Amicus Curiae Brief — Arizona Dept. of Revenue v. Blaze Constr. Co.

In The

Supreme Court of the United States

October Term, 1997

>

STATE OF ARIZONA ex rel.,

Arizona Department of Revenue,

Petitioner,

vs.

BLAZE CONSTRUCTION COMPANY, INC., __,

Respondent.

,

On Writ Of Certiorari To The Arizona

Court Of Appeals, Division One

>

BRIEF OF THE NAVAJO NATION AS AMICUS CURIAE

IN SUPPORT OF THE RESPONDENT

.

Navajo NATION

DEPARTMENT OF JUSTICE

Hers YaAzzie

Attorney General

Marceuino R. Gomez*

Assistant Attorney General

P.O. Drawer 2010

Window Rock, Navajo Nation

(AZ) 86515

(520) 871-6347

"Counsel of Record

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

QUESTION PRESENTED

Whether a State may impose a transaction privilege

tax on a contractor who enters into contracts with the

Bureau of Indian Affairs to construct and improve roads

on an Indian reservation, where there is a comprehensive

reservation road regulatory scheme with substantial

involvement of the Indian nation.

ii

TABLE OF CONTENTS

Page

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INTEREST OF THE AMICUS CURIAE ............. 1

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SUMMARY OF ARGUMENT. ............cccccceees 5

EE 6

THE IMPOSITION OF THE ARIZONA TRANSAC-

TION PRIVILEGE TAX INTERFERES WITH

TRIBAL SELF GOVERNMENT................... 6

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iii

TABLE OF AUTHORITIES

Page

Cases

Carpenter v. Shaw, 280 U.S. 363 (1930)................ 6

The Kansas Indians, 5 Wall. 737 (1867)................ 6

McClanahan v. Arizona Tax Comm'n, 411 U.S. 164

SDs Sile 66s edd ennded ia tanieddadedetuhekerechers 7

Ramah Navajo School Bd. v. Bureau of Revenue, 458

Shas GEe ence ccccovnnnnebeseveree 5, 7, 8, 9, 10

Fe %& Fi F. Fe rere pee 6

Warren Trading Post Co. v. Arizona Tax Comm., 380

Sey Ge ED aWadeccisctatcscceéenskeehessdnbaads 7

White Mountain Apache Tribe v. Bracker, 448 U.S.

SD Fic dev esd. cosconesdenteusivccniepuns 5, 7, 8, 10

Worchester v. Georgia, 6 Pet. 515 (1832) ............... 6

CONSTITUTIONS

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STATUTES AND TREATIES

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Transportation Equity Act for The 21st Century,

Pub. L. No. 105-178 Tit. I, 112 Stat. 107 (1998)

ESCO, BES TR BER csc ccvicdcccncvacccsccsss 3

Indian Self-Determination and Educational Assis-

tance Act, 25 U.S.C. §450, et seq.........---ee cece +

sft PTT err ter Ter 5

Treaty between the United States and the Navajo

f F £ Sa Aree oe seoee 6

iv

TABLE OF AUTHORITIES - Continued

Page

REGULATIONS

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OrHerR AUTHORITIES

Navajo Nation Division of Community Develop-

ment, 1990 Census Population and Housing Char-

acteristics of the Navajo Nation (1993) ............. 1,2

Navajo Nation Department of Transportation,

Navajo Nation Long Range Comprehensive Trans-

COVGETENS. FER GROSS 0 0 cvecctcesesdsecccovvecesecses 4

INTEREST OF THE AMICUS CURIAE

This case concerns the State of Arizona’s attempt to

impose its transaction privilege tax on a contractor for

services related to the construction of roads on behalf of

the Bureau of Indian Affairs (“BIA”), an agency of the

United States. The road projects are located entirely

within the exterior boundaries of Indian reservations. The

Arizona Court of Appeals held that the State’s assessment

of the transaction privilege tax on the contractor’s gross

proceeds from building roads for the Bureau of Indian

Affairs on Indian reservations was preempted by the

comprehensive federal Indian policies of promoting tribal

self-sufficiency and economic development.

The Navajo Tribe of Indians (the Navajo Nation) is a

federally recognized Indian tribe and is the largest such

tribe in the United States, comprised of more than 200,000

members and occupying approximately 25,000 square

miles of trust lands within the three states, Arizona, New

Mexico and Utah.' The Navajo Nation government exer-

cises governmental jurisdiction over the Navajo Nation.

The Navajo Nation government provides a wide variety

of governmental services throughout its jurisdiction. The

State of Arizona’s attempt to impose a transaction

1 Navajo Nation Division of Community Development,

1990 Census Population and Housing Characteristics of the Navajo

Nation (1993).

privilege tax on respondent would interfere with the

Navajo Nation’s short and long range road plans.?

*

STATEMENT OF FACTS

The Navajo Tribe of Indians (the Navajo Nation) is a

federally recognized Indian tribe and is the largest such

tribe in the United States, comprised of more than 200,000

members and occupying approximately 25,000 square

miles of trust lands within the three states, Arizona, New

Mexico and Utah.? Approximately 69 percent of the land

is utilized for grazing. The traditional style of sheep

herding provided a stable lifestyle in the past, and con-

tinues to provide supplemental income for many tribal

members. As a result, Navajo Nation members live

sparsely across the Navajo Nation with an average den-

sity of 6.37 people per square mile.

The present Navajo government structure is a form of

a three-branch government: the Executive Branch, the

2 The parties have consented to the filing of this brief by the

Navajo Nation. The consents have been filed with the Clerk

pursuant to Rule 37.3 of the Rules of the Court.

Pursuant to Rule 37.6 of the Rules of this Court, amicus

states that no counsel for a party has authored this brief in

whole or in part, and that no person or entity, other than amicus,

has made a monetary contribution to the preparation or

submission of this brief.

3 Navajo Nation Division of Community Development,

1990 Census Population and Housing Characteristics of the Navajo

Nation (1993).

Legislative Branch, and the Judicial Branch. The Execu-

tive Branch includes the President of the Navajo Nation,

the Vice President, and appointed officials overseeing 10

divisions and several offices. The Legislative Branch con-

sists of the Speaker of the Council and the Navajo Nation

Council comprised of 88 elected council delegates repre-

senting 110 chapters.* The Judicial Branch includes the

Chief Justice and the Navajo Nation courts. Elections for

the President and the delegates are held every four years

in November.°

Navajo BIA Roads are constructed and approved pur-

suant to 23 U.S.C. §204. Funds for road construction and

improvement on the Navajo Indian Reservation are

appropriated in a lump sum for each fiscal year from the

federal Highway Trust Fund. Transportation Equity Act

§1101(a)(8), 112 Stat. 112. The funds available for Indian

tribes are allocated based on a formula established by the

Secretary of Interior pursuant to a negotiated rulemaking

procedure with involvement of tribal representatives.

Pursuant to regulation, the Commissioner of Indian

Affairs has the responsibility to plan, survey, design and

construct the Indian reservation roads. 25 C.F.R.

§§170.2(d), 170.3, 170.4, 170.4(a). The Secretary of Trans-

portation must approve the location, type, and design of

all projects on the Navajo BIA Road System. 25 C.F.R.

§170.4.

* A chapter is a political subdivision of the Navajo Nation

government. A chapter may be similar to a county in a state

government setting.

5 The Navajo Nation government is not engaged in any

gaming enterprise.

Pursuant to Title 1 of the Indian Self-Determination

and Educational Assistance Act, the Navajo Nation has

entered into an intergovernmental agreement for the

Transportation Planning of the Navajo BIA Reservation

Road system. 25 U.S.C. §450, et seq. The Navajo BIA Road

System consists of 6,184.2 miles of roads. State and

county roads within the Navajo Nation account for

approximately 3,197 miles of roads in the three state area

in which the Navajo Nation is located.© The Navajo

Nation is geographically divided into five agencies. The

road projects are reviewed and recommended by five

agency road committees.” These projects are usually

derived from chapter requests. The Navajo Department of

Transportation is an agency, of the Navajo Nation govern-

ment, which oversees and coordinates road development

on the Navajo Reservation. It participates in, approves

and receives all information on reservation road planning

and construction programs.

The Transportation and Community Development

Committee of the Navajo Nation Council is the Navajo

Nation legislative oversight committee for all road and

transportation matters within the Navajo Nation. It gives

final approval to all reservation road construction project

lists, road plans and oversees the coordination of all

* Navajo Nation Department of Transportation, Navajo

Nation Long Range Comprehensive Transportation Plan, ch. Ill

(1998).

7 The agency road committees are local Navajo

transportation boards appointed by Navajo Agency delegation

boards (comprised of district and chapter officials) as the local

Navajo representatives.

=>

transportation activities within the Navajo Nation. 2

NNC §§421, 423.°

SUMMARY OF ARGUMENT

This case involves the application of the Arizona

transaction privilege tax to BIA road construction activ-

ities performed within Indian reservations cated within

the State of Arizona. The federal government has devel-

oped a comprehensive reservation road regulatory

scheme.

This court has identified the relevant federal, tribal

and state interests to be considered in determining

whether a particular exercise of state authority violates

federal law. White Mountain Apache Tribe v. Bracker, 448

U.S. 136, 145 (1980). See also Ramah Navajo School Bd. v.

Bureau of Revenue, 458 U.S. 832, 837 (1982). The presence

of this comprehensive reservation road regulatory

scheme leaves no room for the additional burden sought

to be imposed by the State of Arizona through its taxation

of the gross receipts paid to Blaze Construction. Ramah

Navajo School Bd. v. Bureau of Revenue, 458 U.S. 832, 842.

Like the State in Ramah, the State of Arizona simply has

nothing to do with the reservation road construction

activity it seeks to tax. Ramah, 458 U.S. at 843.

8 The Navajo Nation Code shall be cited as “NNC”.

Thus, the state transaction privilege tax is unlawful

and the decision of the Arizona Court of Appeals should

be affirmed.

— +

ARGUMENT

THE IMPOSITION OF THE ARIZONA TRANSAC-

TION PRIVILEGE TAX INTERFERES WITH TRIBAL

SELF GOVERNMENT.

There is an established policy of leaving Indians free

from state jurisdiction in this country. Rice v. Olson, 324

U.S. 786, 789 (1945). This policy is based on the principle

that Indian nations are distinct political communities

which possess exclusive authority within the exterior

boundaries of their territory. Worchester v. Georgia, 6 Pet.

515 (1832). As long as the tribal organization remains

intact and recognized by the United States government as

existing, a tribe is “distinct from others” separate from

the jurisdiction of the state and to be governed exclu-

sively by the government of the United States. The Kansas

Indians, 5 Wall. 737, 755 (1867).

The Navajo Nation entered into a treaty with the

federal government in 1868. In return for their promise to

keep peace the treaty set aside for the use and occupation

of the Navajo tribe of Indians a portion of what had been

their native country. 15 Stat. 667, 668. This treaty should

be interpreted under the rule that doubtful expressions

are to be resolved in favor of the Navajo Nation. Carpen-

ter v. Shaw, 280 U.S. 363, 367 (1930). It would be logical to

conclude that the Navajo treaty “ . . . established the

lands as within the exclusive sovereignty of the Navajos

under general federal supervision.” McClanahan v. Ari-

zona Tax Comm'n, 411 U.S. 164, 174-75 (1973). This is the

same interpretation that was made to preclude the impo-

sition of a state tax law on the Navajo reservation. See

Warren Trading Post Co. v. Arizona Tax Comm., 380 U.S. 685,

687, 690 (1965).

This court has identified the relevant federal, tribal

and state interests to be considered in determining

whether a particular exercise of state authority violates

federal law. White Mountain Apache Tribe v. Bracker, 448

U.S. 136, 145 (1980). See also Ramah Navajo School Bd. v.

Bureau of Revenue, 458 U.S. 832, 837 (1982). The federal

and tribal interests arose from the broad power of Con-

gress to regulate tribal affairs under the Indian Com-

merce Clause, Art. 1, §8 cl. 3, and from the

semiautonomous status of Indian tribes. White Mountain,

448 U.S. at 145 (1980). The Court has referenced a number

of congressional enactments revealing a strong and defi-

nite federal policy of promoting tribal self-sufficiency and

economic development. As a result ambiguities in federal

law should be construed generously to comport with

these traditional notions of sovereignty and with the

federal policy of encouraging tribal independence.

McClanahan v. Arizona Tax Comm'n, 411 U.S. 164, 174-175

(1973).

In White Mountain, the federal government undertook

comprehensive regulation of the harvesting and sale of

tribal timber. The federal regulation scheme was found to

be so pervasive that it precluded the imposition of the

additional burdens of a relevant state tax. White Moun-

tain, 448 U.S. at 148. The BIA was involved in virtually

every aspect of the production and marketing of Indian

timber. The BIA established bidding procedures, set man-

datory terms to be included in every contract and

required all contracts be approved by the Secretary of

Interior. White Mountain, 448 U.S. at 147.

In Ramah, the BIA possessed wide ranging monitor-

ing and review authority. The BIA was required to con-

duct preliminary on site inspections, and prepare cost

estimates for the project in cooperation with the Board.

The Board was required to approve any architectural and

engineering agreements. The BIA required certain terms

to be included in the subcontracting agreements. The

Board was required to maintain records for inspection by

the Secretary of Interior. The Court held that direction by

the federal government for the construction of Indian

schools left no room for the additional burden sought to

be imposed by the State of New Mexico through its

taxation of the gross receipts of the construction contrac-

tor. Ramah, 458 U.S. at 842. The State of New Mexico was

precluded from imposing an additional burden on the

comprehensive federal scheme intended to provide this

education — a scheme which has “left the State with no

duties or responsibilities.” Ramah, 458 U.S. at 843.

The attempt by the State of Arizona to impose its

transaction privilege tax on the reservation road contrac-

tor, in this case, simply cannot be reconciled with neither

White Mountain nor Ramah. A regulatory scheme exists for

the construction of Indian reservation roads similar to the

detailed and comprehensive regulatory schemes that

were present in White Mountain and Ramah. The regula-

tory scheme developed under 25 C.F.R. §170.3 sets out the

planning, surveying, designing and construction phases

of Indian reservation roads by the Commissioner of

Indian Affairs. The Secretary of Transportation is

required to approve location, type and design of all

Indian reservation road projects before any construction

expenditures are made. 25 C.F.R. §170.4. Tribes shall

establish annual priorities for road construction projects.

25 C.F.R. §170.4(a). The procedure for obtaining right-of-

way is governed by part 169 of the regulations. 25 C.F.R.

§170.5. The maintenance of Indian reservation roads is

basically a local function. 25 C.F.R. §170.6. The Commis-

sioner may enter into an agreement for tribal contribu-

tions. 25 C.F.R. §170.6(a). The Commissioner may enter

into agreements with states for cooperation in the con-

struction or maintenance of reservation roads and

bridges. 25 C.F.R. §170.7. The Navajo Nation government

is heavily implicated in the road planning and selection

process. It is quite apparent that a comprehensive and

detailed reservation road regulatory scheme is present.

The presence of this comprehensive regulatory

scheme simply leaves no room for the additional burden

sought to be imposed by the State of Arizona through its

taxation of the gross receipts paid to Blaze Construction.

Ramah Navajo School Bd. v. Bureau of Revenue, 458 U.S. 832,

842. Like the State in Ramah the State of Arizona simply

has nothing to do with the reservation road construction

activity it seeks to tax. Ramah, 458 U.S. at 843.

.

CONCLUSION

This Court has identified the relevant federal, tribal

and state interests to be considered in determining

whether a particular exercise of state authority violates

10

federal law. White Mountain Apache Tribe v. Bracker, 448

U.S. 136, 145 (1980). See also Ramah Navajo School Bd. v.

Bureau of Revenue, 458 U.S. 832, 837 (1982). Neither White

Mountain nor Ramah tolerate the attempt by the State of

Arizona to impose its transaction privilege tax on the

reservation road contractor. A regulatory scheme exists

for the construction of Indian reservation roads similar to

the detailed and comprehensive schemes that were pre-

sent in White Mountain and Ramah. The Navajo Nation

government is extensively involved in the reservation

road scheme. The presence of this comprehensive regula-

tory scheme leaves no room for the additional burden

sought to be imposed by the State of Arizona through its

taxation of the gross receipts paid to Blaze Construction.

Ramah Navajo School Bd. v. Bureau of Revenue, 458 U.S. 832,

842. Like the State in Ramah, the State of Arizona simply

has nothing to do with the reservation road construction

activity it seeks to tax. Ramah, 458 U.S. at 843.

The state transaction privilege tax is clearly unlawful.

The decision of the Arizona Court of Appeals should be

affirmed.

Respectfully submitted,

Navajo NATION

DEPARTMENT OF JUSTICE

Hers YAzzie

Attorney General

Marceino R. Gomez*

Assistant Attorney General

P.O. Drawer 2010

Window Rock, Navajo Nation

(AZ) 86515

(520) 871-6347