENCE R. FRY §& NELLIE R. FRY, 6.7 Husband § Wife, > Petitioners, Vv. 8 UNITED STATES OF AMERICA PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES SUPREME COURT 3,4 4 The Petitioners, LAWRENCE F. FRY and 4 NELLIE R. FRY, husband and wife, pray that a Writ of Certiorari issue to re- : view the opinion and judgment of the 6 United States Court of Appeals for the : Ninth Circuit, rendered in these proceed- ings on June 22, 1977. oj. OPINIONS BELOW The opinion of the United States Court of Appeals for the Ninth Cir- cuit, 557 F.2d 646, appears at Appendix A. The opinion of the United States District Court, East- ern District of Washington, is umnre- ported, and appears at Appendix B. The United States Court of Appeals for the Ninth Circuit affirms the opinion of the United States District Court, Eastern District of Washing- ton. JURISDICTION The order or judgment of the United States Court of Appeals for the Ninth Circuit was rendered and entered on June 22, 1977. This petition for certiorari was filed less than 90 days from the date aforesaid. o De The jurisdiction of this Court is in- voked under 28 U.S.C. Section 1254(1). QUESTIONS PRESENTED Is income derived from logging of standing timber off of unallotted tribal lands by an unenrolled, non- competent member of the Confederated Tribes of the Colville Reservation, in the State of Washington,subject to federal income tax and old age, survivors, and disability insurance tax (self-employment tax), under the Sixteenth Amendment to the United States Constitution? STATUTORY AND CONSTITUTIONAL PROVISIONS INVOLVED The Constitution of the United States, Amendment XVI: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, o$- without apportionment among the several States, and with- out regard to any census or enumeration ." 26 U.S.C. 61: "(a) General Definition. - Except as otherwise provided in this subtitle, gross in- come means all income from whatever source derived, in- cluding (but not limited g the following items: 26 U.S.C. 1401: "(a) Old-Age, Survivors, and Disability Insurance. - In addition to the other taxes, though there shall be imposed for each taxable year, on the self-employment income of every individual, a tax as follows: (1) In the case of any taxable year beginning after December 31, 1965 and before January 1, 1967, the tax shall be equal to 5.8% of the amount of the self-employment income for such taxable year; STATEMENT OF FACTS The facts relevant to the question presented by this petition are uncon- -4- troverted and therefore may be intro- duced to the Court in the summary fashion. Petitioners are husband and wife and are both noncompetent enrolled members of the Confederated Tribes of the Colville Reservation and live on the reservation. For the tax years 1962 through 1966, inclusive, Petitioners paid $21,498.62 in fed- eral income tax, self-employment tax and interest accrued thereon. Petitioners’ sole source of in- come for the tax years in question was from contract logging and stand- ing timber on unallotted tribal land owned by the Confederated Tribes of the Colville Reservation. The con- tracts let out to log this land were to non-Indian contractors and Peti- tioners' acted as a subcontractor in o $< performing the actual logging. Peti- tioner predominately utilized other members of the Confederated Tribes of the Colville Reservation on con- ducting his logging operation. BASIS FOR JURISDICTION BELOW Petitioner had proper jurisdic- tion with the District Court of the United States for the Eastern District of Washington under 28 U.S.C. Section 1346(a). REASONS FOR GRANTING WRIT The Court has not spoken in the area of the Federal income taxation of Indians since the "Landmark" case of Squire v. Capoeman, 351 U.S.1 (1956). In Capoeman the Court car- ved out a judicial exemption to the application of the federal income tax laws as they applied to income -6- realized by noncompetent Indian from the sale of timber off of trust- allotted land. The instant case dif- fers from Capoeman in that the log- ging activity conducted by the Peti- tioner was from unallotted tribal land. A good deal of confusion and re- sulting litigation has marked the era Since the decision in the Capoeman case. It is obvious that substantial numbers of people are effected by these decisions - i.e., the many thousands of individuals in the United States who maintain their heritage as American Indians. Defining the rights of these peoples as they concern the taxing power of the federal government is of extreme national importance. The state of the law is now one of confusion and inequity. If the affe Petitioner in the instant case had log- ged allotted land acquired by him either through gift, inheritance, or purchase, he would have been clearly exempt from the payment of federal income tax on his logging income. (See Stevens v. C.I.R., 452 F.2d 741 (9th Cir. 1971). Such a result is not only inequitable but in- explicable on any kind of meaningful basis. In the instant case the United States Court of Appeals for the Ninth Circuit found that to accept the argu- ment of Petitioner would amount to judicial legislation. The court ig- nored the fact that the entire area of federal taxation of Indians is a his- tory of judicially made exemption and the revocation of such exemptions, with- out any apparent common thread running through the cases. -§8- In short, the Court needs to bring clarification to a trouble- some area of significant impor- tance. CONCLUSION For these reasons a Writ of Certiorari should issue to review the judgment and opinion of the United States Court of Appeals for the Ninth Circuit. (Note: Since preparation of Petition, Petitioners' found Critees v. B.S... C&.Ck.. (7732/77) which upholds broad federal income tax exemption for Indians, includ- ing timber sales. Reported U.S. Tax Week, 1977, No. 36, p.1063). RESPECTFULLY oe) » O counsel for GUSTAFSON §& REYNOLDS, P.S. 1315 Washington Mutual Bldg Spokane, Washington 99201 (S09) 455-9666 Counsel for Petitioners September 14, te APPENDIX A Here is set forth the opinion rendered in the United States Court of Appeals for the Ninth Circuit. -10- UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT LAWRENCE R. FRY §& ) NELLIE R. FRY, husband § wife, JNO. 76-1779 Plaintiffs-Appellants,)OPINION vs. ) UNITED STATES OF AMERICA) Defendant-Appellee. ) ) APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF WASHINGTON Before: CHAMBERS and CHOY, Circuit Judges, and BONSAL, * District Judge CHOY, Circuit Judge: Appellants, Lawrence and Nellie Fry, are members of the Confederated Tribes of the Colville Reservation (the Tribe). They appeal from a judg- ment of the district court holding that their income derived from logging opera- tions on Reservation land is not exempt ofP- from federal income taxation. We Affirm. Kettle Falls Lumber Company, a non- Indian concern, contracted with the Tribe to cut timber from unallotted lands of the Reservation.1/ Lawrence Fry, in turn, was hired by Kettle Falls as a logging subcontractor, but Fry him- self had no direct contractual rela- tionship with the Tribe. The majority of Fry's employees were Indians. Fry and his wife paid income taxes on the income derived from this logging opera- tion and then sued for a refund.2/ The district court granted the Commissioner's motion for summary judgment. This appeal followed. At the outset, appellants concede *Honorable Dudley B. Bonsal, United States District Judge for the Southern District of New York, sitting by desig- nation. 12 that the general rule is that Indians, like other United States citizens, are subject to federal income taxation un- less exempted by treaty or statute. >/ Sauire v. Capoeman, 351 U.S. 1. 6 (1956). In Squire, the Supreme Court found such an exemption in Sections 5 and 6 of the General Allotment Act of 1887 (the Act), 25 U.S.C. Section 348 and 349, as amended. It is held that, because the Act "evinces a congression- al intent to subject an Indian allot- ment to all taxes only after a patent in fee is issued to the allottee," 351 U.S. at 8, and because "'the exemption according tribal and restricted lands extends to the income derived directly therefrom'," id. at 9, quoting F. Cohen, Handbook of Federal Indian Law 265 (1940), the income realized by a non- competent Indian allottee from the sale -13- of timber taken from his trust- it protected ordinary income as well allotted land was exempt from federal as capital gains; and that it applied capital gains tax. See 351 U.S. at in spite of the fact that the land from 9-10 & n.19.4/ . which Stevens' income directly derived In Stevens v. C.I.R., 452 F.2d 741 was not acquired by him through origin- (9th Cir. 1971), we had occasion to al allotment. See 452 F.2d at 744-49. construe the meaning and scope of the See also Kirkwood v. Arenas, 243 F.2d Squire exemption. There, we held that 863 (9th Cir. 1957); United States v. income directly derived by a noncompe- Daney, 370 F.2d 791 (10th Cir. 1966); tent Indian allottee from farming and United States v. Hallman, 304 F.2d 620 ranching operations on his allotted (10th Cir. 1962); Big Eagle v. United lands was exempt from federal income : States, 300 F.2d 765 (Ct. Cl. 1962); taxation regardless of whether he acquired Asenap V. United States, 283 F. Supp. the land as part of an original allot- ; 566, 573 (W.D. Ok11 1968); Nash v. ment, by gift from an original allot- Wiseman, 227 F. Supp. 552, 553-55 tee, or by purchase from an original al- (W.D. Okl. 1963). But compare Bird Bear lottee or the estate thereof. See 452 v. McClean County, 513 F.2d 190, 193 F.2d at 746, 749. We did so on the basis (8th Cir. 1975); Quinault Allottee Ass'n that the same exemption found in the , v. United States, 485 F.2d 1391-1400 Act and construed by the Supreme Court (Ct. Cl. 1973), cert. denied, 416 U.S. in Squire covered Stevens’ tribe; that 961 (1974) .5/ -14- -15- Appellants acknowledge that, since concerned are tax-exempt®/ appellants allotted lands are not here at issue, ’ cannot show that their income derives the exemption construed in Squire and "directly" from those lands. While Stevens does not, by its terms, apply. the Tribe's income from appellants’ They also admit their inability to cite logging operations may indeed be said to a statutory or treaty exemption which derive directly from its ownership of does specifically apply to them or their the unallotted Reservation lands, activities. Nevertheless, they still appellants' income derives from a con- seek an exemption, basing their argu- tract entered into between them and ment on an analogy to Squire and Stevens. Kettle Falls, whose income in turn de- Basically, appellants maintain that, since rives from a contract between it and the the income which the Tribe itself direct- Tribe.2/ ly derives from the logging operations In both Squire and Stevens, the on tax-exempt land is exempt from fed- income which was held to be exempt to the eral income taxation, their income too allottee was from operations conducted should be shielded. This argument is on his own allotted land. Indeed,in without merit. Stevens, the Tax Court had held taxable First, appellants here fail to point income derived from the ranching and to any treaty or statute which, in the farming of land which was leased from first instance, exempts the tribal lands : other allottees by Stevens, and he did from federal taxation. Second, even if not appeal that ruling. See 452 F.2d . “3 - we assume that the Reservation lands ’ oM- at 743. We, therefore, were concerned only with income directly derived from land which was held by the taxpayer, though acquired other than by original allotment. The Eighth Circuit, however, has held that, even if income derived from tribal land may be tax-exempt to the tribe itself, the income which a noncompetent Indian derives from cattie operations conducted on such lands pur- Suant to a grazing permit from the tribe is not tax exempt. Holt v. C.I.R., 364 F.2d 38, 41 (8th Cir. 1966), cert. denied, 386 U.S. 931 (1967). See also, Strom v. C.I.R., 158 F.2d 520 (9th Cir. 1947), aff'g 6 T.C. 621 (1946). Appellants, however, are not to be deterred. Recognizing that the link between their income and tax-exempt Indian land is probably too tenuous to meet the test of precedent in this area, -18- they advance to bold variant on their basic argument. They suggest that we read Squire and Stevens, not as turn- ing on the construction of a statutory exemption, but rather as standing for the broader proposition that income de- rived by an Indian from activities which directly benefit other Indians is tax- exempt. They bring their own case with- in such a rule by pointing both to the benefit which the Tribe obtains in hav- ing its timber logged and to that which their Indian employees enjoy through employment. It is true that both Squire and Stevens contain language to the effect that ambiguities in treaties and statu- tes are to be resolved in favor of Indians. See, 351 U.S. at 6-7; 452 F.2d at 744. But it is one thing to say that courts should construe trea- ties and statutes dealing with Indians -19- Tax Comm'n v. United States, 319 U.S. liberally, and quite another to say ‘ 598, 606-07 (1943). Accord, Agua that, based on those same policy con- Caliente Band of Mission Ind. v. siderations which promoted the canon . County of Riverside, 442 F.2d 1184, of liberal construction, courts them- 1187 §& n.15 (9th Cir. 1971), cert. selves are free to create favorable denied, 405 U.S. 933 (1972). rules. See, Holt, supra, at 40. Cf. The exemption construed in Squire Wells Fargo §& Co. v. Wells Fargo Exp. and Stevens was intended to provide Co., No. 74-2109 (9th Cir. April 22, the allottee with unencumbered land 1977) (slip opinion at 775-76). We é when he became competent. See Squire, have previously refused to accept such 351 U.S. at 9-10 & n.19. It was not an argument in this context, pointing . to benefit him simply because he was out that Congress is the body which 9 / ‘ an Indian,’ or to benefit Indians gen- grants tax exemptions. See, C.I.R, ’ erally.10/Moreover, the efforts of the v. Walker, 326 F.2d 261, 264 (9th Cir. taxpayer in C.I.R. v. Walker, 326 F.2d 1964).°/ and, 261 (9th Cir. 1964), who served as "(the Supreme) Court has repeatedly said that tax exemp- Treasurer for his Indian community, tions are not granted by impli- cation. .. . It has applied surely benefited Indians more clearly that rule to taxing acts affect- Indians as to all others. and directly than did appellants' log- ging operations, yet we found Walker's «24- Mescalero Apache Tribe v. Jones, 411 U. ° S. 145, 156 (1973), quoting Oklahoma - 20- salary to be subject to federal income FOOTNOTES taxation. Appellants can point to no treaty 1. (reference on page 1) or act of Congress that grants an exemp- Reservation land is divided into tion which is applicable to their case. al a eee hg ge tell al Accordingly, the general rule of taxa- rir ee Eger Ee ngs! Big dln -yogae bility controls, and the judgment of of the entire community . the district court must be cheb Gay, tesa) 526 F.2d 261, 265 AFFIRMED. - (reference on page 1) It appears that Mrs. Fry was not involved in the logging venture which produced the income at issue here. Her status as taxpayer and appellant apparently derives from the fact that, although filing separately during the relevant years, she reported a portion of the subject income on her tax re- turns. 3. (reference on page 3) For recent Supreme Court cases which delineate the rules govern- ing state taxation of Indians and their activities, see Moe v. Salish §& Kootenai Tribes, 425 U.S. 463 (1976); McClanaham v. Arizona State Tax Comm'n, 411 U.S. 164 ; (1973); Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1973). See -22- also, United States v. Antelope, 45° U.S.L.W. 4361 (U.S. April 19, -23- 1977); Confederated B. & T. of Yakima Indian Nat. v. Washing- ton, 550 F.2d 443 (9th Cir. 1977) (en banc). (reference on page 2) A noncompetent Indian is one who holds allotted lands only under a trust patent and may not dispose of his property without the approval of the Sec- retary of the Interior, It does not denote mental incapacity. Stevens v. C.I.R., 452 F.2d 741, 742 n. 1 (9th Cir. 1971). Ss. 6. (reference on page 3) We have been called upon to construe the Act in contexts other than taxa- tion as well. See, e. g., United States v. Southern Pacific Transp. Co., 543 F.2d 676, 694-95 (9th Cir. 1976); Dillon v. Antlear Land Co., 507 F.2d 940 (9th Cir. 1974), cert. denied, 421 U.S. 992 (1975); Akers v. Morton, 499 F.2d 44, 47-48 (9th Cir. 1974), cert. denied, 423 U.S. 831 (1975). (reference on page 4) Indian tax appellants seem regularly to call upon appellate courts - a. this unsupported assumption. ee, e€.g., C.I.R. v. Walker, 326 F.2d 261, 264, (9th Cir. 1964); Holt v. C. I. R., 364 F.2d 38. 41 (8th Cir. 1966). cert. denied . 386 U.S. 931 (1967). The basis for the instant, assumed exemption for tribal lands was neither briefed nor o22- 7. discussed at oral argumen:i bv the varties. (reference on page 4) We are aware that anv tax on appellants' income may be said to indirectly tax the Tribe it- self -- denending. of course. on the ability of appellants to shift the burden -- and to that extent undercuts the tribal land's assumed tax exemption. Such a nexus does not meet the require- ment that the impact be "direct." Compare Aqua Caliente Band of Mission Ind. v. County of River- side, 442 F.2d 1184, 1186 (9th cir. 1971), cert. denied, 405 U.S. 933 (1972). Crt.Superintendent of Five Civilized Tribes v. Com- missioner, 295 U.S. 418, 421 (1935) (return from reinvestment of exempt income directly derived from exempt land held taxable), discussed in Squire, 351 U.S. at 9. (reference on page 5) As appellants assert, a policy argu- ment can be made that noncompetent Indians should be exempt from feder- al taxation on income derived from services performed on the reserva- tion where they live, for the bene- fit of the Tribe, notwithstanding that they were paid by an outside contractor. Such policy considera- tions, however, are matters to be determined by the Congress and not by the Courts. -25- 9. (reference on page 6) APPENDIX B Although the point was not pressed ; here, it appears that appellants also argued below that it is "unconsti- , —_ tutional" for the Federal Govern- : Here is set forth the opinion ouch aiar [of eee rendered in the United States District Be ULS at 6. These the Coust Court, Eastern District of Washington. emphasized the point: The Government also relies upon Choteau v. Burnet, 283 U.S. 691, but that case also is not controlling, since it held only that a competent Indian, who had unrestricted control over lands and income therefrom, was not exempt from income tax solely because of his status as an Indian. ‘ 351 U.S. at 9-10 n.19 (emphasis in ori- ginal). See LaFontaine v. C.1I.R., 533 , F.2d 382 (8th Cir. 1976). 10 (reference on page 6) See note 7 supra. 27a » 26- IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF WASHINGTON LAWRENCE F. FRY and NELLIE R. FRY, husband and wife, CIVIL NO. C-74-192 Plaintiffs, JUDGMENT vs. UNITED STATES OF AMERICA, Defendant. Name ee Nae Ne Ne Ne Ne See” See See” See? eee” This action having come on for hearing on the defendant's motion for summary, judgment, and the Court having duly considered all the facts, written briefs and oral arguments of counsel for all parties, and the Court having con- cluded that there is no genuine issue of a material fact, and that the defen- dant is entitled to judgment as a mat- ter of law, IT IS HEREBY ORDERED that the - 20- plaintiffs' complaint be dismissed with prejudice. D E ICT JUDGE January 28, 1976 DATE Entered in Civil Docket on 1/29/76 -29- --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385004_2560%3A1. Public record. Not legal advice.